Double-digit digital delivery for Accenture's full year numbers

Double-digit growth in digital revenues topped off what can only be seen as a stellar-growth full year for Accenture, with organic growth in local currency of 9.5%.

The firm, which had revised its revenue expectations up three times across the year, came in at $31.1 billion for FY15, up from $30 billion in FY14, on an operating margin of 14.3%. Digital-related services are now delivering revenues in excess of $7 billion, a 35% year-on-year growth.

CEO Pierre Nanterme points again to early digital investment as one of the main drivers for this performance:

We are making focused investments in high growth areas including more than $2.5 billion in acquisitions over the last three years. These investments are all about building new capabilities to further differentiate Accenture in the marketplace.

The new innovative services we have created in Accenture Digital and Accenture Operations have contributed significantly to our growth. In Accenture Digital, we are working with our clients to help them create competitive advantage and tap into new sources of value. In Accenture Analytics, we are using our new Accenture Insights Platform to help Thames Water in the UK embrace the Internet of Things to transform decision-making.

Our new cloud-based solution monitors and analyses data in real-time from more than 20,000 centers and with data visualization tools, managers can proactively respond to risk on the network. We are helping one of the largest banks in the Euro zone implement a major digital transformation. We are combining our design capabilities from Fjord which we acquired two years ago with our analytics capabilities to create a new and seamless multichannel customer experience, while also driving significant operating efficiencies.

Europe in particular appears to have a digital appetite at present. Nanterme says:

It’s fascinating to see that the digital rotation we’ve seen in Europe is as strong, even slightly stronger than the one we see in the US. It appears that our target clients, mainly the premium brands in the Global 2000 that we’re serving in Europe, are really accelerating their investments in terms of digital rotation.

Acquisition and organic

While attention was rightly drawn to Accenture’s organic growth levels, the firm has been busily acquisitive this year, with 18 deals since the start of this year along, including last week’s surprise purchase of Cloud Sherpas, which will bring a further 1,100 cloud specialists into Accenture. Nanterme says:

We’re taking a cloud first approach. We are strongly believers that now, and even more moving forward, this cloud first agenda will be quite prevalent for our clients> We want to preempt, to be ahead of the curve or to embrace this new cloud first environment and so to be a prominent provider in the service, software and Solution as a Service environment.

When we defined this position for Accenture, the name of the game for us was how to scale more rapidly to take the leadership position, especially around the Salesforce solution. Cloud Sherpas was a very relevant opportunity for us to scale rapidly the good capabilities we have.

We are the leader in providing services for Salesforce. We are already the leader and we believe that through this acquisition, they have excellent people, a significant number of these people being certified, which is even more important, we are scaling faster and taking the leadership in this market, which we believe is going to be promising in the coming years.

Accenture has a clear acquisition strategy, explains Nanterme:

We are doing acquisitions for three reasons. The first one is to accelerate access to capabilities in what we’re calling the new at Accenture - the combination of digital services, cloud services, security services, all new technologies, such as cognitive computing, automation, or artificial intelligence.

Second is to have access to very deep industry expertise, especially in consulting.

And the number three would be to scale faster to take the leadership position in the marketplace and by leadership, we mean the Number 1. I’m thinking about Procurian, I’m thinking about Cloud Sherpas. I would put in that category, scale to lead putting more distance between Accenture and the competition.

But it’s the ability to drive organic growth on top of acquisition-based growth that is key, he adds:

Probably, one of the best case coming in my mind would be Procurian. We became the Number 1 in procurement services and since we made this acquisition, we’ve been scaling faster, and now we are the market leader and the organic growth of our procurement services is even higher than the business days we built.

Being able to tap into the Accenture Global Delivery Network helps here, says Nanterme:

Part of the work we are doing in digital related services could be onshore. However, we are probably one of the largest enterprise apps developer in the world. All these developments are being made via our Global Delivery Network and it’s definitely part of digital related services.

When I think about strong innovations in term of automation, robotics, cognitive computing and artificial intelligence, they are coming a lot from the Philippines and from India as well.

While Accenture has clearly benefited from transitioning early to a digital services focus, rivals are of course now making the same moves. As such, Nanterme doesn’t see much change in the line-up of the competitive landscape in the digital world:

We’ve not seen much change in the competitive environment. I think the competition is quite well established in the different businesses we’re operating in, from the consulting and strategy with the usual players. Then, you have the technology with the other players and then of course operations.

So I guess, the environment is pretty stable with some, I mean, there are winners and losers and we are investing and driving our business to be part of the winners. But there’s not much to say around the competitive environment, it’s still the usual suspects.

My take

The usual suspects perhaps, but Accenture can stake a claim to be the digital Keyser Soze. Digital investment is paying back in spades.