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Accenture First Quarter 2008 Results Analysis and India Trends

Accenture First Quarter 2008 Results Analysis and India Trends



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Published by offshoreindianews
Accenture 2008 first quarter results ad what is says about the 2008 IT spending and market trends. Indian outsourcing vendor challenges
Accenture 2008 first quarter results ad what is says about the 2008 IT spending and market trends. Indian outsourcing vendor challenges

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Published by: offshoreindianews on Dec 21, 2007
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 Accenture impressive first quarter fiscal 2008 results
Accenture released their first quarter fiscal 2008 results December 19
, 2007 (Accenturefiscal year ends August 31
). The results and the guidance are a good indicator of  possible trends and spending pattern for 2008. Accenture does appear to have a fairlyhigh degree of confidence in their outlook going in 2008. The earnings should help balance the doom and gloom scenarios being projected in IT spend for 2008.It was interesting to see a renewed level of confidence in the earning call. A month back the Accenture team had a bit more cautious approach. Overall I believe this should bodewell for the 2008 markets for outsourcing firms. Bill Green, Accenture Chairman andCEO mentioned that the senior leadership team has been doing the round with their ‘diamond’ clients and feels comfortable with what they hear. Bill also interesting took aswipe at the competitors (‘low cost’ providers) who he believes are stubbing their toesnow and will not be able to compete with the full range of services which Accentureoffers!LINK TO ACCENTURE CALL TRANSCRIPT
Financial HighlightsBusiness Highlights
 Net revenues of $5.67 billion increaseof 19.3% Year-Over-Year 
Earning per share $.60 cents increaseof 30% Year-Over-Year 
Guidance for full fiscal year raised to arange of $2.36 to $2.41 – raised by$.15 cents
Operating Income 19% increase $726million or 12.8% percent of netrevenues compared with $610 millionor 12.8 net revenues
Gross Margin was 30.1% flat as 2007
SG&A $970 million - 17.1 percent of net revenues compared with $ 817million 17.2%
5.9 Billion US$ bookings (Consulting3.4, Outsourcing 2.5)
Consulting net revenues were $3.46 billion an increase of 19% YoY
Outsourcing net revenues were $2.22 billion, an increase of 20% YoY
America’s revenue
: 2.325 billion (grew11% YoY). Growth coming from USAand Canada and Brazil and Argentina
EMEA revenue:
- 2.883 billion (grew25% YoY) – Growth in UK, France,Italy, Spain and Netherlands
APAC revenue:
465 million (grew 29%YoY) – Growth in Japan, Australia,Singapore and China
Global Delivery network of 75,000 people grew 41%. Strong growth inIndia and Philippines (43% headcount inglobal delivery network)
175,000 employees ,
Product Area breakdown in revenues:
Communication and High Tech
: $1.3 billion (20% YoY)
Financial Services
: $1.244 billion (17%YoY)
: $1.473 Billion (23% YoY)
Public Services:$
709 million(13%YoY)
:$931 million (22% YoY)
Accenture impressive first quarter fiscal 2008 results – positive trends forAccenture: challenges for Indian outsourcing vendors?
 Market Trends
1.Accenture does not foresee a slow down in IT and business spending despite theadverse market conditions. The team believes that there could be a potentialgrowth in spending and customers they have spoken with. 70% of the businessesin the US see a focus to increase sales and 80% of these expect the employmentto rise in 2008.2.Financial Services industry product line for Accenture has grown YoY by 17%.This growth has come from US and EMEA.3.There is no market pushback or delays in larger deals which Accenture is seeingin the marketplace.4.Significant opportunities in outsourcing exist (outsourcing does not directlyequate to offshoring). Accenture also continues to be selective about their clients.Growth continues to come by going deeper in existing relationship with clients.5.There is a short term growth in consulting demand in certain industries whereclients are looking for short term cost reduction processes to allow companies tosave money for mid to longer term initiatives. This necessarily does not mean agrowth in offshoring but a whole range of consulting product offerings fromAccenture including: re-engineering, six sigma, process improvement, strategicrealignment etc..
Where is the growth
1.Accenture expanding industry expertise in Military command and controloperations – Accenture has recently purchased two companies in this space(Gestalt and Maxim systems)2.Strong growth in Management Consulting – Human Performance has been agrowth area3. Outsourcing growth in Learning, F&A and Procurement
4.Growth in Technology consulting business – strong demand for Microsofttechnology services. Growth seen in Network consulting services ( Accentureacquired Coriliant)5.Strong demand for ERP consulting – SAP and Oracle6.Expanding BPO vertical offerings in Health Administration and Pharma7.Growth in Infrastructure outsourcing8.Overall levers Accenture is looking to manage businessa.Pricing initiatives b.SG&A – Opportunity to drive down cost in Sales. In G&A corporatefunctions moved to low cost locationsc.Chargeability – Down from 86% to 83% and believe this optimum in mostareas.
1.Accenture has seen strong growth in their global delivery network (41% YoY)and has seen a strong growth in India and Philippines.2.Accenture setting up a Management Consulting Center of Excellence in Delhi andwill add another three locations across India. The COE will build expertisearound Data Analytics, Workforce optimization and Supply Chain.3.Accenture COO did not disclose any hard numbers on growth they expect in headcount in India. (
 Based on recent press releases Accenture has 35,000 employeesin India and plans to grow at 30-50% YoY – see links at the end of the report 
 Sound Bites
 Bill Green – Accenture – Chairman and CEO
One is, some of the new entrants in the outsourcing business are starting to stub their toes, and those are people that  sold sort of cost-based deals and they are having delivery issues, or service level issues associated with the cost. Theother thing that has happened is as people have gotten more experienced with this, they understand the power of thetransformational proposition as opposed to the cost based one. And so I find that people are a lot more tuned in towhat's the service level, what's the predictability, what's the reliability, all of those things as it relates to theoutsourcing proposition.
 I found this very interesting as Bill takes a shot at the Indian ‘low cost’ service providers who are working tomove up the value chain and compete with the Accentures, IBM, and HPs.
 Julie Santoriello - Morgan Stanley - Analyst 
Great. And just one quick clarification on, for those customers that have started down this path of looking for quick cost savings type of things, does this almost universally mean offshore?
 Bill Green - Accenture - Chairman and CEO
Oh know, absolutely not. It has to do with rationalizing of strategy and our people putting their investments in theright place. Are they focused on the most profitable offerings? In certain industries, it has a lot to do with customer  service because a major cost in certain industries is the cost that it takes to maintain a certain level of customer 

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