Digital agencies are, increasingly, facing more competition from tech consultancies, and it will become a way of life.

BUSINESS TRANSFORMATION IS BECOMING CORE FOR DIGITAL AGENCIES

The average marketer’s needs have transitioned exponentially from traditional to digital. Such a change has been catalyzed by unprecedented digital consumption, and of emerging (tech driven) marketing channels. Most businesses have made this paradigm shift, moving from traditional only, to digital inclusive.

Such a change is hardly superficial. It requires a business wide transformation, that not only impacts marketing, but other allied functions (such as product, delivery, technology, among others). It is not surprising that Gartner’s Magic Quadrant includes business transformation as a key component of its digital agency research.

This research  focuses on agencies that have helped define the digital experience across customer journeys. It also recognizes digital agencies for their work on strategy, development, execution and measurement.

And it is this transformation capabilities, that has allowed big name management consultancies (such as IBM, Accenture, PwC, and Deloitte) to enter the market – and to be featured as leaders and challengers!

Source: Gartner Magic Quadrant

The inclusion of big name consultancies has been testament to their application of technology to the advertising world. However, the challenge going forward will be incorporating creative processes in an overly corporate culture. On the other hand, digital agencies will need to develop the necessary technology capabilities to stay competitive.

The convergence of digital agencies and tech consultancies

How can digital agencies respond

Bigger digital agencies (holding companies with a multitude of agencies under them) are already reacting to this threat and consolidating their portfolio of companies. They seem to be bringing processes and make them ‘business as usual’ – a leaf out of how tech companies work, and the basis with which costs and margins can be optimized. This, along with enhancing capabilities on strategy and technology will be the focus.

Smaller agencies could find themselves an acquisition target, while medium sized agencies may face the most threat. For such agencies, partnerships and bolstering capabilities provides a good option.

The direction agencies, big or small, will need to take remains to move forward, build capabilities, and truly compete with tech consultancies on their hunting grounds.

(Digiday has a good insight from a digital agency executive. It’s worth the read.)