Monday, 29 June 2009

Accenture – Eight Years On

(By Anthony Miller – Monday 29th June 2009 9:30pm). As ever with Accenture’s results, the interesting bits are to be found in the analyst concall. I shan’t bore you with the headline numbers from last week’s Q3 report – you can read them for yourselves here. They were OK, by the way, under the circumstances. But let’s look ‘under the covers’ at some of the key messages:

· Europe is a mixed bag. Spain, Italy and France are lagging, while Netherlands, Nordics and Germany are growing – in some instances double-digits. But the UK still sounds sick: Accenture COO, Steve Rohleder, said they are "work(ing) hard to get that business stood back up”.

· Consulting remains tough: “some clients are slowing the pace of ongoing projects and deferring decisions to expand scope beyond current commitments”. This isn’t helped by pricing pressure: “clients are continuing to ask us to go back and reevaluate our existing arrangements with them and reduce our prices”.

· Outsourcing is still growing in real terms but growth has slowed “due to the continuing shift to lower-cost resources at a reduced price level, and a lower volume of scope expansions on existing contracts”

· It’s still too early to call the bottom: “it's hard to say if the worst is behind us or the worst is in front of us.”

In other words, there’s no real sign that clients are focusing on anything more than cost containment. As a result, they're putting more work offshore.

But let’s give Accenture its due. July will mark the eighth anniversary of the company’s IPO. Since then, in the words of CEO Bill Green, “we delivered compound annual growth of 10% in revenue; 12% in operating income, with 140 basis points of margin expansion; 26% in EPS; and 20% in free cash flow (...) We have returned $13 billion to shareholders through share repurchases and dividends. All of this while adding more than 100,000 employees.” And perhaps he could have added: “and all of this in the face of the phenomenal rise of the India-based SIs, whose leading players pitch themselves directly against Accenture and have extracted close to $100b of revenues from the global IT services and BPO marketplace during that period.” Cap-doffing is perfectly in order, I would say.

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