Spate of layoffs in technology firms continues as Accenture prepares for another round of pink slips. In the next 18 months, the IT behemoth is planning to fire 19,000 employees (about 2.5% of its global headcount). The impact on its Indian operations, however, is unclear.
Accenture has over 3 lakh employees in India. "The people impact is estimated to be 2.5% of our current global workforce. This may differ by market and by country, as a consequence of our different footprint and growth, and should not be taken as a figure applicable to all geographies," the company said in a statement.
Of the 19,000 employees it will lay off, Accenture said over half will be in non-billable corporate functions. Speaking to analysts, Chief Financial Officer KC McClure said nearly half of these layoffs will be in FY23, or before August 31.
The company expects to incur $1.2 billion in employee severance and other personnel costs — $500 million in FY23 and $700 million in FY24.
This is part of the $1.5 billion the company will incur towards business optimisation costs in FY23 and FY24.
The company also lowered its revenue guidance at the upper end for the 2023 fiscal year, an indication of the worsening stress in the IT services sector as clients pull back on spending with an increased focus on cost optimisation.
Accenture expects its revenue to increase by 8-10 percent in FY23 year-on-year, slashing the top end of its guidance from 11 percent. Accenture follows a September-August financial year.
The company beat its revenue guidance for the quarter with revenue coming in at $15.81 billion, and also new bookings at a record high of $22.1 billion — an increase of 36.4 percent sequentially. For Q3, the company has guided revenues to be $16.1-16.7 billion.
The company saw its revenue increase sequentially by 0.4 percent. Net income, however, fell 22.46 percent from last quarter.
Chief Executive Officer Julie Sweet said the company is seeing wage inflation as none of them has ever experienced, which they were addressing so far through a combination of improved pricing and cost efficiencies.
McClure said the company is going after structural costs to ensure it is in a better position. “We've been dealing with the difficult challenges of compounding wage inflation. We've been doing that with pricing, but we've also been doing that with cost efficiencies and digitising. We have identified an opportunity to go after more structural costs to create that resilience in that room and the P&L as we look forward."
The company net headcount addition quarter-on-quarter has remained flat, with the headcount at 7,38,000, and annualised voluntary attrition down to 12 percent from 13 percent in the same period. Sweet said the net headcount addition will trend similarly in Q3 and there may be additions in Q4.
Deal pipeline
Sweet said in terms of the nature of deals in the last several quarters, there has been a “laser focus on costs”. She said that most clients want to see a shorter return on investment and that it varies across industries.
“I would say a common theme is that in this kind of an environment, everyone does want to be optimising costs, but where they're focusing is different by industry,” she said.
Accenture saw record new bookings of $22.1 billion during the quarter, including 35 clients with quarterly bookings greater than $100 million.
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The communications, media, and technology of the company did not see any growth on a year-on-year basis in local currency, while financial services grew by 10 percent, health and public service by 15 percent, products by 9 percent, and resources by 16 percent.
Sweet said there is continued strong demand for larger transformational deals. She added that for Q3, the pipeline is strong but bookings are expected to be lighter than in Q2.
In strategy and consulting, the company’s leadership said there is a slower deal conversion.
Vendor consolidation, which becomes a prominent theme as clients look to save costs, is something that Accenture is witnessing as well. Sweet said it's less about cost and more about efficiency where companies do not work to work with many vendors.
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