KPMG says it plans to hire 3,500 technologists in the UK over the next three years as it creates a new business unit to deliver digital transformation projects. The news coincides with reports that EY plans to spin off its audit division to form a separate company focused on consultancy, highlighting the changing role of accountancy’s traditional ‘Big Four’ – Deloitte, EY, KPMG and PwC – and the importance of IT services to their future prospects.
The new business unit, KPMG Products, will see the company offering a set of digital tools to clients to aid digital transformation. The first products include analytics tools for retailers, and for measuring ESG performance of existing and prospective assets, as well as a strategic workforce planning solution designed with NHS organisations in mind.
To support this work, the company says it is hiring 3,500 people over the next three years, including designers, engineers and data scientists. Currently its UK technology team is 3,000 strong.
“The consulting industry is evolving, and this considerable investment signals a significant change in how we operate and serve the organisations we work with,” Lisa Heneghan, global chief digital officer at KPMG UK, said. “To realise this change, we have already started to significantly grow our pool of digital talent to develop these revolutionary technologies.
“Founded on our consulting heritage, these products are being designed using the firm’s unique expertise to support our clients in the most innovative ways where they need it most.”
Why is KPMG delivering more tech consultancy services?
The Products launch by KPMG brings it into line with other services being offered by rival businesses, says Nitish Mittal, partner at Everest Group. “This specific investment by KPMG is similar to what Deloitte did with its Converge Business, which is a desire to invest in data-centric re-purposable products/platforms to help accelerate client outcomes,” he says. “This is an increasing area of focus by consulting and system integration peers.”
Deloitte launched Converge, a collection of digital tools to support transformation projects across a number of business verticals, in February as part of a $750m global investment.
Mittal says these moves are designed to ensure the consultancies do not leave “value on the table” when working with clients. “They want to get involved in the implementation of their digital roadmap as well,” he says. “That’s why you see the management consultancies (such as McKinsey, Bain and BCG) starting and investing in their own platforms and data businesses, and the Big Four investing in system integration-like capabilities, similar to Accenture, IBM, TCS or Infosys.”
Consultancy services are already lucrative for the Big Four. KPMG UK’s 2021 financial results show consultancy brought in pre-tax profits of £179m, up from £139m in 2020. In contrast, income from its traditional audit business remained steady at £95m.
With this in mind, it’s no wonder the KPMG is investing heavily in its tech team, advertising far more roles than its peers in recent months, even before today’s news.
And though the market is a crowded one, Mittal says the relationships the Big Four have with business leaders can help them win business ahead of rivals. "Consultancies want to extend their natural presence in the boardroom to also help these clients with implementation and governance of their technology journeys," he says." This is different from the typical pathways for system integrators, which often have good relationships with IT and sourcing or procurement teams, but not necessarily business stakeholders in charge of these decisions.
The future of Big Four – will auditing and consultancy be separated?
Increased complexity around auditing also makes growing tech consultancy revenue even more important for the Big Four, Mittal says. "The audit and consulting market is going through a portfolio shift," he says. "These firms have grown as audit-led businesses but have scaled their management and tech consulting presence in the recent past, and this has caught the attention of regulators as well as clients."
On Thursday, it was reported that EY is planning to spin off its auditing business and create a separate company away from its consulting arm. This is in response to increasing pressure from regulators to reduce the perceived conflict of interest in cases where accountancy firms offer auditing and other business services to the same company. The standard of auditing was widely questioned in the wake of the high-profile collapses of businesses such as BHS, Thomas Cook and Carillion.
The UK's regulator for accountancies and audit firms, the Financial Reporting Council, said in 2018 that the Big Four must separate their auditing and consultancy functions by 2024 to enable more clarity and greater scrutiny around auditing. They do not, however, have to form completely separate companies, as EY is said to be considering.
Read more: What does digital transformation actually mean?
