Wednesday, April 7, 2010

The rocket science of scale

While needless complexity can often complicate the branded solution's problems (see my post The rocket science of soup), it turns out that the onrush of technology can offer some knowledge based service providers real advantages over their less prestigious 'white label' competitors.  I had the privilege of listening to Al Kent - a Senior Partner at PricewaterhouseCoopers - at lunch today.  He talked about how the "Big 4" accounting firms are increasingly using technology to automate and offshore many of the more tedious activities of the accounting profession.

This is interesting because historically the Big 4,6,8 have been substantially more expensive than their less branded (if not White label then grey label) competitors - this is because the big boys needed far more infrastructure and risk management to serve global companies than the regionals needed to serve simpler mid-market businesses.  This led to a mass exodus towards 'selectivity' or the abandonment of the mid-market by the Big 4.  In Mr. Kent's remarks I noted the glimmer of a shift in competitive dynamics.  By utilizing their global reach, scale and access to technology, the Big 4 appear to be narrowing the price gap between themselves and their smaller competitors, making the decision to go with the Brand Name easier for the upper end of the mid-market.

It will be interesting to see how the 'speed boats' respond to this challenge from the 'ocean liners' out on the Openwater.

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