Why did Deloitte acquire Day1 Solutions?

Deloitte recently announced it acquired cloud consulting firm Day1 Solutions. Deloitte is one of the world’s largest service providers and has service relationships with most major U.S. enterprises. Day1 is a small firm. So, this raises the question: Why does Deloitte need Day1? And why should your enterprise care?

Deloitte needs Day1 for the same reason Accenture needs Genfour, Genpact needs Rage Frameworks and Infosys needs Panaya. The problem for Deloitte and for every traditional services company is that their clients do not believe they have the digital skills to lead the digital transformation journey the clients want their business to undertake.

In acquiring Day1, Deloitte wants to demonstrate to its existing clients that it has the digital chops it needs and is the right partner to help clients with their digital journey. Accenture has been extremely aggressive in acquiring digital implementation firms with a constant stream of announcements seemingly every week. It appears that Deloitte is now following Accenture down the same path with its acquisition of Day1.

The services market is rotating into digital, and today all the growth in the market is in implementing digital technologies. The labor arbitrage-based services market stopped growing last year, and 21 percent of the services industry growth is now in businesses with a digital focus. Deloitte understands this.

Deloitte is a digital leader and Everest Group’s studies show the firm is well perceived by customers, but that is not enough. The firm needs to accelerate its growth and is using this acquisition to do that. Enterprises are looking for service providers with people that have real digital experience. And no company, including Deloitte, has enough of them. It is acquiring Day1 to add to that number. For every digital person with credentials, Deloitte can pull through a huge amount of digital transformation.

For enterprise clients, this acquisition demonstrates Deloitte’s commitment to provide the resources to enable and accelerate their digital journeys. Cloud integration is a critical enabler of digital transformation, and Day1’s cloud expertise will significantly boost Deloitte’s expertise in this area.

As I look forward, I believe that Deloitte runs the risk of being outflanked by Accenture and other service providers that are more aggressive in mergers and acquisitions. As a result, I anticipate Deloitte will intensify its M&A activities.