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SapientRazorfish Merger: A Necessary Digital Consultancy Consolidation

sapientrazorfishTwo years ago, we published our take on Publicis Groupe’s acquisition of then independent, digital powerhouse, Sapient. In that report, we predicted that it would be difficult to integrate the capabilities and culture of Sapient with existing Publicis agencies Razorfish and DigitasLBi to drive value for clients.

We were right, it was difficult. Clients struggled to find clear points of differentiation between the firms, which often competed against one another for new business. Revenue suffered. Meanwhile, consultancies like Accenture Interactive and Deloitte Digital continued to move into digital agency territory.

And now, two years later, Publicis Group is merging SapientNitro and Razorfish to form SapientRazorfish. The new entity will sit under Publicis Groupe’s digital arm, Publicis.Sapient and will begin fully operating in the new model on January 2, 2017.

SapientRazorfish Merger: Smart

This merger is smart because it:

Provides credible capability for digital transformation opportunity. Publicis Groupe is now closer to being able to compete with consultancies for digital transformation work. Merging Sapient and Razorfish brings together an estimated 12,000 employees with experience across digital strategy, creative, data, technology and platform implementation. The depth and breadth of technology offerings is unmatched by any of the competitive agency holding companies. And while not as large as an Accenture Interactive or Deloitte Digital, particularly in sheer number of development and consultant numbers, SapientRazorfish’s agency heritage implies a creativity and agility that is not part of the consultant’s DNA.

Eliminates (some) client confusion. While Sapient and Razorfish have unique capabilities and regional differences, the agencies have many overlapping capabilities particularly in their web and eCommerce practices. Since the Sapient acquisition, Razorfish and Sapient have existed in a state of competitive cooperation, which has been distracting at best, destructive at worst. This comes at a time when clients are looking to consolidate agency rosters to deliver end to end brand strategy and digital experience services. With the combined entity, clients won’t have to choose between Sapient and Razorfish.  Publicis.Sapient, however, will need to figure out how it is going to position DigitasLBi. As of now, the holding company touts DigitasLBi’s “data-centered customer relationship management capabilities.” Will DigitasLBi be the CRM arm, digital brand and content shop or the digital media buying agency?  What about Publicis’ other media entities? This remains an open question.

Offers a way forward for rebuilding corporate culture. Employees at Sapient and Razorfish have been in limbo since the Sapient acquisition – unclear what Publicis planned to do with both shops. Lack of clarity on corporate vision and culture affects hiring, retention and overall productivity. The merger is the first step in rebuilding a new corporate culture, which should invigorate existing employees and attract new talent. Buyers should be aware that this cultural shift will take time, and we expect SapientRazorfish to have some growing pains as they sort this out over the next year.

This merger is also the beginning of, what we believe, will be a year of consolidation in the agency world. As marketers look to deliver integrated brand experience, agencies (and holding companies) will need to reposition to lead across traditional and digital creative, strategy, experience and production. Established global creative agencies, once the go-to for big creative ideas will lose relevance as smaller boutiques and agencies with digital heritage assume a leadership role.  To stay relevant, smaller shops will need to deepen expertise in areas core to delivering integrated brand and customer experience (CX design, omni-channel experience planning, integrated media buying, technology implementation).

Constants & Digital Agency Transformation

Consultants won’t make it easy for agencies during this year of transformation: they are aggressively acquiring and building expertise. Look for consultancies to acquire creative and design-focused agencies to add that capability to digital experience and delivery. We expect to see acquisitions that broaden consultancies’ agency capabilities, particularly around areas like brand, creative, and even media.

In the upcoming months, I’ll be publishing research on additional lead agencies to consider, how to RFP for a lead agency, and the future of agencies. Stay tuned, or set up an inquiry with me to learn more.

By Sarah Sikowitz with Anjali Yakkundi of Forrester Research. Read more Forrester blogs here.

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