Accenture's offensive on the $5bn digital opportunity

Stuart Lauchlan Profile picture for user slauchlan September 24, 2014
Accenture's turned in a stellar full year as the firm restructures to add new digital opportunities to its core ERP and BPO services bedrock.

[sws_grey_box box_size="690"]SUMMARY - Accenture's turned in a stellar full year as the firm restructures to add new digital opportunities to its core ERP and BPO services bedrock.[/sws_grey_box]

Pierre Nanterme

A good offense is a good defense and I think this is exactly what we do at Accenture. We’re always playing offense. And indeed for us playing offense is to take some very significant steps in the digital because this is the segment of the market which is growing well. We anticipated that few years ago and we definitely accelerated our growth strategy regarding digital.

So says a bullish Accenture CEO Pierre Nanterme after the firm turned in some stellar full year results yesterday that suggest the company is making the transition to the new digital age while maintaining its stronghold in more traditional services. For the full year, net revenues hit the $30 billion mark, up 5% year-on-year.

Nanterme attributes this success to the firm reshaping itself:

We are providing relevant and highly differentiated services that are clearly resonating with the needs of our clients…We aligned our organization to be even more relevant, differentiated and competitive in the marketplace.

We've created Accenture Strategy, a unique capability and the first in the market to bring together business strategy and technology strategy equally and at scale. We created Accenture Digital by combining our market leading capabilities in Accenture Interactive, Accenture Analytics and Accenture Mobility.

We now have more than 28,000 professionals working in Accenture Digital, making it the world's largest end-to-end digital capability.

We formed Accenture Operations by bringing together our market leading business process capabilities with our infrastructure and cloud services, to offer our clients an even more compelling value proposition, running key operations as a service and at scale.

The digital focus is seen as a rich seam of future growth. Nanterme argues:

Today what we’re doing with Accenture Digital is around 17% of our business growing in the double digit. So around $5 billion revenue in fiscal year ’14 at Accenture and I'm indeed very pleased with that because this is a business which is growing fast double digit, which is extremely relevant for clients and which is now meaningful in the business of Accenture. When you’re starting to hit the 17%, trending certainly to the 20% of the business, it is a meaningful business and I'm extraordinarily pleased with repositioning we’ve been undertaking.

What’s good if you will or impressive is digital is pervasive across the patch. It’s clearly a set of technologies and I'm talking about of course the digital consumer, the digital enterprise, the digital operations all related to analytics, of course cloud enabling technologies, usually known as SMAC in the past or [mobile] and each cloud is absolutely pervasive across the board.

Digital opportunities also range across both B2C and B2B markets, he adds:

We’re starting to see good traction of course with more the B2C kind of industries if you will. I’m thinking about retail, I'm thinking about consumer good, financial services, telecom. [There’s] good appetite for that, but certainly we see the second wave of digital impacting now more the B2C businesses. I could have mentioned Healthcare. Healthcare is probably a hybrid because it’s B2C as well as B2B.

Then you move in to more the manufacturing kind of organization with what we call the Internet of things and we are taking steps as well to move from the B2C to do B2B2C and from B2B and from the digital consumer to the Internet of things. So the early adopters, we are very pleased with them. They are the usual suspects, but now we see good traction in all the parts of the business.

I'm thinking even about the resources where we’re starting to put digital in what we are calling digital plant and digital operations and things we’re doing with some of our partners and we’ve recently created joint ventures as you might have seen with General Electric around aircraft maintenance as well as intelligent pipeline, which is the new launch we made with General Electric. And on the other side of the spectrum with Siemens around the SmartGrid.

But there is also still the traditional ‘bread and butter’ work for Accenture. Nanterme states:

At the same time we continue to see demand for large scale transformation programs which has always been Accenture's sweet spot.

Today all of our clients are facing the imperative to transform their businesses to compete in the digital world and we are partnering with them on this journey.

A great example is our work with a global media and entertaining company, where we are leveraging the full range of Accenture’s capabilities, especially in mobility, [supervision] and analytics to fundamentally transform the customer experience, by implementing a broad set of digital tools.

The centerpiece of this technology is a wearable device that allows customers to access their hotel room and pay for goods and services. Through our work we are helping our clients engage millions of customers each year with a truly integrated and personalized experience.

At the same time our clients are looking to drive more efficiency and to increase productivity in their operations. At a leading commodity trading and mining company we are providing finance and accounting and procurement services to help improve business operations. We are leveraging our end-to-end sourcing, procurement and analytics capabilities, together with the full power of the global delivery network to deliver over $500 million in bottom line savings, while also providing flexibility for future growth.

And then there’s traditional outsourcing and BPO, although that too has had a change of positioning. Nanterme explains:

BPO is now part of what we are calling Accenture Operations where we put together our infrastructure services and business process services, if you will, to create what we believe is going to be a unique value proposition in the marketplace, in the context of providing more and more BPO as a service on platforms and all of these cloud-enabled. I think we are making in the market very significant steps because as far as I know we are the only one today, are proposing this opportunity.

BPO is an excellent answer to what I called before the renationalization agenda of our clients to get more efficiency and more productivity. Again BPO is pretty hot across the board when you are looking at our results and especially around what we are calling the [original] tools, Finance and Accounting, HR Administration and of course procurement where we are clearly now the market leader. We are selling these three capabilities across all the industries. I am thinking about in financial services with a European Bank where we are now driving all their finance and accounting operation.

All told it’s a powerful combination of new models and existing delivery, he concludes:

We are still famous for the more classic ERP and technology business. We continue of course to be competitive in that space but we added two big engines for growth at scale, double-digit extra meaningful for Accenture, Accenture Digital, this $5 billion business, and Accenture Operations on the other hand which is another formidable machine for growth.

Playing offense is paying off for Accenture, reckons Bozhidar Hristov, Analyst with Technology Business Research:

Developing solutions around digitization and rationalization paired with the company’s ability to offer deep industry-specific expertise through its streamlined organizational structure will help Accenture expand its IT services market share in areas such as Internet of Things and social, mobility, analytics and cloud.

Accenture’s success managing and expanding client wallet share and traction in aforementioned disruptive technologies was highlighted by the additional 28 Diamond-level clients to total of 141 during FY14 and reported $5 billion in revenue from Accenture Digital. Acquisitions will continue to deepen Accenture’s industry-specific capabilities and presence, enabling it to scale up resources and offerings ahead of the market, sustaining its leading market position.

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