Accenture: Accenture’s consulting biz uptick shows sector is key for IT recovery
Consulting enables technology services companies to build broader businesses and be a key growth driver in a sustainable manner, experts said. While outsourcing only aids participation in deals, consulting helps shape deals and stay ahead of the curve, especially with the GenAI adoption, they said.
Consulting is important to build growth during a structural shift in the $250-billion software services space, analysts added.
“Increase in consulting revenue is a lead indicator of green shoots in discretionary spending or the ability to shape deals in newer areas such as cyber security, interactive, and IoT (internet of things), among others,” said Ramkumar Ramamoorthy, partner at growth advisory firm Catalincs. “It is important to note that Accenture is gaining an outsized share in these newer areas as reflected in its revenues of $19 billion from Accenture Song, $9 billion from Security, and $8 billion from Industry X.”
Accenture reported a growth in its “consulting type of work for the first time in six quarters” for its fourth quarter ended August. It witnessed a strong rebound in consulting with a 3% year-on-year (YoY) growth in constant currency terms and 0.8% growth sequentially after five quarters of decline.
Consulting contributed 60% to Accenture’s sequential increase in revenue.
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Ramamoorthy, who is also a former chairman and managing director of Cognizant India, said consulting proactively helps shape deals, rather than participate in RFPs (request for proposals) where there is little room for premium pricing.Cognizant’s current CEO Ravi Kumar S, in an earnings call after the June quarter results, had said, “A lot of the consulting dollars are getting diverted to generative AI. I mean, all the way from business case creation to governance to… I know companies which are now saying we need to reestablish enterprise 2.0.”
While most Indian IT players do not have a robust consulting division, some are trying to expand this business. Wipro acquired management and technology consultancy Capco and SAP consulting firm Rizing in 2021 and 2022, respectively.
Most analysts expect sustenance of green shoots in the consulting business for Wipro.
In July, Wipro CEO and MD Srini Pallia reiterated that one of his priorities is “to develop AI-powered industry and cross-industry solutions using a consulting-led approach.”
“Clearly, our goal here is to help clients transform their business and operating models using the power of AI. We are also actively strengthening and accelerating our industry consulting capabilities to support this,” he said.
Earlier this year, Tata Consultancy Services’ (TCS) consulting and services integration (C&SI) division reportedly underwent a restructuring followed by resignations of some senior executives.
“For the IT sector in general and Indian IT sector in particular, consulting will be a key growth driver and enabler for broader business,” said Yugal Joshi, partner at research firm Everest Group. “The type of consulting Indian IT delivers may be different from what Accenture or Big 4 firms do. However, we expect a lot more industry and domain-aligned consulting from Indian IT providers. Though some of it could be investment in client accounts and may not give immediate revenue, it will be needed to have strategic conversations and acquire larger business from clients in the future,” Joshi said.
Indian IT majors will start reporting their results for the second quarter ended September starting on October 10 with TCS.
Accenture’s consulting bookings for the latest quarter ended August were at $8.6 billion, up 1% on year.
The Ireland-headquartered firm has upped its consulting game with multiple acquisitions in Europe, mainly in the healthcare space, including UK-based Nautilus Consulting, German healthcare consultancy firm Consus Health, Italy’s Intellera Consulting, Customer Management IT and SirfinPA.
In both consulting and managed services, Accenture projects low-to mid-single digit growth rates for the year ahead.
“Our clients turn to us for our unique combination of services across strategy, consulting, Song, Industry X, technology and operations,” Accenture’s chair and CEO Julie Sweet said. “Our strategists and deep industry, functional, customer and technology consultants work hand in hand with our clients and across services to shape and deliver these reinventions.”
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