‘The Great Unbundling’ May Drive a Consulting Renaissance

After years of rumors and speculation, Big Four firm EY announced a plan and timeline to separate out its consulting business from its audit and related services, potentially unlocking explosive growth and profitability by reducing the consulting arm’s exposure to conflict of interest regulations. EY’s Errol Gardner and Andy Baldwin recently spoke to CDO Trends to discuss the major impacts of the upcoming split on technology leaders.

Current regulations that came in with Sarbanes-Oxley Act of 2002 limit an audit firm’s ability to perform systems of record work for its clients, as well as prohibit them from having public partnerships or marketing agreements, limiting their ability to succeed in those markets. EY’s coming split will mean that its new consulting business will no longer be constrained in its technology work. It will be able to form partnerships and embark on joint investments and marketing activities, boosting capabilities around key players like Oracle and Salesforce.

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Additionally, tech leaders will soon have a new business strategy and technology service provider to consider along with a small number of other providers that offer business strategy, solution implementation, and transactions in a single transformation, a key combination of services for the modern market. The separation will allow the new consulting business to be more credible in its technology solution work, offering a broader footprint of partners and skills as a true technology advisory partner no longer restricted by the severe limitations imposed by being a simultaneous provider of audit and advisory services.

Gardner and Baldwin cited a potential downside as well, noting that while EY was limited in its interactions with big tech firms due to its existing audit relationships, the restriction enabled it to become highly focused versus firms that attempted to be all things to all people. The coming split is sure to open new opportunities, but also runs the risk of placing the new consulting business in a sea of digital sameness as it competes for investment and attention from clients facing a multitude of options.

As firms like IBM and Atos are also looking to unbundle their service offerings to sharpen their focus, EY’s coming move will put further pressure on the likes of KPMG, PwC, and Deloitte as well as technology service providers to adapt to the newest player in the market.