In recent years, many IT services firms have been aggressively acquiring new capabilities in creative areas such as design.

One of the key challenges they face in acquiring such firms is managing what can be a significant culture gap between the flexibility of small creative firms and the regimented, industrialized nature of a global IT services firm. Successful acquisitions strike a balance between maintaining the autonomy of the acquired firm, keeping the talent engaged, and integrating capabilities into the broader company to realize the value being sought through the acquisition. Rather than allowing an acquired firm to continue running fully autonomously or being fully subsumed into the broader organization, acquirers are looking at a blend: combining a common foundation, direction and values while maintaining a level of autonomy in how services are delivered.

Based on our conversations with a number of IT services firms and representatives of acquired firms, this blog looks at some of the more effective approaches being adopted to balance autonomy and integration when assimilating newly acquired capabilities.

Maintaining Autonomy

Leveraging Existing Brands

Maintaining autonomy in branding of newly acquired capabilities signals to both employees and the market that this is a unique capability within the broader IT services firm’s delivery portfolio. This is a common approach for design agencies that have developed their own brand awareness. Examples where IT services firms have maintained the brands after acquisition include Infosys’ WONGDOODY and Brilliant Basics, TCS’ W12 Studios, Tech Mahindra’s BIO Agency, and Wipro’s Designit.

Acquiring firms are also frequently allowing acquired design firms to maintain their own go-to-market initiatives. While leveraging the acquired capabilities to support existing engagements, broaden relationships with existing clients, and reach new clients are the main drivers of these acquisitions, global IT services firms are recognizing that design agencies have relationships and visibility of opportunities they lack. In these instances, the design agency leads the client relationship while leveraging the broader IT services firm to offer a much broader portfolio of offerings.

Maintaining separate branding is particularly important for acquiring firms that lack a strong consulting heritage. While the companies above all come from an IT outsourcing heritage, competitors with a more consulting-led heritage have built distinct branded design business units integrated with their consulting capabilities rather than continuing stand-alone brands after acquisition. Examples include Capgemini Invent and IBM iX. Accenture’s Fjord sits somewhere in the middle: a part of Accenture Interactive with a number of design agency acquisitions rolled under the brand of its first major design agency acquisition, Fjord.

Maintaining Dedicated Delivery Locations

In M&A situations, the opportunity for cost synergies from consolidating real estate is a common cost saving measure. However, IT services firms are instead frequently maintaining dedicated design agency space to minimize the disruption to the existing employee base and help demonstrate the acquiring firm’s commitment to the acquired firm’s culture. When TCS bought London-based W12 studios last year it was already in the process of building out a creative design thinking space in London. Even with the space complete, the W12 team has so far remained in its small home-like Camden offices a few miles away. Infosys is building a design studio network, including a Design and Innovation Hub in Providence, Rhode Island, while WONGDOODY (Los Angeles, San Francisco, New York and Seattle) and Brilliant Basics (London, Dublin, Berlin and Amsterdam) has maintained its own studio locations.

Maintaining Career Trajectories and Expanding Opportunities

In order to retain their new creative employees, acquiring IT services firms are also often maintaining many of their former employer’s career development structures. Smart acquirers are actively seeking to minimize the impact on the processes and procedures that directly impact the career growth of their newly acquired talent.

Furthermore, they are leveraging their scale to emphasize to their new employees the range of new career development opportunities available in a global organization. These can include working in new geographies and/or new industries and adding adjacent skills. Allowing employees to see new opportunities to apply their expertise in new ways can provide an incentive to remain, post-acquisition.

Pursuing Integration

Building a Common Toolset

One of the key challenges of acquiring a niche firm is the application of its capabilities to a broader, global client base. This is a particular challenge when a large firm makes a series of acquisitions. Different groups across different markets, deploying different tools, processes and methodologies can mean inconsistent outcomes. Acquiring firms need to build a global toolset of common templates, assets and methodologies to act as a common denominator across geographies and delivery units.

Accenture has rapidly expanded its creative capabilities since its acquisition of Fjord in 2013. To ensure consistency of delivery across these geographically diverse units it has developed its product design kit (PDK), a bundled set of proprietary assets including style guides, front-end development accelerators, accessibility standards, design templates, code snippets, pattern libraries, and usage and content guidelines to support design engagements.

Leveraging the Best of Both Parties

As part of building that common foundation, it is important to identify and keep the best of what each organization brings. Imposing rigid structures onto an acquired firm may reduce the value that can be realized, and applying the processes of a small, nimble boutique in a global context may not work.

Successful integration requires taking the core capabilities from the acquired firm, industrializing them and then training the broader workforce of the acquirer on these new approaches. Following Tech Mahindra’s acquisition of the BIO Agency in 2016, it launched ‘BIO University’, with BIO employees delivering training to employees based in Tech Mahindra delivery centers on the skills, processes, and methods derived from those used by the core BIO team but tailored to a global organization. This initiative expanded the design-skilled resource pool from 150 employees based in London and New York to 650, including ~400 in India.

Accenture and Fjord undertook a similar global training program: Fjord estimates that, in addition to its ~1.1k dedicated design specialists, another ~50k Accenture employees have undertaken some training on design principles about which they can speak knowledgeably with their clients.

Building an Organization within an Organization

For serial acquirers, it may not make sense to let each newly acquired creative firm maintain its autonomy in branding and approach as described above. Rather, the acquirer can build a dedicated business unit to house each of these organizations together. This business unit balances global commonalities in delivery methodologies, tools and skills without imposing the greater standardization that comes with integrating creative groups into non-creative business units. IBM iX, Wipro’s Designit and Accenture’s Fjord all play this role as a landing spot for each new creative acquisition.

When Wipro acquired Designit in 2015, the design firm had ~300 employees based across seven countries. By 2018, Designit, now Wipro’s strategic design unit, had grown its headcount to ~500 employees across thirteen countries thanks to both organic and inorganic growth.

Summary

As IT services firms have looked to expand the breadth of services offered to their clients, they have frequently looked to grow through acquisition of niche capabilities, particularly creative firms. To make these acquisitions successful, firms must be mindful of cultural differences and understand how to balance integrating capabilities and allowing the acquired firms to maintain a level of autonomy.