Accenture New Revenue Catches Up With Top Five Indian IT Firms

Accenture added $4.72 billion in incremental revenue in the financial year ended August 2018, a shade lower than the combined $4.78 billion new revenue of TCS, Cognizant, Infosys, Wipro and HCL Tech.

Accenture Plc reported 13.5% growth and added $4.72 billion in incremental revenue in the financial year ended August 2018, a shade lower than the combined $4.78 billion new revenue of Tata Consultancy Services Ltd (TCS), Cognizant Technology Solutions Corp, Infosys Ltd, Wipro Ltd and HCL Technologies Ltd.

Accenture’s scorching growth pace was underpinned by the firm’s aggressive acquisition strategy and the firm generating more business from technology areas that are seeing faster growth: digital, the fuzzy umbrella term which each company uses to classify revenue generated from areas generally classified as social, mobile, analytics, cloud computing and Internet of Things.

Accenture claims that its new business, which comprises digital, cloud computing and cyber security, totalled $23 billion, or about 60% of its full-year revenue. Along with its strong consulting practice, Accenture managed to end the year with $39.57 billion in revenue.

Homegrown IT firms, for now, say that digital accounts for between 22% and 25% of their business.

Last year, Accenture spent $750 million in buying companies, less than the $1.8 billion it spent to buy companies in 2016-17. However, Accenture has again upped its acquisition spend in 2018-19.

“This year, we would expect to spend up to $1.5 billion, consistent with our capital allocation strategy. As always, given the right opportunities and the right circumstances, we could certainly spend more than that,” Accenture’s Chief Financial Officer David Rowland told analysts after the company declared its earnings.

Accenture added 34,309 employees last year to take its total workforce to 459,178 people. Cognizant and the four big Indian IT firms added only 13,772 employees in 2017-18.

“We believe Accenture’s execution is best in class among IT service providers in our coverage. We think digital will continue to help drive strong revenue growth with slow and steady margin expansion over time,” Keith Bachman, an analyst with BMO Capital Markets, wrote in a note dated 27 September.

Accenture firm follows a September-August financial year. Indian IT firms follow an April-March financial year while Nasdaq-listed Cognizant follows a January-December financial year.

Over the past three years, Accenture has spent $3.4 billion to buy 70 companies, considerably more than the $1.58 billion spent by TCS, Infosys and Wipro put together, since 1 April 2014.

Only twice earlier have two companies added more than $2 billion in new business in a year, according to a Mint analysis. In 2015, Cognizant had added $2.15 billion in incremental revenue, while Mumbai-based TCS added $2 billion in new business in the year ended March 2015.

In July, Mint reported that Accenture was on its way to script history by adding incremental revenue that would be about the new revenue generated by the five firms together. Save for Noida-based HCL Technologies, all IT companies reported single-digit growth in the year ended March 2018.

Still, homegrown IT firms expect better growth in the current financial year. TCS does not issue annual or quarterly guidance, but the management expects to report double-digit growth in the current financial year. Hiring for all the firms has also seen encouraging signs, as the top five software services providers operating in India added 24,047 people in the first quarter of this financial year, compared with the 13,772 net additions in the previous year, leading many experts to believe that the industry is set to record its fastest growth in three years. – Live Mint