Accenture SMACs down on digital

Profile picture for user slauchlan By Stuart Lauchlan June 30, 2013
Summary:
When you think of Accenture, most people would think about multi-year, multi-million cost, massive outsourcing, systems integration, ERP and consulting projects. Time to smack down on digital!

Accenture-Pierre-Nanterme
Pierre Nanterme, Accenture CEO

When you think of Accenture, most people would cite multi-year, multi-million cost, massive outsourcing, systems integration, ERP and consulting projects.

The trouble is a lot of those are slipping away now and just as the enterprise software vendors have had to adjust to new business models - often with painful short term impact- so too do services giants such as Accenture.

According to its most recent quarterly results, Accenture's outsourcing business is holding firm enough for now, but a slow down is expected, while its consulting arm has already seen a softening. New sources of revenue and a new business model are needed.

To that end the company is looking to SMAC itself back on track. SMAC is the latest buzzword from the US, referring to Social Mobile Analytics and Cloud. Accenture however wants to customise that a bit, according to CEO Pierre Nanterme who says:

"What we would put in this SMAC, for us that would be Digital Marketing, Analytics, Mobility, Cloud."

That doesn't provide the pleasing acronym but it's indicative of where Accenture sees its growth potential for the future.

Digital direction

Digital is where it's at, argues Nanterme:

"As I meet with CEOs around the world, it's striking to see how digital is now a part of every conversation.

Digital is fundamentally disrupting business models and requiring companies to rethink how they operate, from how they interact with customers and employees to how they manage their supply chains and collaborate with business partners."

Inevitably the party line is that Accenture is very well-positioned to help clients transform their businesses to compete in this new digital world, particularly around marketing. Nenterme explains:

"Marketing is one of the key functions that digital is having a huge impact on.

"Chief Marketing Officers are increasingly looking for integrated solutions that bring together strategy, technology and analytics, add scale to get more value out of their investments.

"To better serve them, we continue to make strategic investments to enhance Accenture Interactive, our Digital Marketing Services group."

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These include this acquisition of Acquity Group, the second largest independent Digital Marketing company in the U.S.; Fjord, a global design firm; and earlier this year, avVenta, a digital production company.

"Together, these acquisitions expand our capabilities and position us as a leader in this fast-growing segment of the market. Accenture Interactive was key to a recent win at BMW, which selected us to manage the rollout of its new web platform to 100 markets around the world.

"We will also manage its online marketing campaigns, including content customization and social media in local markets, helping BMW deliver the right experiences to the right consumers at the right times. We continue to see strong demand for our digital capabilities in many other areas, including Analytics and Mobility."

Cloud work

Accenture's skin in the cloud market is also more and more apparent:

  • Cloud revenues recently reached the $1 billion mark, nearly 3.5% of 2012 total.
  • The company has partnerships with 25 cloud service providers
  • It has worked on more than 4,000 cloud projects for clients
  • It employs around 6,700 professionals trained to work in the cloud.
  • It plans to spend nearly $400 million by 2015 to develop its cloud-computing business.

Making a success of such a push is crucial at a time when softness in the global market continues to cast a shadow over prospects. Nanterme admits:

"The overall environment has not been progressing probably the way we all expected, including our clients The situation in Europe is not even slightly better. It's probably slightly worse. Even if we do not have a Greece event, if you will, the environment is moving from an economic standpoint to recession.

"So the mood with our clients over there is still to be thoughtful and to be very mindful about the way they invest. And when clients are thoughtful and mindful, they tend to wait a little bit more and to think further on when and how much they're going to invest."

But for all that, Nanterme still thinks there's room for a return to form for the consulting business although it may be some time yet:

"It's slightly different from the mindset on outsourcing, which most of the time is more driven through cost optimization. Consulting is more about building for the future, if you will, for clients.

"Building for the future is requiring confidence, confidence in the economic outlook, confidence in the business.

"The level of confidence is not at the level we expected."

Verdict

  • Accenture's shift to new revenue streams is a pragmatic move and one that can be seen mirrored across the enterprise services landscape.
  • Its cloud investment to date has been highly impressive and its diversification into the digital marketing space intriguing but seemingly successful to date.
  • The problem at present is that there are no official numbers in the public domain around the so-called SMAC offerings, other than an acknowledgement that they are enjoying higher growth rates than Accenture's traditional services.
  • That said, the traditional business still pays dividends. Just today it's been announced that the firm has been chosen to to implement a National Information Management System for the Scottish Police. Under the 10-year deal with the Scottish Police Authority and Police Scotland, Accenture will develop and maintain i6, a new operational policing system for Police Scotland, the new national force. (That's  just the sort of deal that the public sector isn't supposed to be commissioning any more incidentally, but that's an argument for another day!)
  • For the likes of Accenture, such occasional 'old style' engagements need to be complemented by more SMAC-centric ones.

With that in mind, Accenture is at least headed on the right path.