How Accenture’s IT Consultancy Thrives in the Face of Spending Slowdown

Receive free Lex updates

We’ll send you a myFT Daily Digest email rounding up the latest Lex news every morning.

A consultant is someone who borrows your watch to tell you the time, and then keeps it, so the joke goes.

These days, it seems like fewer people are willing to lend out their watches. The demand for management and consulting services experienced a surge during the pandemic as companies sought advice on how to adapt and reshape their businesses. However, concerns about the economy and cost-cutting measures in the tech and banking sectors have slowed down spending in this industry.

Accenture is the latest to highlight the pressures affecting its sector. The company, known for its IT consulting and outsourcing services, reported a 4% increase in revenue for the fiscal fourth quarter that ended in August.

However, the consulting business, which makes up over half of the group revenue, declined by 2%. The pullback in demand from the communications, media, and tech industries (CMT) was particularly noticeable, with revenue in that sector dropping by 12%.

The forecast for fiscal 2024 provided by Accenture did little to alleviate concerns about diminishing IT spending. The projected full-year adjusted earnings per share range is between $11.97 and $12.32, below the estimated $12.45. The midpoint of their revenue growth forecast, between 2% and 5%, also fell short of expectations.

Despite this, Accenture appears to be in a better position than many of its competitors to weather the slowdown. Unlike stand-alone consultancies like McKinsey or outsourcing firms like India’s Infosys, Accenture has transformed itself into a one-stop-shop for clients, offering comprehensive solutions. This means they not only formulate new IT strategies but also provide the necessary coders, designers, and marketing resources to execute the plan.

This ability to offer end-to-end solutions has contributed to Accenture’s growth, with annual revenue increasing from $28bn in 2012 to $61.6bn last year. Net income has more than doubled during this period.

Accenture’s market value reflects its position in the industry. Despite a 5% decline on Thursday, the stock is still up 14% over the past 12 months, giving the company a market valuation of nearly $200bn. Additionally, its expansion into generative services supports a valuation of 26 times forward earnings.

Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.