HFS Highlight: EY does the math and acquires Pythagoras to bolster Microsoft capabilities in the UK

As the war for talent and cloud migration heats up, EY strengthens its service capabilities with the addition of Pythagoras’s services and its technical staff and a healthy book of business.

With the UK Microsoft technology firm acquisition announcement, EY continues to grow its technology consulting services to compete with KPMG, Avanade, and others and furthers its commitment to be the leading consultancy for Microsoft customers seeking Digital Transformation and their journey to Cloud Native.

The 22-year-old Pythagoras Communications firm brings a broad range of Microsoft service capabilities like Dynamics 365, Azure, Power Platform, and SharePoint to EY.  From a talent perspective EY adds nearly 120 Microsoft consulting and technology experts to its technology consulting arm, and further expands its dedicated Microsoft service group, launched late last year (Dec 2020).

This is as much a defensive move as offensive

EY began to build its deep partnership with Microsoft six years ago and grew to be a top global Microsoft consulting and implementation partners. As a result, EY has collected 15 Microsoft awards over five consecutive years in excellence and innovation in various areas, including advisory services, digital technologies, analytics, AI, blockchain, and Dynamics CRM.

EY’s direct rivals dominate the Microsoft service space in the UK and Europe, with significant partnership investments and acquisitions to strengthen their technology, people, and innovation. In response to the market’s large-scale digital transformation demands and competitions, EY took consecutive bold moves setting up a Microsoft dedicated service group and acquiring Pythagoras. EY builds its robust Microsoft capabilities, breadth of services, and scale as the market still has considerable potential.

Why Pythagoras and why now?

EY’s acquisition of Pythagoras boosts EY UK’s Microsoft Dynamics 365 and Azure certified professional bench from previously being one of the smaller Hyperscaler’s certified benches to comparable size to its competitors. With the new addition, EY advances its position as a reliable Dynamics 365, Power Platform, and cloud partner in this market.

In our recent HFS hyperscaler service providers Top 10 study, we observed enterprises consider Microsoft their preferred choice of cloud partner. Often, they are already using Microsoft products (such as Dynamics 365, Teams, Windows service, etc.), and it is less complex to migrate their workloads to Azure cloud. Also, we have noticed that Azure’s workload usage is increasing because of its consistent demand in the market.

Talent crisis is one of the major issues in the industry. The high employee utilization level and increasing attrition rate forced many major IT service organizations to hire; however, 30 percent of such selected candidates drop out for better opportunities. Bringing a pool of skilled professionals to meet the demand is a massive challenge in today’s scenario. In our view, EY was opportunistic in this buy by picking up a firm that is strong in the Microsoft consulting business and has a rich talent but strives to scale. EY paid an undisclosed sum to close the deal.

EY can boost customer’s journey to the OneOffice™

Microsoft offers a deep set of tools and technologies that can deliver the OneOffice™ emerging technology stack. With Pythagoras, EY adds technical and customer engagement talent to its UK services team. It also adds 140 customers who represent cross-industry use cases as these clients migrate their Microsoft (and other) systems, workloads, and business processes to the cloud. Furthermore, EY added various capabilities in its portfolios through acquisitions like AgilityWorks for SAP competencies and Zilker Technology for e-commerce, digital, and cloud capabilities. As per the HFS OneOffice vision, more could be achieved by leveraging best-of-breed technologies (Exhibit 1).

Bringing in the right technology capabilities and the people to improve the customer experience is key to the success of any business in OneOffice vision. EY’s overall strategy is in line with HFS OneOffice vision by combining various key factors and understanding market requirements to deliver the true value and experience to the clients.

Exhibit.1: OneOffice emerging technology platform

Source: HFS Research, 2021, Examples are representative

The Bottom Line: While defensive, EY brings stability and a higher level of engagement to UK firms with significant Microsoft investments through the acquisition of Pythagoras

Microsoft offers many relevant capabilities like cloud, triple-A, low/no-code apps, and other enterprise applications, which are inevitable for today’s digital enterprise. As we know that the demand is continuously increasing for enterprise applications and services, EY is swiftly ramping up its Microsoft capabilities through its dedicated Microsoft services group and Pythagoras acquisition. Microsoft products are an integral part of enterprise business to an extent and are aligned well with the OneOffice vision. Digital transformation, Cloud, security, and automation services are on the priority list for many organizations because of the pandemic. And with the inorganic strategy, EY has bolstered its Microsoft capabilities and region coverage making it a high potential partner that helps it to stay competitive.