Last week, KPMG Australia announced 2017-18 revenue was up 9.2% to A$1.64 billion, partly because its management consulting business is growing so strongly.

‘Wow,’ you might think. ‘That’s pretty good in the slow-growth 2010s!’

But for a Big Four accounting firm, it’s just typical. Deloitte, PwC, EY and KPMG have been growing at around 10% a year for some time, so that now they have a combined annual global revenue of more than US$130 billion a year.

And while management consulting has been the Big Four’s biggest revenue growth area, they’ve also expanded from their traditional audit and tax advice territory into all sorts of fields, from law to digital marketing, IT and engineering. They dominate geographies from Australasia to North America to China.

They are now not so much large accounting firms as the great professional services conglomerates of the early 21st century, and even that’s not entirely true. Rather than being companies or even partnerships, they’re actually collections of firms in different countries operating under common brand names.

And here’s the weird thing: no-one can really explain why they are doing so well. I’ve spent a bunch of time in the past few months looking at plausible explanations, and the truth probably involves a combination of them. But it’s still unclear to me just what that combination is.

Among the explanations I’ve looked at are these:

  • Their branding is powerful – except that none of the Big Four has really differentiated themselves from the others. When you hear “EY”, for instance, do you think of anything different from “Deloitte”? When you see “PricewaterhouseCoopers”, do you think of anything distinctive about that firm (other than maybe ‘Why don’t they capitalise the ‘w’?’). If there’s a powerful brand in the industry, it’s ‘the Big Four’, which no-one is actively promoting.
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  • Size makes the Big Four’s businesses more efficient – except that it’s surprisingly rare to hear a clear, specific, believable benefit they get just from being big. And, in seemingly similar fields like law, no comparable giants have emerged.
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  • Clients like getting many services from one firm – except that in practice many companies seem to buy services from multiple Big Four firms at the same time. For instance, when UK construction and facilities management giant Carillion went bust in January 2018, it was using every one of the Big Four in substantial ways. And if accounting firms can cross-sell services easily, why can’t law firms or consulting firms pull off the same trick?
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  • The Big Four hire the best people – except that few believe this to be the case, outside maybe China. The smartest people in US management consulting, for instance, still go to McKinsey – yet the Big Four have made substantial inroads into that business.
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  • The Big Four have been strongest at implementation, and that’s what companies want these days – except that while this seems to be true in management consulting, it’s not obviously the right explanation in other fields.

 
If you want to dive deeper into the success and challenges of the Big Four, I’ve written a more detailed examination of their position and problems at Acuity, the publication of the Chartered Accountants of Australia and New Zealand. It leans on a new book by Melbourne University corporate governance expert professor Ian Gow and accomplished writer Stuart Kells, The Big Four: The Curious Past and Perilous Future of the Global Accounting Monopoly, which I recommend to anyone wanting to expand their understanding of big-picture business issues.

But Gow and Kells don’t have a thorough explanation of the Big Four’s success either. It’s still a puzzle. Feel free to make suggestions in the comments.