Schumpeter – The rise and rise of Accenture | Business
MANAGEMENT CONSULTANTS thrive on a simple business model. First, scare companies by laying bare where they are failing. Then soothe them with counsel on how to improve. The scaring part has grown easier as technology upends one industry after another. Rare is the chief executive these days unconcerned about cyber-security, artificial intelligence (AI) or their online offering. The soothing, though, may have become harder. Who is a boss to trust when consultancies themselves are only slowly getting to grips with the meaning of technological upheaval?
To a growing number of CEOs the answer is Accenture. The firm, whose name is a portmanteau of “accent on the future”, certainly has pedigree when it comes to tech. It is descended from Arthur Andersen, an accounting-and-advisory giant which helped persuade General Electric to install a UNIVAC 1, corporate America’s first computer, in 1954. In 2000 Andersen Consulting finally severed its strained ties to its parent (whose remaining accountancy business was felled two years later by the Enron fraud scandal). It changed its name and, in 2001, listed on the stockmarket at a value of $14bn.
Since then its growth has been tentacular. Today around 200 clients are thought to pay Accenture at least $100m each annually to keep their tech humming. Its 500,000 or so employees perform menial functions (running clients’ overseas call centres or making their sales software connect properly to accounting) and more glamorous ones (uploading businesses to the cloud, designing their apps, building AI chatbots, even imagining their next ad campaign). Last year the firm’s revenues reached $43bn. Total shareholder returns, including dividends, come to 118% over the past five years, compared with 56% for the S&P 500 index. In February its market capitalisation hit $137bn.
Two things help explain Accenture’s rise. One was beyond its control: technology’s role within companies has moved from the back office to the core of what many of them do—hence those corner-office jitters. The second factor was a tech-heavy soothing strategy. Pierre Nanterme, a Frenchman who led Accenture from 2011 until shortly before his death in January 2019, doubled down on all things analytics, mobile, cloud and cyber-security. Each year the firm spends roughly $1bn on around two dozen acquisitions to get on top of the buzziest tech trends. What Accenture calls “The New” now accounts for around two-thirds of its sales, up from one-third five years ago.
“The New” complements Accenture’s older capabilities in a way that is hard for rivals to match. Unlike outsourcing competitors such as India’s Infosys or Tata Consultancy Services, it has management-consulting chops from the Andersen days. At the same time, in contrast to august strategy firms like McKinsey or accountant-advisers like Deloitte, EY or PwC, its army of relatively cheap white-collar labour, roughly half of it in India and the Philippines, can be enlisted to perform labour-intensive tasks such as taking down dodgy videos on social media (which Accenture does for Facebook and Google). A global footprint helps insulate it against downturns in any particular region. Despite rivals’ claims of the superiority of the limited-partnership model, which still dominates the industry, Accenture’s stockmarket listing does not appear to have hurt its growth.
The result is an unusual ability to offer clients a comprehensive service. Refocusing your business around a new app? Accenture will be on hand to write the code—but can also supply designers to make it look pretty. Need an ad blitz to sell it to consumers? Accenture’s marketing arm grossed $10bn in revenue last year, placing it among the five biggest ad groups in the world—it has become a creative agency not dissimilar from WPP or Publicis Groupe. Want to expand into new markets? Just ring one of its more than 200 offices in 51 countries.
The question for Julie Sweet, an American who took charge in September, is whether Accenture can keep ballooning. She faces three challenges. First, the sheer scale of the firm already feels daunting. No listed corporation bar Amazon and Chinese hardware-makers added more employees in the 2010s. It is tricky to build a culture—and foster a sense of purpose that clever clogs now demand of their employers—that appeals to both buttoned-down database managers in Bangalore and tattooed creative directors in Spitalfields. Accenture has morphed into a white-collar conglomerate at a time when investors favour focused businesses. Its margins are less juicy than those of the Indian outsourcers.
The second challenge is an economic downturn, like the one that looks increasingly possible as covid-19 goes pandemic. Recessions hurt consultants as cash-strapped clients focus on survival rather than expansion. Accenture weathered the financial crisis of 2007-09 but its revenues sank. Its share price has now fallen as it did back then, this time by a quarter since its February peak, faster than the covid-infected markets as a whole.
Ms Sweet’s final predicament is perhaps the most consequential. If her firm keeps doing such a bang-up job in convincing clients that technology is central to their success, more of them might opt to build and run a bigger slice of it in-house rather than splurging on outside advice. Accenture seems at times to suggest that companies should let its consultants handle not just their brand and tech innards, but also their power to innovate.
Still, the Nanterme-era digital strategy has life in it yet. Many companies are behind in the technology race. Before most so much as ask themselves how zippy 5G networks, the “Internet of Things” or machine learning will transform their businesses, Accenture already has some answers. If someone, some day, finds a function for blockchain, expect Accenture to be there to advise bosses on its use—and to soothe frayed nerves.■
This article appeared in the Business section of the print edition under the headline “The rise and rise of Accenture”