Opinion: The company says in its earnings report that its consulting business is picking up steam while its outsourcing business seems to have crested for now. Is the big-player integrator business world changing?
If Accentures recent financial results prove an accurate barometer, integrators may be in for a shifting business climate.
Global management consulting, technology services and outsourcing giant Accenture released results Wednesday for its fiscal third quarter, which ended May 31. During a teleconference discussion of the companys financials, executives pointed to a couple of interesting trends.
To summarize, Accentures consulting services business is rebounding, while the high growth of its outsourcing business may have crested for the time being.
Joe Forehand, chairman and CEO at Accenture, reported "a continued pickup of our consulting business" during the analyst call. This increase is reflected in both new business and new hiring. According to Forehand, the company expects to see a net increase in consulting hires in fiscal 2005something that hasnt happened in recent years.
Forehand characterized hiring as aggressive, noting that the company is recruiting from college campuses. Accenture was a dependable on-campus presence during the boom years of the 1990s.
Bill Green, Accentures chief operating officer for client services, said the companys consulting business is seeing particular growth in the supply chain and customer services sectors, as well as merger and acquisition integration work.
He said complex integration deals also have started to make a comeback. Green described the activity as classic envision/architect/design/build work. Over the past several years, organizations havent spent much money on such projects, he added.
The financial community has noted consultings return. In a recent research note, Robert W. Baird & Co. said it expected Accentures consulting upswing to continue in coming quarters.
The uptick in consulting and complex deals is not just music to integrators ears. Resellers who have migrated their businesses upstream in recent years should be encouraged as well.
Accentures outsourcing business, meanwhile, is "likely to grow at a slower rate" than in previous quarters, noted Harry You, Accentures chief financial officer. Outsourcing revenue from the companys telecommunications and high-tech business segment had been expanding at a rapid pace. That growth, You said, reflected where the industry stood in the business cycle "relative to the Internet bubble."
Tech companies driven to cut costs have employed outsourcing as a way to boost efficiency. Accentures business with them grew accordingly. Accenture won outsourcing deals in a similar fashion during an earlier economic upheaval, as the leverage buyout craze of the 1980s spurred outsourcing as companies looked to take assetssuch as data centersoff their balance sheets.
But while Accentures outsourcing operation may cool, company executives said the business will continue to deliver strong revenue growth. Industry watchers back up this premise, with both Gartner Group and International Data Corp. saying they expect outsourcing to outpace consulting services.
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John writes the Contract Watch column and his own column for the Channel Insider.
John has covered the information-technology industry for 15 years, focusing on government issues, systems integrators, resellers and channel activities. Prior to working with Channel Insider, he was an editor at Smart Partner, and a department editor at Federal Computer Week, a newspaper covering federal information technology. At Federal Computer Week, John covered federal contractors and compiled the publication's annual ranking of the market's top 25 integrators. John also was a senior editor in the Washington, D.C., bureau of Computer Systems News.