Out with the old, in with The New - outsourcing re-invented at Accenture?

Profile picture for user slauchlan By Stuart Lauchlan September 28, 2017
Taking a bet on The New was a good gamble for Accenture and has left CEO Pierre Nanterme excited, to say the least.

Pierre Nanterme

I’m excited with everything regarding The New.

That’s a not entirely unexpected declaration from Accenture CEO Pierre Nanterme. For the full fiscal year 2017 just concluded, The New accounted for $18 billion or 50% of total revenues. Thats up from roughly 40% of total revenues just one year ago and 30% the year before.

What is The New? It’s digital and it’s cloud and its AI and it’s all the stuff that Accenture’s been betting the farm on for the past few years. In so doing, Nanterme argues that the old outsourcing business models of the past have been re-invented:

Outsourcing is rotating to The New…we are now selling more and more of those services based on automation, robotics, intelligent solutions based. We are re-inventing application services to differentiate. To some extent you can segregate the market between the players still trying to sell more harder of the legacy older classic IT, and [The New] players and we’re part of that camp. We are re-inventing this service by providing much more of the new technologies and new features to capture more growth, Our outsourcing business is double-digit and is very vibrant, [but] it's because it does what [it does] to the New, and not because we’re trying to sell more of the legacy.

The shift to The New has also led to new organizational structure within Accenture, which now looks like a federation of loosely-couple, but synergistic businesses. Nanterme points to design arm Fjord as a case in point:

When we decided to be in the design and experience-led kind of services, [that was] quite far from Accenture. We identified a company called Fjord, 180 people at the time, less than 10 studios around the world. We said, ‘We are going to keep the Fjord culture, the studio, the way they work. We are going to keep the Fjord identity and brand’. We could have integrated them in Accenture more from a backbone standpoint. From a value standpoint they were sharing our values anyway.

After less than four years, we are celebrating with 1,000 people in Fjord. They have a formidable brand in the marketplace. But if you talk to the Fjord people, they’re an interesting hybrid. They live and breathe Fjord and they live and breathe Accenture. That's what now we want to accommodate with this concept of culture of cultures, which I think is reasonably a strong evolution for large big global group which has been developing with their concept of ‘everything is one’. At Accenture, we love diversity.

Client agenda

But across all of the various businesses, the mission statement remains the same, adds Nanterme:

Our job is to be relevant to the clients agenda and to understand at what speed they’re going to evolve the kind of services we could provide. If you look at the overall spend we could address, its growing…If you look at this from a legacy IT [perspective], its flat or shrinking. If you look at the addressable spend for us, it is growing. That’s why at Accenture we have decided five years ago in our strategy to stretch and to extend our reach from where we were famous before - support function, finance, HR, supply-chain and IT - to be relevant still in that space of support and IT stretching to the frontline, addressing the marketing spend and stretching to the operation in the field line through the Industrial Internet, so we could expand the addressable budget we are tapping into and the benefit of this stretching the boundaries of our scope.

He cites a couple of examples of how this client engagement works in The New:

We're collaborating with Roche, the healthcare company to develop an analytics platform that will improve care for millions of patients around the globe.Built on the Accenture intelligent patient platform, this new solution enables Roche to underwrite data in a secure environment and generate insights to provide patients with more customized care.

We are helping a leading global bank with a mission-critical program to meet New regulatory requirements. Leveraging our global capabilities across consulting, digital, technology and operations, we're delivering significant changes to the core banking platforms which handles over $100 trillion of transactions per year.

Another crucial development has been to expand and extent relationships with other leading firms in the world of The New. This has meant adding the likes of Amazon Web Services, Google, Apple and Salesforce to the more long-established partnerships with such as Microsoft, Oracle and SAP. Nanterme highlights the importance of these alliances:

We are leading with SAP, we’re leading with Oracle, with Microsoft, with Salesforce…we’ve opened new fronts with coming leaders, such as Google, such as Amazon Web Services. We’re going to develop platforms on top of the cloud and you’ve certainly heard about the announcements we made with Apple to develop solutions based on iOS.

So, we are very active on platform. We are very pleased with what we’re doing and I’m especially pleased that we’re leading with their new platforms. When we talk about the SAP, we are talking about SAP Hana, Oracle in the cloud. …We’re always aiming [to be] leading not with the solution of yesterday, but with the solutions of tomorrow and taking a leadership position which is exactly what we do.

In all of this otherwise upbeat overview, the one downbeat note comes from the US government market, where the arrival of the Trump administration has led to uncertainties that have impacted on prospects:

The markets and our clients [were] expecting some reforms and these reforms have not come as expected, creating kind of wait and see positioning with our clients, especially in health and public sector with all the uncertainties around the healthcare reforms.

To some extent [there’s] less uncertainty with what might come. Now we still believe that we’re going to see a tax reform or some evolution that’s going to be good for the business. On balance what we expect [is] that next year the contribution of the US and North America will be incrementally better than this year.

My take

There’s a sense that Wall Street is becoming too used to the success of Accenture’s digital re-invention. Despite beating expectations and predicting improvement from the US next year, the firm’s share price was essentially flat on the full year results announcement. That shouldn’t detract from the success of the bet that the company has placed on The New. Many other services firms look on and wish they’d rolled the same dice earlier.