• by David L. Smith , November 11, 2002

Last week at the IAB Leadership Conference, the morning keynote speaker was Booz Allen Hamilton's Chief Marketing Officer Randall Rothenberg, who talked about some of the troubles that the agency business faced. One point really hit home. In the Q&A, Mr. Rothenberg opined that agencies could not meet two big front-end needs for clients, consulting in corporate and brand strategies and consulting in technology. As you are no doubt aware, it is hard to separate the two these days as your strategy can vastly affect your technology needs and, despite the turndown, technology still represents a huge investment for most companies.

The agencies do fine with creative and media executing the strategy, but to a large degree they depend on the client to hand them that strategy. (I’m not talking communications strategy, but corporate strategy here). At the same time, many companies are becoming more and more dependent upon outsourcing, and corporate and brand strategies are major outsourced services to the big consulting companies. In fact, Mr. Rothenberg implied that the agencies had “permission” to provide strategic services; they just no longer had the capability because of their own cutbacks.

That got me thinking about a slide I have been carrying around and presenting for the last several years, called "The Service Convergence." In our industry, the concept of convergence was first and best iterated by Nicholas Negroponte, co-founder and chairman of the MIT Media Lab. In the 1987 book “The Media Lab” by Stewart Brand, Negroponte talked about his vision of convergence that included the “Broadcast and Motion Picture Industry,” the “Print and Publishing Industry” and the “Computer Industry.” He said this would happen by the year 2000. Interesting concept at the time, as no vehicle existed that would facilitate this convergence. The Web, of course, made it all possible.

In 2000, I put a stake in the ground about a convergence movement that I thought would happen within ours and related industries. I call this concept Service Convergence. This involves the assimilation of the advertising industry, the big five (now the final four) accounting firms or their consulting arms, and the system integrators. These three industries are natural partners and I continue to believe that this is going to happen. Maybe not by 2005, but certainly within the decade. The absorption of PWC Consulting into IBM (arguably the world’s biggest systems integrator) was just the first step towards this mega merger of the service industries.

Mr. Rothenberg confirmed that I am not the only one who believes that technology and strategy are intertwined today. What interested me most was his observation that consulting companies were doing some work that the agencies could be doing. While the agencies “could” be more involved in strategy, they have cut back in staffing too far to have the horsepower. In addition, the pressures on quarterly profitability do not permit them to get into a cyclical business. Media and creative can provide regular (and hopefully predictable) income. Strategic work is not forever. A strategic combination or outright merger of the major consulting companies and the agency holding companies would be a marriage made in heaven.

Advantages would include:

The hand-off of the strategic learning to a sister company that executes creative and media means that the consulting company gets a long-term relationship with a now-cyclical client.

In the same vein, the agency could get business passed down to it without the high expense of a new business effort. And, clients might be more loyal with the strategic alliance in place.

Two major service industries work with many of the same clients providing non-competitive services.

Big advertising holding companies get their own exit strategy permitting the major advertising holding company heads to “get their money out” as they move towards retirement.

Won’t happen, some say. Too many egos involved. All the same, the agency holding companies are in the midst of a painful downturn. The prognosticators keep indicating an improved future, but it seems to continually be 6-12 months away. And if systems integrators and consulting companies can find a reason to partner, why not consider inviting the agencies to the party?