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Accenture to shed 19,000 jobs, but CEO Julie Sweet says the big transformational deals are still happening

Stuart Lauchlan Profile picture for user slauchlan March 24, 2023
Summary:
A solid Q2, but Accenture is not immune to the vagaries of the current macro-economic realities...

Julie Sweet
Julie Sweet

Accenture has become the latest enterprise giant to announce headcount cuts, with 19,000 jobs going worldwide over the next 18 months. That’s 2.5% of the total workforce, with roles set to go from HR, IT, finance and marketing. 

The news came as the consultancy firm announced its Q2 numbers which recorded a profit of $1.5 billion on revenue of $15.81 billion, slightly up on $15.05 billion a year ago. But the firm issued cautious Q3 guidance in the face of the current macro-economic crisis. CEO Julie Sweet talked about clients now having “just a laser focus on cost”:

Most clients want to see a shorter return on investments, more focused on cost. They love cost and growth, but it has to be, in most cases, a shorter return on the investment. At the same time, it’s important that not all industries are in the same place. So if you’ve got industries like, say, in the hi-tech area, and some spots on retail, for example, cost optimization is very dominant. If you’ve got some of the other less affected industries, say, insurance, energy, everyone wants to be more resilient and lower cost. But they are really trying to deal with their technical debt, they are thinking about growth, how do you reimagine the customer experience? So I would say a common theme is that in this kind of an environment, everyone does want to be optimizing costs, but where they are focusing is different by industry .

At the same time, she  argues that that economic crisis should be encouraging clients to spend more: 

We believe that the ongoing volatility and uncertainty in the macro environment is making it even clearer to clients that they need to change more, not less. And that two of the five key forces of change that we have identified for the next decade, the need for total enterprise reinvention and the ability to access, create and unlock the potential of talent are critical to succeed in the near, medium and long-term.

We see two common themes. First, all strategies continue to lead to technology, particularly cloud, data, AI and security. This is reflected in the latest market estimates, which are down slightly, but are still hovering around 5%. And second, companies remain focused on executing compressed transformations to achieve lower cost, stronger growth, more agility and greater resilience faster.

There is ongoing demand for what Sweet characterised as “larger transformational deals”, particularly around the need to “build the digital core| of the enterprise: 

I’m personally working right now with clients across insurance, healthcare, consumer goods, banking and telecom, all of whom are very focused on how do we get rid of our technical debt, how do we build more resilience? They are trying to build digital products, but they have got really old systems. And so we remain in the early innings of building the kind of digital core that [they] really need to transform every part of the enterprise. So we continue to feel good, not just about our pipeline, but about the demand we’re seeing, really rooted in our view that all companies are going to have to do total enterprise reinvention across the enterprise, that it’s really a continuous cycle starting with a strong digital core. And there is a lot of work to do on building those cores out.

On the ground

Sweet cited a number of use case exemplars to back up her argument:

We are helping Shionogi & Co. Limited, a Japanese pharmaceutical company with a compressed transformation to improve its business process efficiency and create a more agile organization. We will enter into a joint venture with the company that will provide managed services capability to oversee back office functions such as human resources, finance and accounting, public relations, facility management, procurement and marketing.

The joint venture will also be charged with the management of the pharmacovigilance function from safety management operations to post-marketing operations to regulatory compliance. As part of this transformation, we will upscale over 400 employees, enabling them to play a greater role in the growth and development of the wider business, hence demonstrating the value of all our services from strategy and consulting, our deep industry knowledge to technology and operations coming together to enable the clients transformation. 

In the UK, Accenture is working with the Department for Work and Pensions to modernize its legacy systems, eliminate backlogs and deliver a better experience for citizens and employees. Sweet explained: 

We developed a cloud-based intelligent optimization platform that combines robotic process automation, AI, analytics and machine learning, to provide bots as a service to create the equivalent of a virtual workforce available 24/7. With routine tests now automated, the organization has already saved 2.4 million human hours, which can be reallocated to more complex higher value tasks. 

Cloud revenues continue to grow by “very strong double digits”, Sweet added, pointing to the State of Missouri, where Accenture is replacing legacy apps and infrastructure with cloud ERP replacements:

As the current ERP system no longer fully meets the business needs of the state, they are looking for a modern system that is efficient, scalable and flexible, all delivered by a best-in-class implementation partner. This compressed transformation, one of the earliest and most complex ERP implementations for any state will help reduce operating expenses, provide opportunities for up-skilling and improve customer experience and services. We are partnering with minority and women-owned businesses on this transformation and we will bring in apprentices, the program’s lifecycle part of our shared commitment with the state of Missouri to foster diversity and inclusion.

And inevitably there’s a generative AI and Metaverse story with Sweet stating: 

We’ve talked about the importance of artificial intelligence in building the digital core for our clients. While generative AI has recently burst into the popular imagination, at Accenture we’ve been working with the technology from its earliest stages and are already applying it at clients. For example, we’re working with a multi-national bank to transform how it manages high volumes of post-trade processing e-mails every day. We are leveraging a generative AI solution as it is built to understand the context of e-mails with high accuracy. It automatically routes large numbers of e-mails, daily to relevant teams and draft responses with recommended actions and related information. Our work will help reduce manual effort and risk, boost worker efficiency and improve interactions with customers.

Sweet concluded:

Long-term, we see these technology changes, things like generative AI, playing to our strengths because to use these technologies, it requires deep understanding of the industry, the use cases, the process changes. When people talk about the new kinds of generative AI, which we are super excited about, being like a co-pilot to human beings, the entire process has to be changed in order to make that work. You have got to up-skill the people and you have to be able to do all of that in a very responsible way…There has been a lot of demand to understand this and in understanding it, understanding actually how hard it is to be able to implement at scale in an enterprise. We are all having fun playing with it, but how you build that into an enterprise is very different and a great opportunity?

My take

How indeed? A solid enough quarter and the message from Sweet is inevitably upbeat. But the note of caution running through the forward guidance and, of course, the job cuts, are a reminder of the current volatility in the wider economy. 

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