QUOTE AND NEWS
The Economic Times  Jun 28  Comment 
Media and technology firms, and enterprises in the Asia-Pacific region reported the highest rates — 77% and 80%, respectively.
Benzinga  Jun 27  Comment 
As shares of Accenture Plc (NYSE: ACN) are trading slightly less than $110, Baird said they would be more interested if the stock trades less than $110 per share. The analysts comments came on the back of a deal to buy dgroup. The brokerage has a...
Insurance Journal  Jun 27  Comment 
As businesses spend billions of dollars a year trying to protect their data from hacking that’s costing trillions, they face another threat closer to home: data theft by their own employees.  That’s one of the findings in a survey to …
Motley Fool  Jun 24  Comment 
New-business bookings of $9.1 billion bode well for the global consulting firm.
Forbes  Jun 24  Comment 
The DividendRank formula at Dividend Channel ranks a coverage universe of thousands of dividend stocks, according to a proprietary formula designed to identify those stocks that combine two important characteristics — strong fundamentals and a...
Benzinga  Jun 23  Comment 
Accenture Plc (NYSE: ACN) announced 11.76 percent increase in profit for the third quarter driven by 8.56 percent growth in the top line. Its earnings, as well as, revenue also came in above the Street analysts' predictions. However, the company...
The Economic Times  Jun 23  Comment 
Accenture expects net revenue growth of 9.5 percent to 10.5 percent in local currency for FY16, compared with earlier expectations of 8 percent to 10 percent growth.
The Economic Times  Jun 23  Comment 
The net income attributable to Accenture rose to $897.2 million, or $1.41 per share, in the third quarter ended May 31, from $793.7 million, or $1.24 per share, a year earlier.




 
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Accenture (NYSE: ACN) is a management and technology consulting firm. In addition to consulting clients on a range of management, operational and technological issues, Accenture also provides its clients with outsourcing services. Accenture has operations in over 49 countries with170,000 employees.[1] Accenture has expanded its business to include a large number of employees in rapidly developing, low-cost nations. Accenture employs around 50,000 employees in India, China and the Philippines with plans to triple the number within next 3 years. These employees work for significantly less pay than the company's U.S. workforce, allowing Accenture to profitably provide low cost outsourcing services. However, in recent years, the firm has faced increasing competition from Indian firms specializing in systems integration and outsourcing. In addition to competing with Accenture for clients, these firms compete with Accenture for employees. As a result the salaries of skilled employees in India have risen rapidly over the last 5 years. In the face of increasing competition, Accenture will find it challenging to continue to grow its employee base in India.

Company Overview

Business & Financial Metrics[2]

In 2009, Accenture generated a net income of $1.59 billion on revenues of $23.17 billion. This represents a 6.0% decrease in net income and a 8.5% decrease in revenues from 2008, when the company earned $1.69 billion on $25.31 billion in revenues.

Business Segments[3]

Accenture offers its expertise to clients in 17 industries. These industries are divided into five five operating groups as outlined below.

  • Communications & High Tech - Communications, Electronics & High Tech, Media & Entertainment, 20.8% of total revenue
  • Financial Services - Banking, Capital Markets, Insurance, 18.7% of total revenue
  • Products - Automotive, Consumer Goods & Services, Health & Life Sciences, Industrial Equipment, Retail, Transportation & Travel Services, 23.9% of total revenue
  • Public Service - 12.9% of total revenue
  • Resources - Chemicals, Energy, Natural Resources, Utilities, 16.7% of total revenue

Services

Accenture offers its clients three types of consulting services.

Management Consulting Accenture offers its clients tradition Management Consulting services similar to McKinsey & Co or The Boston Consulting Group. Through management consulting Accenture tries to improve the performance of clients through analysis of their business model and any business challenges they may face in the execution of the model. This is often referred to as strategic consulting. Accenture operates its management consulting division under six separate service lines: Customer Relationship Management, Finance & Performance Management, Talent and Organization Performance ,Strategy, Supply Chain Management, and Process & Innovation Performance.

Systems Integration and Technology Accenture offers its clients technology related services including system integration and technology consulting similar to International Business Machines (IBM). Accenture assists clients in incorporating new technologies in order to increase efficiency in their operations.

Outsourcing Accenture also provides its clients with extensive Business Outsourcing services. Through outsourcing Accenture aims to allow its clients to focus on their area of expertise by allowing outside firms to deal with non-essential areas of their operations.

Trends and Forces

Skilled Talent is Becoming Expensive

As a consulting firm Accenture's most important resource is its workforce. Given ACN's focus on technology, its success is especially dependent on its ability to hire and retain technically skilled individuals, such as engineers, researchers, programmers and accountants. Moreover, the company has emphasized the growth of its labor force in India. Over the past ten years as companies have moved to India, the demand for engineers have driven costs up. Continued salary inflation, will make Accenture's continued rapid expansion more difficult. It will also place pressure on the company's margins.

Offshore Competition Will Weaken Accenture's Margins

Accenture faces growing competition from Off-shore service providers whose revenues have grown upwards of 30% a year. Such companies offer similar services at extremely competitive prices. For example, the average cost per employee at Infosys Technologies (INFY) is $34,000 while Accenture has an average employee cost $110,000. While these numbers are skewed by Accenture's upper level management in the United States, they reflect the large advantage of Indian firms. These firms compete with Accenture mostly outsourcing and systems integration areas.

Large Exposure to Developing Markets: Potentially High Risk or Reward

Accenture is more exposed to developing markets than most of its large American competitors. One third of Accentures's workforce is located offshore while the percentage for International Business Machines (IBM) is 18%, Electronic Data Systems (EDS) is 12%, Computer Sciences (CSC) is 9%.[4] By placing a high proportion of its operations in developing countries, Accenture can be hit hard by the unpredictability of government regulations of the private sector.

Competition

Accenture faces a range of competitors across its three main services areas.

Management Consulting

In Management Consulting, Accenture competes with traditional strategic consulting groups like McKinsey & Co. and The Boston Consulting Group.

Systems Integration and Technology

In technology services, Accenture faces large competitors like International Business Machines (IBM), specifically its Global Services Business Unit. IBM leads Accenture by a large margin in terms of revenue, profitability, and scale. Other smaller competitors include Electronic Data Systems Corporation Electronic Data Systems (EDS) and Computer Sciences (CSC).

Outsourcing

Outsourcing has grown in importance for Accenture in recent years. While this is a quickly growing market, competition has become quite fierce, especially from Indian companies. Accenture's competitors include:

References

  1. Accenture 2007 10K, Item 1A , pg.33
  2. ACN 2009 10-K pg. F-5  
  3. ACN 2009 10-K pg. 48  
  4. Credit Suisse: Initiation, pg.22
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