Transformation programs compress, but the enterprise IT spend holds up, says Accenture CEO Julie Sweet

Stuart Lauchlan Profile picture for user slauchlan June 24, 2022 Audio mode
Summary:
Accenture's being cautious about predicting the macro-economic climate for the coming months, but spend on transformation is holding up.

Accenture

Accenture struck a cautious note about the coming months amid worries about the impact of the macro-economic climate hitting IT spend, but turned in an impressively strong Q3 nonetheless.

For Q3, revenues of $16.2 billion were up 22% year-on-year, while new bookings came in at $17.0 billion, up 10% year-on-year and representing the second highest level ever.  Consulting revenues were $9.03 billion, up 24%, while outsourcing revenues were $7.13 billion, up 19%. By industry group, Comms/Media/Tech and Products both saw the largest growth rate, each on 31% year-on-year, followed by Resources on 26%, Financial Services on 24%, and Health & Public Service on 19%.

CEO Julie Sweet took time on the post-results analyst call to drill down on Accenture’s perceived five forces that clients need to focus on - total enterprise reinvention, talent, sustainability, the Metaverse continuum and the ongoing tech revolution. Two of these are in play today, she said:

Total enterprise reinvention, which involves transformation of every part of every business, leveraging technology, with new ways of working and engaging with customers and employees, and new opportunities for growth and talent, which requires every business to be able to access talent, be a talent creator, not just a talent consumer and to unlock the potential of their people. 

There’s a need for speed that is manifesting in the Vaccine Economy, she added:

Compressed transformation continues with our clients seeking to execute bold programs in accelerated timeframes, often spanning multiple parts of the enterprise at the same time, when in the past, they may have taken a more sequential approach. This desire for speed with strong execution is driving our growth as clients partner with us because of the breadth and depth of our capabilities, the insights that come from our scale, global footprint and our deep functional industry and cross industry expertise. 

A case in point to illustrate this compression can be seen in the financial services sector, she added:

We are working with BNL a leading Italian banking group and subsidiary at BNP Paribas on a compressed transformation just 18 months from start to finish that will leverage our SynOps platform, maximize our clients’ existing talent and reduce total cost of ownership. We will consolidate data to provide deeper analytic insights and a better customer experience with tailored services and faster fulfillment times for customer requests. As part of this transformation, more than 500 people from their team will move to Accenture, where we will leverage their industry specific skills while also providing opportunities for professional development, enabling BNL to focus on strategic growth and benefit from this up-skilling. 

Under pressure, but holding up

Inevitably there are macro-economic pressures at play, said Sweet, but the demand for transformative tech investment is still strong:

While the current macro-economic environment affects industries and markets differently. The common theme across our clients is that all strategies whether for growth, cost or resilience, lead to technology, particularly cloud, data and AI, and our clients turn to us to be able to effectively use technology to achieve their goals.

To illustrate her point, Sweet pointed to two other customers - Clorox and New Look:

We are working with the Clorox company, a leading multi-national manufacturer and marketer of homecare, household and health and beauty products for consumers, as well as products and technologies for professional customers. The company is undertaking a broad digital transformation that will touch every aspect of the enterprise. We will help the company modernize business processes, streamline their operating model, leverages advanced data and analytic insights and establish a future ready technology foundation to deliver new levels of customer and consumer experiences, accelerate go- to-market activities and enable a more agile and resilient supply chain so they can lead and shape the consumer goods industry.

We are helping New Look, a global fashion retailer, migrate its existing e-commerce platform to the cloud and strengthen its technology foundation to enable a seamless experience across stores, online, mobile and social media. AI and machine learning will create greater efficiency, increased sales and provide the flexibility to scale for growth and overcome industry disruption. The company is committed to infusing sustainability into their transformation roadmap, using innovation as an accelerator toward their own 2040 sustainability targets, all of which promises to keep the company in step with the store of the future, the speed of the fashion industry and the demands of their stakeholders.

My take

Good numbers. Nonetheless, the wider economic and geo-political environment remains difficult to predict and Accenture is lowering its expectations for Q4 and the full year. Sweet argued:

We don't predict the macro-economic. What we do is really focused on what has helped us to be successful. And obviously, every financial situation is going to be different to the pandemic. We don't know how this is going to be versus what was happening a decade ago.

Time will tell.

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