In September 2021, global professional services firm Ernst & Young (EY) announced that it would split its consulting business into a separate entity, known as EY Parthenon. This decision was made in response to the growing demand for specialized consulting services and to better position the firm to compete with other consulting firms. This article will explore the split of EY and its potential impact on the consulting industry, including the reasons behind the decision, the challenges and opportunities presented by the split, and the potential impact on clients.
Reasons behind the Split:
The decision to split EY's consulting business into a separate entity was driven by several factors (Goldstein, 2022). One of the main reasons was the increasing demand for specialized consulting services. Clients are increasingly looking for consulting firms that have deep expertise in a particular area, such as healthcare or technology, rather than firms that offer a broad range of services. By creating a separate entity for its consulting business, EY can better focus on developing its expertise in specific areas and offering more specialized services to clients.
Another reason for the split was to better position EY to compete with other consulting firms. In recent years, consulting has become an increasingly competitive industry, with firms such as McKinsey, Bain, and BCG dominating the market. According to the article in Consultancy.UK, it was revealed that by creating a separate entity for its consulting business, EY can more easily differentiate itself from its competitors and focus on developing its strengths.
Challenges and Opportunities:
While the split of EY's consulting business presents many opportunities, it also presents several challenges. One of the main challenges will be ensuring that there is no conflict of interest between EY's consulting business and its audit business (Reuters, 2022). The consulting business will need to maintain strict independence from the audit business to ensure that there is no perceived or actual conflict of interest.
Another challenge will be managing the transition from a single entity to two separate entities (O’Dwyer, 2022). This will require significant investment in new infrastructure and systems, as well as reorganizing the workforce to ensure that both entities are staffed appropriately. However, the split also presents many opportunities. By creating a separate entity for its consulting business, EY can more easily attract and retain top talent in the consulting industry.
Impact on Clients:
The split of EY's consulting business is likely to have a significant impact on clients. One of the main benefits for clients will be the increased specialization of EY's consulting services. By focusing on specific areas, EY Parthenon can offer clients more specialized and tailored solutions to their business problems. This can help clients achieve better outcomes and improve their overall business performance.
However, the split may also present some challenges for clients. For example, clients may need to work with two separate entities for their auditing and consulting needs, which could potentially lead to increased complexity and cost (Lacone, 2022). Additionally, clients may need to spend time and resources evaluating the capabilities and expertise of EY Parthenon to determine if it is the right fit for their specific business needs.
In essence, the division of EY's consulting division into a different organisation represents a significant development for the consulting sector. The desire to better position EY to compete with other consulting firms and the rising demand for specialised consulting services are the driving forces behind it. While there are advantages and disadvantages to the split, it is likely to have a big impact on clients because EY's advisory services will become more specialised.
Edited By Radhika
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