TBR 2Q11 Accenture Report


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While pockets of uncertainty remain in the public sector – the single challenged area of Accenture’s business – the company is performing as a well-oiled machine. Accenture is seeing increased demand for IT services in North America, parts of Europe and emerging markets. The company is addressing demand with its broad portfolio of offerings that covers its core business and innovative service areas, strong industry expertise and high-value transformational proposition. Although major economies will remain Accenture’s key revenue generator, emerging growth markets will begin to play a more important role in the company’s long-term business strategy.

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TBR 2Q11 Accenture Report

  1. 1. Technology Business ResearchAccelerating Customer Success Through Business Research TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
  2. 2. PROFESSIONAL SERVICES BUSINESS QUARTERLYSMAccentureSecond Calendar Quarter 2011Third Fiscal Quarter 2011 Ended May 31, 2011 TBR OUTLOOK – POSITIVE TBR SCORE (0-10 SCALE)  5.95Publish Date: July 12, 2011Author: Elitsa Bakalova (elitsa.bakalova@tbri.com), ProfessionalServices Practice Analyst TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .Content Editor: Alison Crawford, Professional Services Practice SeniorAnalyst
  3. 3. Contents TBR Company Analysis Company Data Models 3 TBR Position 25 Income Statement 4 Executive Summary 26 Balance Sheet 6 Strategy Overview 27 Service Line Model 8 Corporate SWOT Analysis 28 Operating Group Model 9 Scenario Discussion 29 Geographic Model 12 Financial Model Strategy 30 Operating Expense Model 16 Go-to-Market & Services Strategies 31 Headcount Model 20 Alliance & Acquisition Strategies 32 Financial Strategy Graphs 22 Geographic Analysis 34 Go-to-Market Graphs 23 Resource Management Strategy 35 Resource Management Graphs 37 Acquisitions Table 38 Portfolio of Services Table 39 Services Announcements 42 Quarterly Signings Tables 53 Strategic Alliances Tables 55 Org. Structure 56 Worldwide Locations Table 58 About TBR3 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  4. 4. TBR Position TBRA diversified growth strategy will help Accenture maintain positivemomentum across all service lines and geographiesTBR Assessment Corporate Strategic ObjectivesWhile pockets of uncertainty remain in the public Achieve profitable growth (grow revenue 14.0% tosector – the single challenged area of Accenture’s 15.0% in local currency and reach operating margin ofbusiness – the company is performing as a well-oiled 13.6% to 13.7% in FY11)machine. Accenture is seeing increased demand for IT Broad investment in growth and a strong focus onservices in North America, parts of Europe and operational efficiency will help Accenture reach itsemerging markets. The company is addressing growth and profit targets.demand with its broad portfolio of offerings that Expand business from three dimensions: corecovers its core business and innovative service business, outside of core business in growth serviceareas, strong industry expertise and high-value areas, and in emerging and developed marketstransformational proposition. Although major Growth in Accenture’s core business (managementeconomies will remain Accenture’s key revenue consulting, technology and BPO) will continue for thegenerator, emerging growth markets will begin to play near term. The company must aggressively extend itsa more important role in the company’s long-term client reach in new service areas, such as cloudbusiness strategy. computing, analytics and mobility, to generate material revenue gains. Competition in those high- ACCENTURES 2Q11 PERFORMANCE VS. EXPECTATIONS(in $ millions) Consensus Guidance Range Actual growth areas is increasing, which could createAccenture Net Revenue $6,000 - $6,200 $6,300 - $6,500 $6,720 challenges for Accenture’s expansion.Accenture Operating Margin N/A 13.6% - 13.7% (FY11) 14.1% Recruit people to expand onshore and GlobalAccenture Non-GAAP EPS $0.85 $0.80- $0.95 $0.93 Delivery Network and accommodate for demand ACCENTURES 3Q11 GUIDANCE AND EXPECTATIONS Accenture is on track to hire at least 66,000 people(in $ millions) TBR Estimate Consensus Guidance Range in FY11 globally (gross additions on/near/offshore).Accenture Net Revenue $6,500 $6,300 - $6,600 $6,400 - $6,600 Its ability to quickly train and deploy people will helpAccenture Operating Margin 14.2% N/A 13.6% - 13.7% (FY11) Accenture meet increasing market demand with lessAccenture Non-GAAP EPS N/A $0.83-$0.92 $0.85- $0.95 costs attached to new talent efforts. 4 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  5. 5. Executive Summary TBRAccenture’s 2Q11 performance originates from strong revenue,profitability and utilization TBR Company Average Standard CALENDAR QUARTER RESULTS TBR SCORING SUMMARY:FINANCIAL METRICS Score Figure in Class Deviation/2 2Q10 3Q10 4Q10 1Q11 2Q11Operating Margin 5.71 14.1% 9.4% 6.6% Financial Model Strategy: 5.96 6.03 6.23 6.29 6.16Current Ratio 4.49 1.51 1.80 57.1% Go-to-Market & Services Strategies: 6.68 6.31 6.46 6.35 6.45Debt-to-Asset Ratio 3.71 0.72 0.56 12.6% Resource Management Strategy: 5.03 4.97 5.19 5.22 5.22Return on Assets (TTM) 7.17 15.9% 8.1% 3.6% TOTAL AVERAGE TBR SCORE: 5.89 5.77 5.96 5.95 5.95Return on Equity (TTM) 7.68 57.8% 15.6% 15.7%TOTAL AVERAGE TBR SCORE 6.16 TBR Company Average StandardGO-TO-MARKET & SERVICES METRICS Score Figure in Class Deviation/2Revenue (in $ Millions) 8.01 $6,720 $2,384 $1,441 Accenture outperformed its peers inRevenue Growth YTY 5.18 20.6% 17.2% 19.4% go-to-market and financial metrics.Backlog/Revenue 6.06 2.39 2.01 0.36 Accenture’s strong revenue level isDay Sales Outstanding 6.86 43.83 65.25 11.54 driven by increased demand for ITTOTAL AVERAGE TBR SCORE 6.45 services and the company’s well- balanced mix of consulting, SI and TBR Company Average StandardRESOURCE MANAGEMENT METRICS Score Figure in Class Deviation/2 outsourcing offerings.Gross Margin 5.49 34.4% 31.5% 5.9%Operating Expenses as a % of Revenue 5.01 20.2% 20.3% 4.9%Revenue per Employee (TTM) 4.17 $113,602 $175,136 $73,846Operating Income per Employee (TTM) 4.90 $15,286 $17,498 $22,889Utilization Rate 7.70 85.0% 77.2% 2.9%Turnover 5.26 15.0% 15.8% 3.0%TOTAL AVERAGE TBR SCORE 5.22Key Represents an area where Accenture is currently challenged versus peers Represents an area where Accenture is outperforming its peers Represents an area where Accenture is neither significantly outperforming nor underperforming its peers 5 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  6. 6. Executive Summary TBRAccenture will benefit from positive market trends and its investment inofferings and capabilities to address demandTBR assessment of Accenture’s two-year strategic outlookKey Takeaways Strategic OutlookFinancial: Accenture will reach its FY11 ambition to • Accenture is investing in its brand, technology, industryoutpace market growth, thanks to its broad business expertise and people to continue the pursuit of helpingexpansion emphasis focused on core business, new clients transform their businesses and achieve highservice areas (cloud, analytics, etc.), and emerging and performance.developed markets. • Clients are ramping up their investments inGo to Market: Accenture’s industry expertise plays a transformational projects; in response, Accenture is layingkey role in addressing vertical-specific client needs. a strategic foundation to capitalize on innovation,Resource: Accenture will continue to invest in talent emerging technologies and top-notch employees. Theseonshore and offshore to address improved demand. investments are smart and, if implemented well, will herald success for the company. While we see potential ACCENTURES REVENUE, GROWTH AND PROFITABILITY challenges as other multinational IT service providersTBR $30.0 $28.80 invest in creating end-to-end holistic solutions, and Indian 25% $26.29 vendors play catch-up to build consulting abilities, we $25.0 $20.94 $22.21 15% believe Accenture is in an unshakeable position. $20.0 • Accenture’s brand is its people, and its people are its In $ Bi l lions $15.0 5% brand. The company relies heavily on the investments $10.0 $6.72 $6.50 made in its 223,300 employees and leverages in-house $5.57 $5.42 $6.05 $6.05 -5% $5.0 $2.58 $3.00 $3.65 $4.12 expertise and knowledge to provide quantifiable results $0.0 $0.80 $0.71 $0.83 $0.77 $0.95 $0.92 -15% across the industries it serves. Accenture’s brand allows it 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 CY09 CY10 CY11 CY12 to attract talent to conduct transformational Est. Est. Est. engagements, and TBR believes it will be a recruiting Total Revenue (Net Revenue) Operating Income Revenue Growth Y/Y Operating Margin asset in the coming years as the global war for talentSOURCE: ACCENTURE AND TBR further heats up.6 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  7. 7. Strategy Overview TBRAccenture will generate sustained revenue growth by deliveringhigh-value services to its clientsFunction Key Strategies TBR Assessment  Accenture maintains a strong portfolio of high-value offerings in consulting & SI and outsourcing. Clients looking Increase Accenture’s business to generate cost savings, transform their businesses and ITOverall momentum by focusing on infrastructures and achieve growth are turning to Accenture, delivering value to the client. creating momentum for the company. TBR expects this positive outlook to remain during 3Q11, the last quarter of Accenture’s FY11, and into FY12.  Accenture surpassed its guidance range again this quarter Deliver profitable growth: with solid revenue returns. A major contributor to its top- • Grow FY11 revenue by 14% to line strength is continuous signings growth and pipeline. 15% in local currency, faster thanFinancial the market.  Efficiency on the OPEX side coupled with shifting of service delivery to the Global Delivery Network (GDN) – especially • Reach operating margin of 13.6% for outsourcing and, increasingly, SI – and use of assets to to 13.7% in FY11, up year-to- automate delivery will support Accenture’s long-term year by 10 to 20 basis points. profitability and attract clients.  Accenture’s core business (management consulting, Expand business from three technology and BPO) remains the key focus and strength for dimensions: core business as the company. However, investment in high-growth serviceGo to primary growth engine, outside of areas (cloud computing, analytics, mobility), supplementedMarket core business in growth service by geographic expansion in emerging regions, will gradually areas, and in emerging and increase their positive influence on the company’s developed markets. performance in the long run. Key:  Working: Short-term impact expected on bottom/top line  Not working: No major impact or differentiation expected7 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  8. 8. Strategy Overview TBRAccenture is growing its global delivery resources while entrenching itselfin local markets to gain share in emerging economiesFunction Key Strategies TBR Assessment  Alliances are key to the development of Accenture’s • Make strategic alliances to portfolio, especially in new service areas with high-growth expand in new areas of potential such as cloud computing, analytics and mobility. technology and vertical- The firm will utilize partners to augment its offerings andAlliances & specific offerings capabilities to gain new channels and access to technologies.Acquisitions  One of Accenture’s strengths is its ability to integrate small- • Leverage tuck-in acquisitions scale acquisitions that fill gaps in its portfolio and client to fill gaps in its portfolio and reach. Accenture’s acquisitions quest will continue in the expand global reach coming quarters, as it looks to augment its portfolio, IP and vertical expertise and grow in emerging markets.  Accenture will continue to grow its headcount to address • Recruit people to expand improving market demand. The company is augmenting its GDN and onshore (hiring GDN, particularly in lower-cost regions (e.g., Philippines, ~66,000 employees in FY11) India, Brazil) to strengthen its global delivery and better serve local market clients. Service areas with improvingResources & • Develop and increase demand, such as consulting & SI, are also seeing staffInvestments leverage of global delivery increases, largely onshore for consulting, as a response to capabilities returning discretionary spending.  Investments in industrialized/standard service delivery (e.g. • Invest in automation to offer specialization of people, automation tools, solution factories differentiated, less risky and reusable technical libraries) will support the company’s implementations bottom line in the long run. Key:  Working: Short-term impact expected on bottom/top line  Not working: No major impact or differentiation expected8 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  9. 9. Corporate SWOT Analysis TBRAccenture’s well-developed resources, industry and technology expertiseallow it to win new growth opportunitiesCorporate SWOT AnalysisStrengths Opportunities• High-end consulting and integration capabilities • Target growth opportunities in emerging markets• Broad GDN and developed presence in low-cost beyond the BRIC region locations • Expansion of GDN in Latin America due to demand for• Leverage of a standard framework for building and 1 services delivered from the region delivering services across the GDN • Stabilizing consulting/SI demand will drive growth in• Alliance relationships with 150+ partners Accenture’s consulting & SI business• Strong industry, technology expertise (Accenture is • Growth potential of cloud computing can help vendor-agnostic) and proprietary tools/assets Accenture gain traction• Core competency to attract, hire, train, deploy and • Increasing demand for analytics to support retain skilled talent Accenture’s growth • Demand for mobility solutions across verticalsWeaknesses Threats• Price competitiveness is limited in commoditized/sole • Indian vendors are becoming more active in business sourcing deals – unlike in large/complex 1 consulting, analytics and remote management ITO. engagements. • Competition from other and European firms for top• Recruiting and training costs tied to hiring, wage and clients salary increases used as means to hold off rising • Uneven economic performance across the European attrition are diluting gross margin in FY11. countries and tight public sector spending will• High concentration of resources in India and the challenge Accenture’s performance 1 Philippines (the two account for ~80% of Accenture’s near/offshore headcount) creates operational risk9 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  10. 10. Scenario Discussion TBR A technology revolution is upon us, and Accenture must tame Cloud Computing, Analytics and Mobility to drive growth in the long runScenario Discussion: Revenue and signings growth, coupled with positive demand trends in core and newservice areas, indicate growth for AccentureScenario SWOT Assessment • TBR anticipates demand for Accenture’s core businessStrength: Deep industry and functional (management consulting, technology and BPO) will remainexpertise attracts clients strong in future quarters. Accenture’s strong industry andWeakness: Prices tend to be higher than its technology expertise will help it gain momentum across a broadcompetitors (based on type of engagement) range of technology-related services.Opportunity: Growing demand across core • The firm’s investment in new high-demand service areas, such asbusiness and new service areas cloud computing, analytics and mobility, will supplement its core business growth to maintain pipeline growth for years to come.Threat: Competitors addressing improving While each of the three service areas is at the front end ofdemand, investing in new service areas and adoption, Accenture is investing in resources and capabilities tocreating challenges for Accenture’s growth prepare for upcoming demand growth.TBR ACCENTURES NET REVENUE AND GROWTH o Cloud – Adoption will be gradual and clients will not replace $30 $28.1 40% structures overnight or even move core systems en masse to the cloud. Accenture’s strong consulting know-how is the key Net Revenue Growth Y/Y (in $) $25.3 $25 $23.4 $21.6 $21.6 $19.7 aspect that will drive cloud strategy work with clients. $20 20% o Analytics – A key differentiator is Accenture’s ability to moveIn $ Bi l lions $15 18.3% 18.7% 17.5% 11.1% from insights to decisions to outcomes by providing a holistic $10 0% -0.1% service approach that starts with strategy and ends with $5 -7.7% execution. $0 -20% o Mobility – Accenture took over Symbian software development FY07 FY08 FY09 FY10 FY11 FY12 Est. Est. from Nokia and deepened its partnership with SAP to develop Net Revenue Net Revenue Growth Y-t-Y CAGR FY07 - FY10: enterprise mobility solutions on the Sybase platform – moves 3% (i n U.S. dollars) that give Accenture a bigger play in mobility.SOURCE: ACCENTURE AND TBR 10 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  11. 11. Scenario Discussion TBRWhile the trend requiring consulting expertise has some vendorsscrambling, Accenture has already made necessary investmentsScenario Discussion: Accenture is seeing a strong comeback in consulting & SI (59% of its business in 2Q11)with revenue and signings buildingScenario SWOT Assessment • TBR predicts two types of projects will become the norm; theStrength: Strong consulting & SI brand and first will require an end-to-end hardware-software-servicesproven track record (25+ years in management capability and resonate well in emerging geos that need toconsulting, 10+ years of experience in delivering build infrastructure, as well as processes, while the second typelarge-scale IT transformation projects) will involve transformational improvement engagements thatWeakness: Challenges with work-life balance for will leverage infrastructures to deliver business benefits. To winemployees (e.g., long hours, hard work, travel) such projects, clients will require systems integrators to have experienced personnel, a track record in the vertical, and anOpportunity: Stabilizing consulting/SI demand understanding of how technology can generate businessThreat: Other MNCs investing in end-to-end processes innovation and produce results at the top-andholistic transformation solutions and capabilities bottom-line levels. ACCENTURES SERVICE LINE REVENUE AND • Accenture has well-developed industry expertise, which plays a TBR PROJECTIONS key role in addressing vertical-specific client needs (100,000+ $20.0 80.0% $16.6 people specialized in industry skills across consulting, $14.8 Yea r-to-year Growth (in $) $16.0 $14.1 60.0% technology, outsourcing).In $ Bi l lions $12.6 $12.4 $12.0 $10.5 $11.5 40.0% • Accenture has a history of providing high-value, often $9.3 $9.0 $9.2 holistic/large-scale transformation to clients. Accenture $8.0 20.0% achieves this thanks to its consulting capabilities, SI expertise $4.0 0.0% and use of assets/intellectual property. The company $- -20.0% seamlessly integrates consulting & SI with outsourcing FY08 FY09 FY10 FY11 Est. FY12 Est. capabilities across the full cycle of business/technology Consulting & SI Outsourcing transformation. Consulting & SI Growth Y-t-Y Outsourcing Growth Y-t-Y SOURCE: ACCENTURE AND TBR • The positive momentum in consulting & SI will continue as Accenture attracts clients with its strong value proposition.11 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  12. 12. Scenario Discussion TBREmerging markets are growing increasingly important, but still representa small share of Accenture’s overall businessScenario Discussion: Emerging markets will create avenues for Accenture’s growth in the long runScenario SWOT Assessment • High-growth emerging markets represent a significantStrength: Established presence in high-growth opportunity for Accenture’s global delivery capabilities. Theemerging markets for global service delivery firm is intensifying its focus on local clients to diversify itsWeakness: Concentration of resources in India and revenue base and decrease risk from slower performance ofthe Philippines the major economies (~85% of annual revenue).Opportunity: Increasing demand for IT services in • Accenture is making progress in winning local clients inemerging, fast-growth regions emerging high-growth markets, and this trend will continueThreat: Stiff competition within emerging markets in the long run. The company is expanding beyond the BRICfor market share and talent region in areas such as Turkey, Mexico, Middle East, South Africa, and South Korea. Brazil reached ~$1.0 billion in annualTBR ACCENTURES EMERGING MARKETS REVENUE revenue and is experiencing strong growth with positive $7.0 market momentum. • Organic investment is the major driver behind emerging $6.0 $6.0 market expansion and occasional small-scale acquisitions are CAGR FY10 - FY15: being used to gain a foothold in underpenetrated/small-scaleIn $ Bi l lions 15% (i n U.S. dollars) $5.0 regions, such as the Middle East (Accenture acquired a $4.0 majority stake in Al Faisaliah Business & Technology Company, based in Saudi Arabia). $3.0 $3.0 • Accenture is taking the right global expansion approach. It will experience strong benefits due to its ability to cross- $2.0 utilize established global service delivery capabilities in $1.0 emerging markets and serve local clients. At the same time, FY10 FY15 Est. competition in emerging markets is increasing, which couldSOURCE: ACCENTURE AND TBR ESTIMATES challenge Accenture’s expansion efforts.12 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  13. 13. Financial Model Strategy: Revenue TBRAccenture’s continued momentum will drive more record numbersby the end of FY11 Revenue Performance and StrategiesTBR ACCENTURES NET REVENUE, GROWTH AND 2Q11 Net Revenue: $6.7 billion, 20.6% YTY PROJECTIONS Net Revenue Growth Year-to-year $30 $26.3 $28.8 20.0% Accenture beat its revenue guidance range for the second $25 20.6% 19.9% $22.2 15.0% straight quarter. The $6.72 billion net revenue in 2Q11 was 8.3% 16.9% $20 18.3% 10.0% an all-time high for the company and well above theIn $ Bi l lions 5.3% 12.3% $15 9.5% 5.0% guidance range of $6.3 billion to $6.5 billion. Positive $10 6.1% 0.0% market momentum allowed Accenture to make another $6.5 $5 $5.6 $5.4 $6.0 $6.1 $6.7 -5.0% increase in its FY11 guidance to 14% to 15% growth in local $0 -10.0% currency – up from 11% to 14%. 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 CY10 CY11 CY12 Net Revenue Est. Est. Est. Revenue and Growth Outlook Revenue Growth Year-to-year NOTE: Annual revenue and projections are for calendar 2010, 2011 and 2012, respectively. SOURCE: ACCENTURE AND TBR • While the growth expectation for FY12 of 7% to 10% in TBR ACCENTURES TRAILING 12-MONTH REVENUE local currency is conservative, TBR expects this estimate $28 $25.3 to increase given positive global demand trends. $26 $24.2 $24 $22.4 $21.6 $22.2 $23.1 • Accenture also sees growth potential in the healthcare $20.9 $20.8 $21.3 $21.6 sector as this vertical has gained traction and saw In $ Bi l lions $22 $20 substantial growth in the quarter. $18 FY09 FY10 FY11 $16 • Expected revenue growth in the upcoming quarters from $14 strong demand for outsourcing and consulting bolster 3Q08- 4Q08- 1Q09- 2Q09- 3Q09- 4Q09- 1Q10- 2Q10- 3Q10- 4Q10- pipeline and signings. 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Est. SOURCE: ACCENTURE FINANCIALS AND TBR 13 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  14. 14. Financial Model Strategy: Operating Groups TBR The public sector will remain pressured in major economies, but the commercial sector will see global growth Operating Group Performance and Strategies CHT CHT recorded substantial growth in consulting TBR ACCENTURES REVENUE BY OPERATING GROUP revenues spurred by demand for ERP and outsourcing (IN $ BILLIONS) $1.4 billion in the communications field to enhance clients’ 100% $0.93 $0.86 $0.93 $0.96 $0.97 $0.97 22.5%YTY operational efficiency. % of Net Revenue 75% $1.00 $1.01 $1.13 $1.17 $1.28 $1.22 $1.30 Financial Financial Services grew in both outsourcing and $1.15 $1.12 $1.27 $1.44 $1.42 50% Services consulting & SI in areas such as post-merger $1.18 $1.16 $1.28 $1.39 25% $1.27 $1.44 $1.4 billion integration, operational effectiveness, risk and 0% $1.31 $1.27 $1.40 $1.37 $1.58 $1.45 25.4% YTY regulatory compliance and global operating models. 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Est. HPS is seeing strong demand and growth in healthcare Health & Public Service Resources (e.g., connected health and electronic medical Financial Services Communications & High-Tech Health & Products records), but the public sector remains challenged, Public SOURCE: TBR AND ACCENTURE Service (HPS) especially in U.S. state and local, several countries in $1.0 billion EMEA and the Americas. Repositioning of the public ACCENTURES OPERATING GROUP PROFITABLITY sector business with differentiated offerings, and moreTBR 4.8% YTY emphasis on the U.S. federal sector will help Accenture 19.0% improve performance, albeit not in the near term.% of Net Revenue 17.0% 15.0% Products saw strong growth in consulting across all 13.0% Products geographies and industries, led by consumer goods & 11.0% 9.0% $1.6 billion services and automotive. Outsourcing grew across all 7.0% 20.4% YTY geographies in air, freight & travel services and in retail 5.0% in Americas and APAC. 3.0% 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Est. Remained the fastest-growing operating group due to Resources Communications & High-Tech Financial Services strong growth in consulting & SI driven by ERP Health & Public Service Products $1.3 billion programs to support clients’ global expansions and Resources 27.9% YTYSOURCE: TBR AND ACCENTURE growth in outsourcing driven by ITO and F&A BPO. 14 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  15. 15. Financial Model Strategy TBRConsulting & SI demand will continue to improve, driving near-termrevenue benefits for AccentureService Line Performance and Strategies • Consulting & SI saw strong growth in the ACCENTURE SERVICE LINE REVENUETBR (IN $ MILLIONS) resources vertical, as well as growth in financial $8.0 25.0% services, communications & high-tech and Growth Year-to-Year $7.0 $6.0 $2.75 20.0% products. Additional growth will come as demandIn $ Bi l lions $2.70 $5.0 $2.35 $2.33 $2.48 $2.54 15.0% intensifies with clients in major and emerging $4.0 $3.0 10.0% economies. $2.0 $1.0 5.0% Consulting & SI: • Consulting will be driven by cost take-out, revenue $3.09 $3.57 $3.51 $3.80 $0.0 $3.22 $3.97 0.0% $3.97 billion, growth, compliance and risk management, 2Q10 3Q10 Outsourcing 4Q10 1Q11 C&SI 2Q11 3Q11 Est. up 23.0% year- infrastructure virtualization and consolidation and C&SI YtY Growth Outsourcing YtY Growth to-year cloud computing. SOURCE: TBR AND ACCENTURE • SI will be driven by ERP (extend ERP for data management and analytics, supporting Accenture’s analytics agenda), application TBR modernization, web development and ACCENTURE SERVICE LINE REVENUE AND PROFITABILITY technologies for wireless services and SaaS – a 75% large focus area for Accenture in cloud. % of Net Revenue 57.9% 57.1% 59.0% 58.0% 59.0% 58.5% 60% 45% 42.1% 42.9% 41.0% 42.0% 41.0% 41.5% • Outsourcing remains driven by verticals, such as 30% resources, communications & high-tech and 15% 16.5% 15.0% 15.1% 14.0% 14.9% 15.0% financial services. 0% 11.6% 10.7% 11.6% 11.0% 13.0% 13.0% Outsourcing: • Outsourcing will keep its momentum as clients 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Est. $2.75 billion, focus on cost take-out and network and Consulting & SI Revenue Outsourcing Revenue up 17.4% year- datacenter upgrades, creating new and add-on Consulting & SI Operating Margin* Outsourcing Operating Margin* to-year work for Accenture. SOURCE: TBR AND ACCENTURE * Operating margin is a TBR estimate • Accenture’s ability to combine horizontal and industry-specific BPO with analytics to drive business outcomes will support BPO growth.15 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  16. 16. Financial Model Strategy: Expenses TBRThe FY11 operating margin target is well calculated, as the companyabsorbs higher costs due to hiring and business development activities Expense Performance and Strategies ACCENTURES OPERATING EXPENSES 2Q11 Operating Expenses: $1.3 billion TBR AS A PERCENTAGE OF SALES • Focus on efficiency and productivity in cost of 22.0% services generated positive results in 2Q11. 17.0% Cost of • Gross margin in 2Q11 was lower than in 2Q10, 12.8% 12.9% 11.7% 12.4% 12.9% 12.0% 12.1% Revenue due to lower contract profitability, as Accenture 7.0% absorbed higher compensation and 7.4% 8.0% 6.4% 7.2% 7.8% 7.0% $4.4 subcontractor costs, with higher pricing and 2.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% billion better resource mix. Higher recruiting and -3.0% 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Est. training costs to address demand through hiring also diluted gross margin in 2Q11. Sales and Marketing General and Administrative Reorganization cost (benefit) SOURCE: ACCENTURE AND TBR Business development initiatives related to SG&A addressing improving demand and strengthening Expense client relationships is boosting Accenture’s sales TBR ACCENTURES GROSS AND OPERATING PROFIT $1.36 expenses. Despite strict G&A management, AND PROJECTIONS 40% billion litigation costs of $75 million increased G&A as a 34.7% 34.4% 34.1% percentage of revenue by 110 basis points. Gross and Operating Margin 34.0% 32.2% 31.7% 30% • As the pricing environment stabilizes, Accenture 20% will be able to leverage its gross margin through 14.4% 13.2% 13.7% 12.7% 14.1% 14.2% higher pricing and create a more efficient 10% Margins resource mix. and • Business development efforts will push up sales 0% Outlook expenses; this trend will continue as Accenture 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Est. works toward its operating margin goal of 13.6% Gross Margin Operating Margin to 13.7% for FY11, which TBR believes SOURCE: TBR AND ACCENTURE is achievable.16 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  17. 17. Go-to-Market & Services Strategies: Sales Strategy TBRAccenture’s continued emphasis on client relationships will maintainstrong signings and revenue in the futureSales Strategy & Customer SegmentationTBR Assessment Accenture’s Sales StrategyAccenture is strongly focused on building Accenture’s global sales organization is comprised of a traditional salesclient relationships. The use of senior channel supported by a small direct sales channel.executives in the bulk of sales activities • Internal/Traditional sales channel: Responsible for the bulk ofhelps create long-lasting customer Accenture’s sales. The sales function is tasked to the firm’s partners,relations (e.g., diamond clients), account associate partners and managers (or senior executives) – 4,500growth and revenue benefits. people globally. Each client has account executives responsible for the relationship, business development, etc. • Direct sales channel: Covers new clients with whom Accenture does Accenture’s Sales Structure not yet work, and is comprised of: o Equally small and direct sales team in BPO that targets SMBs. Internal/Traditional Sales (Accenture’s Senior o Direct sales team in applications outsourcing (~80 sales directors) Executives; 4,500 people) and ITO that works with client senior executives. • Third-party advisors: These advisors work with clients to score deals Direct Sales for Accenture and constitute only a minor portion of the company’s (~150 people, TBR sales force. Accenture’s Customer Structure SOURCE: ACCENTURE AND TBR estimate) Accenture defines its “diamond,” or “foundation,” clients as those with Outside $100+ million, long-term, established accounts that have a strong Advisors relationship with the company. The number of Accenture diamond clients across the globe reached 100 at the end of FY10. • The United Kingdom, a key region for Accenture’s business, has ~20 Client diamond clients. Diamond clients are also located in emerging markets (e.g., four in Brazil, one in China – State Grid of China).17 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  18. 18. Go-to-Market & Services Strategies: Service Line Deep Dive TBRIndustry-specific offerings allow Accenture to broaden its client base Accenture’s Services Line Deep Dive TBR Assessment Consulting & SI is seeing increased revenue contribution in 2Q11 driven by rising demand; however, Accenture has a well-balanced business mix that combines strong vertical expertise with high-value transformational ACCENTURE REPORTED 2Q11 SERVICE LINE DEEP DIVE offerings, implementation and cost-optimization capabilities. Accenture is able to target a wide range of ITO, 4.2% clients and TBR believes sustained growth will follow as Outsourcing, BPO, 12.9% clients become more globalized and rely on Accentures 41.0% services to assist in that expansion. AO, 23.9% Service Lines Deep Dive Strategies • C&SI: Place strong emphasis on cost take-out, growth and transformation, ERP, package enhancements and analytics to increase bookings • ITO: Emphasize remote infrastructure management to C&SI, 59.0% accommodate strong demand as clients become increasingly adapted to transferring assets due to C&SI, 59.0% lighter capital costs (cost optimization is a key client priority) • BPO: Offer BPO that has embedded insights, analytics and cloud to drive business value for the client, not just SOURCE: ACCENTURE AND TBR transformation. Expanding core BPO (horizontal – F&A, HR, etc.), industry-specific BPO and focus on growing in emerging markets • AO: Bundle AO with other outsourcing services; provide client value and use IP for AO service delivery18 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  19. 19. Go-to-Market & Product Strategies TBRSignings growth will be driven by a combination of consulting & SI,outsourcing and new high-growth business areas TBR ACCENTURES TTM NEW BOOKINGS AND Y/Y GROWTHSignings & Pipeline $30,000 15% Year-to-year Growth• Accenture’s strong offerings portfolio and $25,000 10% TTM Bookings (In $ Millions) 5% global capabilities will help it capture improving $20,000 0% demand trends during coming quarters. TBR $15,000 -5% expects FY11 bookings to be closer to the high $10,000 -10% end of its expectations range of $25 billion to $5,000 -15% $28 billion. 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 TTM Outsourcing TTM Consulting Est.• Consulting & SI demand continues to improve, Year-to-Year Growth with consulting signings growing 17.4% year-to- SOURCE: TBR AND ACCENTURE year in 2Q11 and more growth to come in 3Q11. Accenture has strong capabilities in all Key 2Q11 Customer Wins three areas, including management and Company TBR Assessment technology consulting and SI. TBR expects this will drive more deal wins with clients in major Accenture took over Symbian software and emerging markets, helping support near- development from Nokia and rebadged Nokia 2,800 Nokia employees – a move that will term revenue performance. Finland give Accenture a bigger play in mobility and• Accenture’s transformational capabilities and its help the struggling Nokia remain relevant mix of cost improvement and growth offerings as the smartphone invasion continues. will help it gain traction in consulting & SI as well as outsourcing. Demand for innovation will This systems integration deal, in which Reliance Accenture will implement a digital rights help the firm gain traction outside its core management system for Reliance, business in new business areas, such as cloud Entertainment showcases Accenture’s global strength in computing, analytics and mobility. India the media and entertainment sector and its ability to win clients in emerging regions.19 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  20. 20. Go-to-Market & Services Strategies: Pricing TBRPrices are stabilizing, but the pricing environment remains competitive,pushing Accenture to improve its resource mix to drive up profit levels Pricing Environment & Strategies Accenture’s market and pricing environment remains competitive; prices are now more stable across a broader share of its business and geographies, allowing the • TBR believes Accenture is starting to see pricing company to sustain its growth trajectory. stability in the Americas, APAC and some countries in Europe (e.g., Germany, the Nordics). We believe the firm is able to test and push slight price ACCENTURES U.S. GOVERNMENT HOURLY RATES TBR (05/10-05/11) increases with clients broadening their IT SKILL LEVEL/EXPERIENCE investments and looking to become more TITLE 1 2 3 4 globalized. Business Integration Analyst $91 $100 $114 $123 Business Integration Consultant $111 $125 $139 $153 • Pricing pressures still exist in regions that lag in Business Integration Manager $157 $177 $183 $202 economic recovery and have tight public sector Business Integration Senior Manager $236 $274 $303 spending (e.g., the Netherlands, the U.K., Spain). Business Integration Associate Partner $316 $347 $378 $417 Business Integration Partner $494 N/A N/A N/A • During 2Q11, Accenture continued to experience Client Financial Management Assistant $64 N/A N/A N/A lower contract profitability year-to-year in Client Financial Management Analyst $81 $91 N/A N/A Client Financial Management Specialist $110 $121 N/A N/A consulting & SI and outsourcing. Accenture was Client Financial Management Manager $157 N/A N/A N/A unable to fully recover the higher annual Client Financial Management Senior Manager $231 N/A N/A N/A compensation increases and subcontractor costs Client Financial Management Associate Partner $340 N/A N/A with better pricing and more efficient resource Executive Assistant NOTE: Net rates (discount deducted). $64 $73 $83 N/A mix. TBR expects contract profitability will stabilize SOURCE: TBR AND GENERAL SERVICES ADMINISTRATION. and improve in FY12 as the pricing environment further stabilizes and improves. The hourly billing rates above are based on Accenture’s General Purpose Commercial IT Equipment, Software and Services government contract with the U.S. General Services Administration, launched in 2010.20 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  21. 21. Alliance & Acquisition Strategies TBRAccenture continued to make small tuck-in acquisitions in 2Q11, gainingmarket share in the Middle East Acquisition Assessment Recent Acquisitions Based on its history of successful acquisitions Al Faisaliah Business & Technology Company integration, TBR believes Accenture will continue to • In June, Accenture announced that in a joint venture look for small-scale acquisition opportunities that help with Al Faisaliah Group, it had acquired a majority expand its service offerings and global footprint. stake in Al Faisaliah Business & Technology Company Accenture Acquisition Strategy (FBTC), a Saudi Arabia-based IT services business. • Accenture’s main goal is to grow its business • Accenture will strengthen its capabilities in the organically; however, the company supplements Middle East, a high-growth geography, by adding organic growth with acquisitions when it finds the FBTC’s IT services and local knowledge of its right transaction in terms of price and capabilities customers. that will be added. • By integrating FBTC, Accenture will enhance its global • Accenture has been successful at finding small, tuck- capabilities in enterprise resource planning solutions in acquisitions that can be incorporated into the and expand its client base in a key geography. business without disrupting its business structure. • The joint venture will allow for more client service • The acquired companies help Accenture fill gaps in its offerings in the Middle East and help Accenture offerings and capabilities, augment its assets and expand its relatively small business in the region. drive overall competitive differentiation. • Accenture has started to use acquisitions to expand in emerging geographies, such as the Middle East, to support its geographic spread.21 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  22. 22. Alliance & Acquisition Strategies TBRAlliances are a strong contributor to Accenture’s competitive positionand diverse set of service offerings Alliance Assessment Recent Alliances • TBR expects Accenture to further expand its SAP partnership base of technology developers, Accenture and SAP announced an expansion of their broadening its offerings with high-growth potential alliance in which the two companies will jointly develop and vertical-specific solutions. an enterprise mobility solution focused on three • Alliances will continue to play a large role by providing industries—oil and gas, utilities and consumer products. Accenture with a means to gain global traction for its This partnership expands Accenture’s service offerings in services and to expand in high-growth areas. the rapidly growing enterprise mobility market. Accenture Alliance Strategy Panasonic • Accenture’s internal organization, the Accenture • In June, Accenture announced it would work with Alliances Group, has 300 dedicated alliance Panasonic and seven other companies on the “Fujisawa professionals and is responsible for forming alliances Sustainable Smart Town” project to develop a smart and partnerships to provide the company with new city in Fujisawa, Japan that will gain its intelligence channels, incremental revenue streams and access to through infrastructure and services. emerging technologies. • TBR believes this alliance will improve Accenture’s • Alliances complement and extend Accenture’s foothold in the growing green energy market. solutions and capabilities. Accenture will leverage its experience with city and • Alliances and partners are centered around the power grid projects to develop energy-efficient services company’s client service business (consulting, SI, within the town. outsourcing, etc.). The company has an alliance network of more than 150 partners.22 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  23. 23. Geographic Analysis TBRAccenture’s geographic expansion strategy is based on growth inemerging markets and sustained market share in the U.S. and EMEAGeographic Revenue Strategies ACCENTURES REVENUE AND YtY GROWTH The region is benefiting from improving economic TBR growth in North America, particularly in the BY GEOGRAPHY United $7.0 50.0% States/ commercial sector. Revenue growth in the region was Revenue Growth Year-to-Year $6.0 40.0% Americas led by the U.S., Canada and Brazil, showing Net Revenue in $ Billions 30.0% $5.0 Accenture’s strength in both mature and emerging $4.0 20.0% $2.9 geographies. Growth in health, financial services, 10.0% $3.0 0.0% billion energy and natural resources helped offset declines $2.0 -10.0% in the Public Service sector. $1.0 -20.0% $0.0 -30.0% EMEA is now on a growth trajectory with a pipeline 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Est. that will turn into deals in the near term. Growing Asia Pacific Axis Title EMEA EMEA local economies are supporting business in the Americas Americas YtY Growth region. Growth was reported in the U.K., Germany, EMEA YtY Growth APAC YtY Growth $2.9 France, Italy, Switzerland and South Africa. Accenture SOURCE: TBR AND ACCENTURE billion works with large multinational clients in Europe that ACCENTURES SEQUENTIAL GROWTH BY GEOGRAPHY have global operations and are not as affected by TBR economic pressures and budget deficit challenges. 20% Net Revenue Grwoth Sequentially 15% APAC continues to be Accenture’s smallest revenue 10% APAC contributor, but saw growth in major and emerging 5% $865 economies in the region (Australia, Japan, Singapore, 0% million China, Malaysia and India), as well as gains in health -5% -10% and retail sectors in APAC. -15% -20% Accenture is expanding beyond BRIC into South 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Emerging Korea, Mexico, Turkey, South Africa and the Middle Est. Americas Sequential Growth EMEA Sequential Growth Markets East with a focus on growing revenue from $3 billion APAC Sequential Growth in FY10/11 to $6 billion in FY15. SOURCE: TBR AND ACCENTURE23 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.
  24. 24. Resource Management Strategy: Headcount TBRHiring onshore and offshore will help Accenture grow in the long termHeadcount Strategies & Investments • Combine near/offshore service delivery with industrialization (i.e., use methods, processes, tools) to support profitability. Total headcount in 2Q11: 223,305 Accenture has leading capabilities in that aspect, closely following IBM, which has a similar focus.~21% of people are ~31% of people in North America • Augment global network of analytics innovation centers with are in EMEA new locations in Barcelona (50 people) and Dublin (100 people) to capture growth opportunities. • Expand GDN with new centers in the Philippines, Brazil and South Korea, allowing Accenture to obtain more clients, both~5% of people international and local, to drive emerging market growth. ~43% of people are in South are in APAC • Accenture’s total headcount continues to expand, driven by America increased hiring activities both onshore and near/offshore as the company focuses on capturing demand. • Notably, Consulting & Solutions headcount (i.e., pure ACCENTURES HEADCOUNT Consulting, SI and Technology employees) rose 22.5% year- TBR to-year. Accenture is emphasizing recovering areas that need Total headcount: 223305 (+17.3% YTY) 250,000 more people to address business coming in. 200,000 • GDN headcount increased 21.7% year-to-year and now Nearshore & Offshore accounts for 58.2% of total headcount. Accenture will expand Total Headcount 114,600 150,000 85,600 Headcount its GDN to provide global delivery and work with local clients. 100,000 Other GDN locations • Accenture will add approximately 2,800 Nokia employees this and onshore October as part of an outsourcing deal between the two 50,000 104,842 108,705 companies. 0 2Q10 2Q11 Calendar Quarter SOURCE: ACCENTURE AND TBR24 Accenture 2Q11 | Professional Services Business Quarterly ©2011 Technology Business Research, Inc.