Accenture is the largest and most diversified independent technology consultant and outsourcing provider globally, serving customers in over 40 industries in more than 120 countries.
Formally established in 1989 (but operating since the 1950s), Accenture began life as the consulting division of the then accounting giant Arthur Andersen and subsequently broke off from its scandal-ridden parent in 1998. Ever since its founding, Accenture has had a mandate to focus on business and technology consulting related to managing large-scale system integrations, which has differentiated it from peers, who have tended to emphasise management consulting.
Under its former CEO Pierre Nanterme and now Julie Sweet, Accenture has followed a strategy of continuously identifying and going after new high-growth verticals, aided by the institutional experience and insights gained from the numerous industries they work in. This approach enabled the company to stay agile and detect emerging technology trends early, understand how it can be integrated into business operations, thereby remaining relevant to their clients in an advisory role. Today, the company derives over 60% of its revenues from ‘new’ businesses, including digital, cloud, connectivity and cyber-security, and actively exploring emerging areas including block-chain, quantum computing and AI.
In a fast-changing world, the urgent task for CEOs, especially of large multinationals with complex and often burdensome corporate structures, is how to keep up. The stakes are high. Accenture is in the business of facilitating these companies to transition their legacy infrastructure into more lightweight and flexible digital solutions, a gruelling challenge that can take years to fully implement, involving a whole network of software and hardware providers and careful navigation between different systems. Boasting strategic alliances with over 150 tech vendors, deep cross-industry expertise across 40+ verticals and a global delivery network, Accenture is one of the few companies with the execution capabilities to coordinate solutions for companies on a global scale.
Cross-pollination is an advantage for companies like Accenture with transferable skills: one of their growth verticals is in digital marketing, where ‘Accenture Digital’ now represents >15% group revenues. Accenture’s background in handling big data and analytics gives them an inherent advantage over traditional “4A” marketing peers on how best to leverage the consumer data collected to target personalised advertising and effectively translate that into dollars spent.
Consulting is a business that converts intangible value into tangible results, and charging is commensurately high.
Accenture’s model of providing consulting (60% of revenues) in combination with operational implementation (40% of revenues) can provide more comprehensive solutions for their customers, increasing switching costs and generating more stable recurring revenues, compared to the project-based revenue stream of a typical consultancy. Client retention has been impressive: 99 of their top 100 clients have been with the firm for over 5 years and 97 over 10 years.
Many of Accenture’s competitors operate under a conglomerate structure, where consulting is a subset of a larger accounting & auditing business. Shedding the accounting arm early on helped to position Accenture as a pure-play with no apparent conflicts of interest, as regulators increasingly scrutinise the blurred lines straddled by the ‘Big Four’. Infotech competitors such as IBM and HP, on the other hand, do not have the same incentives to develop multi-vendor architectures.
Since its listing in 2001, Accenture has grown revenue CAGR of +8.2% and EPS at +16.4%, driven by the swelling of demand for digital modernisation. Technology has become integrated into every aspect of business operations as the critical building block for businesses to reduce inefficiencies and unlock higher productivity. The view of IT services has fundamentally changed, particularly over the past decade, where it is no longer seen as a mere cost factor or a back office function, but increasingly as an incremental revenue driver and point of competitive differentiation. This structural trend will be disruptive for almost every industry sector and re-write the architecture of future society and business. Accenture has positioned itself to benefit as the strategic broker connecting tech vendors and enterprises, offering innovative solutions to guide clients through their first digital transformation and subsequent digital evolutions. Pierre Nanterme was an avid follower of Winston Churchill, particularly his statement that “If you don’t take change by the hand, it will take you by the throat.”