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Accenture Sees Momentum Amid Economic Downturn

By John Madden, Research Director at Ovum

“Part of Accenture’s confidence is tied to their belief that the turmoil has the potential to open even more opportunities in consulting and outsourcing among its global clients, some of which Accenture has worked with for the best part of a decade. While such business may materialize, the reality is that Accenture is one of only a few global companies that may be able to quickly adapt to the shifting market sands without being swallowed up whole. The danger, of course, is that those sands are shifting on a daily basis.

Size, business mix and portfolio are important assets as the global economy sags

Expectations were high for Accenture’s results and how the firm’s executive leadership viewed current market trends. As customers pull back or downsize IT spending, it’s natural to think that consulting projects may be viewed as discretionary and easily cut or postponed – and some customers no doubt share that view. Accenture’s view, however, is that its portfolio of consulting and outsourcing services are perfectly matched to help customers implement new processes, systems and services and deal with current economic conditions and/or transform business.

The firm has several levers – such as pricing, utilization, and its global delivery network (which now comprises 83,000 of the firm’s 186,000 employees) – that it can maneuver if the financial situation deteriorates, and still serve clients effectively. Accenture also believes that it is so engrained among its largest global clients that customers view Accenture services as too critical to cut. As CEO Bill Green said, for many of the firm’s clients “we’re not the fat, we’re the bone.” We would agree that this can provide the firm with a distinct advantage compared to some competitors that are envious of Accenture’s long-term business relationships.

Accenture predicted growth in FY09 in the same range as this past fiscal year – 9% to 12% in local currency, with the caveat of course that the firm will need to reassess this if economic conditions worsen. Green admitted that “we have our work cut out for us” if the firm is to reach the upper end of that guidance. While Accenture has a level of fiscal, organizational and management discipline and durability that few firms can match, we wonder whether it’s only a matter of time before the global economic stress forces Accenture to restate some of its financial goals.

Accenture looking to firm up UK business

As for the quarterly and year-end results, the firm couldn’t have asked for better numbers to bring some good news to weary IT and financial markets. For example, all of Accenture’s geographic regions reported strong growth, with the highest quarterly and annual growth in Asia-Pacific and a surprising spike in its Americas business thanks to increased outsourcing activity (which would seem to indicate that customers are on the hunt for cost savings through outsourcing).

However, despite the worldwide growth, it was clear that Accenture (rightfully so) wants to continue its year-long effort to bolster its EMEA business – in particular the UK. Growth in Italy, France and Spain was offset by “softness” in the UK financial services and public sectors, according to the firm. Accenture has zeroed in on its UK business, with an emphasis on generating additional demand for management and technology consulting services, and firm executives said they would continue to focus on building the UK pipeline – a tall order as an IT spending slowdown washes over European markets.

Fourth-quarter revenues were $6 billion, a 17% increase (10% in local currency) year-on-year, lifting year-end revenues 19% (11% in local currency) to $23.39 billion, the firm’s highest-ever annual revenues. Consulting generated quarterly/full-year net revenues of $3.61 billion/$14.12 billion and outsourcing generated $2.39 billion/$9.27 billion, with $7.67 billion in new bookings for the quarter and a record $26.79 billion for the full fiscal year. SG&A expenses dropped slightly to 17.7% of net revenues from 17.9% last fiscal year, utilization rates remained relatively constant (84%) and full-year attrition dropped slightly to 16% from 18%.” /PR

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