Accenture after Pierre - business as usual, with no pause button

Accenture just turned in another stellar quarter, with early investment in digital transformation services continuing to pay off. But it was a quarter perhaps overshadowed by the death of the firm’s long-standing CEO Pierre Nanterme, the driving force behind much of the digital forward-thinking.

The company hopes to announced a new CEO, chosen from internal candidates, in the coming months, but for now it was left to Interim CEO and former CFO David Rowland to pay tribute to Nanterme’s legacy and:

to acknowledge Pierre, and how important he was to Accenture throughout this decades-long career and his leadership as Chairman and CEO.

Nanterme would, he argued, be proud of how Accenture is currently positioned. It’s digital, cloud and security services - the so-called ‘New’ as Nanterne used to dub them - that are powering growth, with demand for such offerings in the most recent quarter making up nearly two-thirds (65%) of new bookings. Rowland commented:

The foundation of our growth strategy is to drive strong momentum in ‘the New’ and that has certainly been the case so far this year with continued double-digit growth across digital, cloud and security, even as these businesses have reached significant scale and now represents the majority of what we do.

It’s also an area that attracts a lot of investment, he said, citing the Applied Intelligence capabilities as a case in point. This, he explained, combines advanced analytics and AI with vertical industry and business understanding:

We currently have more than 20,000 people focused on Applied Intelligence, including 6,000 deep in artificial intelligence and data science. And we’ve developed more than 250 proprietary industry-specific assets that significantly differentiate us in the market.

Another success story is the Industry X.O initiative, he added:

[This] is using advanced digital technologies to help clients transform their core operation from R&D and engineering to production and after-market support. We’re building a market-leading capability, with more than 10,000 people supporting the Industry X.O and we continue to expand our capabilities in dozens of innovation centers in our global network from Munich to Tokyo to Detroit.

The Accenture Technology business continues to partner with the likes of Oracle, Microsoft, SAP, Salesforce and Workday to provide “intelligent platform services”. This operation accounts for around 40% of total corporate revenues. Elsewhere the firm is providing infrastructure integration services for clients, working with Azure, Amazon Web Services and Google Cloud.

Custom thinking

There’s another pillar to Accenture Technology which Rowland expects to grow - Intelligent Software Engineering:

We’re leveraging the capabilities of more than 30,000 engineering professionals to deliver products and custom systems in a time of accelerating technology disruption. We believe that demand for custom, cloud-based applications will grow significantly in the coming years, and we’re well-positioned to meet that demand.

It’s a response to a shift in the market from a few years ago, he explained, when the preference was to buy “package, package, package”. That’s changed today he argued:

Really to get the full power of the data, the artificial intelligence, the machine learning, there is the need to do a lot of custom apps software development in the cloud, so to speak, to really exploit all of the advantages of kind of the broader landscape of new technology and new platforms.

These are not, as you would expect, these are not like large-scale necessarily individual projects. But it’s a rapid pace of quick development of custom apps in order to really exploit and take advantage of the power of data, Artificial intelligence, machine learning, all of those things that require some customization for individual companies. I think it’s broad-based and pervasive. And it’s really kind of the art, if you will, behind the power of the technology and really customizing that to the needs of a particular company.

Still spending

Rowland pitched that all of this provides Accenture with a competitive differentiator in the market:

When you look at our strategic areas of focus, all of those things, the common thread across all of that is that, many of them are enabled by a strong strategy in consulting practice that is deep in both industry skills and differentiation, but also in functional skills and differentiation. That is part of the end-to-end model that we talk about at Accenture. And, of course, the consulting and strategy capability underpins that and really in many ways, it’s the tip of the spear for most of the pillars of our strategy.

He also argued that despite macro-economic pressures - specifically citing Brexit and global trade disputes - the Accenture offering is one that continues to appeal to its existing and potential client base:

For global companies to operate in this volatile dynamic environment is the new norm, but it’s been the new norm now for several years. And so as we talk to our clients, they continue to focus on, for the most part, driving their business forward..Our clients continue to focus on investing and digitizing their business, both for top line growth – differentiation in the market - but also as a way to create operating efficiency in the business. So, we believe that companies continue, for the most part, continue to be on their front foot looking to invest in digitizing the business.

He added:

Look, the market is always challenging. There’s nothing different about it today than it was a year ago. The market is never easy. It’s always challenging. But as I talk to our C-Suite executives and our clients, there is a willingness and a desire really to invest and drive the business forward, and that’s not changed.

But things are still evolving, he noted:

Our observation is that, with the pace of disruption in global business, with the pace at which industries are getting disrupted, companies are getting disrupted, there’s a recognition we believe we see among companies that you cannot afford to hit the pause button. You cannot afford to slow down.

I think that when we hit the eventual soft spot, what you will see is companies doubling down more and pushing harder on the operational efficiency and cost rationalization agenda in order to fuel what is the lifeblood, which is constantly re-imagining, re-inventing and investing in growth, continuing up this adoption curve of the power of the new technology.

What we believe is that, there’s going to be resiliency and companies’ willingness to invest in their definition of ‘the New’, because to do otherwise would just fundamentally jeopardize the existence of the enterprise going forward. We’ll see the extent to which that plays out, but that is the observation that we have.

My take

I’ve been hugely impressed over the past five years or so about how Accenture has re-defined itself to morph from outsourcing firm to digital services provider. It’s a journey all of the big Systems Integrators are on at some stage or another, but Accenture got in early and it’s paying off.

Overall, there’s a underlying sense of ‘keep calm and carry on’ in the wake of Nanterme’s death. Or as Rowland put it:

It is absolutely business as usual. The statement that I’ve made and our leadership team has embraced, is, ‘We don’t hit the pause button at all’. So we continue to move forward. We operate and I’m executing the responsibilities in the same way the Pierre would have executed them..So no pause. We continue to drive our business forward.