By

[Derrick Vijayan PGP13/15]

‘A Study on the Growth Strategy Adopted by Accenture’

“ High Performance. Delivered ”

27

TABLE OF CONTENTS

TABLE OF CONTENTS .................................................................................................................................... 2 COMPANY OVERVIEW ................................................................................................................................... 3

INTRODUCTION

............................................................................................................. 3

EXECUTIVE SUMMARY ...................................................................................... 5

ACCENTURE’S PRODUCTS/SERVICES ....................................................................... 5

MISSION, VISION, VALUES AND GOALS .................................................................. 6

ACCENTURE’S STRATEGY FOR GROWTH AND POSITIONING ............................................... 7

EXTERNAL ANALYSIS ....................................................................................... 8

DEMOGRAPHIC ..................................................................................................................................... 8 ECONOMIC & LEGAL ............................................................................................................................ 8 TECHNOLOGICAL .................................................................................................................................. 9 GLOBAL .............................................................................................................................................. 9

SWOT ANALYSIS ........................................................................................ 9

STRENGTHS .............................................................................................. 10

WEAKNESSES ............................................................................................ 10

OPPORTUNITIES .......................................................................................... 10

THREATS ................................................................................................. 11

INTERNAL ANALYSIS ..................................................................................... 12

COMPETITOR ANALYSIS .................................................................................. 14

BUSINESS LEVEL STRATEGIES ........................................................................... 16

CORPORATE LEVEL STRATEGIES ......................................................................... 17

INTERNATIONAL CORPORATE LEVEL STRATEGY .......................................................... 21

INTERNATIONAL TO TRANSNATIONAL .................................................................................................... 21 FINANCIAL ANALYSIS .................................................................................... 22

INDUSTRY OVERVIEW .................................................................................................................................. 23 IT SERVICES AND CONSULTING .......................................................................... 23

GLOBAL OUTSOURCING .................................................................................. 24

MANAGEMENT CONSULTING .............................................................................. 25

ACCENTURE, FINANCIAL CRISIS & BEYOND: .................................................................................................. 25 CONCLUSION .............................................................................................................................................. 27 APPENDIX: ................................................................................................................................................ 28 BIBLIOGRAPHY ........................................................................................................................................... 32

27

COMPANY OVERVIEW

INTRODUCTION

Accenture is one of the leading providers of technology, consulting and outsourcing services in the world.

Accenture’s effective use of disruptive technologies and best-practice methodologies in the consulting space, as well as an adaptive management style, has morphed the initially small company into one of the biggest consulting companies in the world The company has wide experience, capabilities across most of the industries and business functions - Yahoo! Inc, “Accenture Ltd Company Profile-Yahoo! Finance”

It provides services to its customers through a global delivery network of over 50 centres. It has offices and operations in more than 200 cities in 52 countries. The company is headquartered in Dublin, Ireland and employs 177,000 people. The chronology of events that led to formation of Accenture:

• 1989: Accenture was formally established as a separate stand-alone business unit (as Andersen Consulting) after a restructuring of the Andersen Worldwide Organization.

• 1991: Anderson-Consulting began its first major outsourcing assignment, which involved BP Exploration’s accounting, finance and support functions.

• 1994: Established R & D centres at Palo Alto (US) & Sophia Antipolis (France)

• 2000: arbitration proceedings between Anderson Consulting, Arthur Anderson & Anderson worldwide led to its separation.

• 2001: renamed Accenture, a public company & listed in NYSE.

Since then the company’s business has evolved and has expanded. Currently, the company's business is structured around five operating groups, which together comprise 18 industry groups. The five operating groups of the company include Products, Communications & High Tech, Financial Services, Resources, and Public Service.

27

Operating Groups and Industry GroupsCommunications

& High Tech

Financial

Services

Health &

Public

Service

Products Resources

Industry Groups Industry Groups Industry

Groups

Industry Groups Industry Groups

• Communicati

ons

• Electronics &

High Tech

• Media &

Entertainme

nt

• Banking

• Capital

• Markets

• Insuranc

e

• Health

• Public

• Service

• Automotive

• Consumer

Goods &

Services

• Life Sciences

• Industrial

Equipment

• Retail

• Infrastructur

e &

Transportati

on

• Chemica

ls

• E

nergy

• Natural

Resourc

es

• Utilities

Prior to September 1, 2009, Accenture’s three growth platforms were:

• Management Consulting;

• Systems integration and Technology; • Outsourcing.

Effective September 1, 2009, following is Accenture’s growth platforms:

• Management Consulting – comprised of six service lines :1. CRM (Customer relationship management)2. Finance and Performance Management3. Talent and Organization Performance4. Process & Innovation Performance5. Strategy6. Supply Chain Management (SCM)

27

• Technology Growth platform (formed by bringing together systems integration and technology growth platform with IT outsourcing) - comprises three service areas:

1. Systems Integration2. Technology Consulting – IT strategy/security consulting, R&D,

enterprise architecture, digital solutions, MS solutions etc.,3. Information Technology Outsourcing.

• Business Process Outsourcing Growth platform (bringing together cross-industry and industry-specific BPO services into a unified organization);

• Health & Public Service Operating Group (formed by combining various healthcare related components of products operating group with public service operating group).

EXECUTIVE SUMMARY

In this paper, we seek to perform multiple analysis on Accenture as a business entity that uses its unique set of resources, activities and capabilities that forms the basis of the firm’s strategy, how it has tackled the dynamic external/internal environmental conditions effectively and its response to it and how Accenture has been able to make choices among two or more alternative strategies. Finally, we desire to make recommendations wherever deemed necessary.

ACCENTURE’S PRODUCTS/SERVICES

To list a few, the company's products/services include the following:

Consulting: Technology: Outsourcing:

a)Analytics a)Oracle Solutions a)Application Outsourcing

b)Change Management b)Application Renewal b)Infrastructure Outsourcing

c)CRM c)Business Intelligence c)Business Process Outsourcing

d)Enterprise Performance Management

d)Data Center Technology & Operations

d)Bundled Outsourcing

e)Finance and Performance Management

e)Data Management & Architecture

e)Customer Contact BPO

f)Human Resources Management

f)Enterprise Architecture f)Finance & Accounting BPO

27

g)Leadership &Talent Management

g)Global Delivery & Sourcing

g)HR BPO

h)Process & Innovation Performance

h)Human Capital Management Solutions

h)Learning BPO

i)Risk Management i)Information Management i)Procurement BPOj)Service Management j)IT Strategy &

Transformationj)Supply chain BPO

k)Strategy Consulting k)Microsoft Solutions k)Custom BPOl)Supply Chain Management

l)Network technology l)Health Administration BPO

m) Sustainability m)Open Source Solutions m)Insurance BPO

MISSION, VISION, VALUES AND GOALS

"We believe that embracing inclusion and diversity in the broadest sense is central to being a high-performance business. This continues to be a top priority for Accenture and defines our character and values." - Bill Green, Chairman & CEO, Accenture.

Accenture has a tagline

“High Performance. Delivered.”

The mission and goal of Accenture is, “to help clients to become high-performance businesses and governments & to become one of the world's leading companies, bringing innovations to improve the way the world works and lives”.

The six core values form the backbone of how Accenture go to market are:

• Client Value Creation : Understand/ meet client expectations 100% of the time

• One Global Network: Act to enhance the collective values of the global organization

• Integrity: Always act with openness and honesty• Stewardship: Think future oriented; act /invest to build a stronger

firm for tomorrow

27

• Best People: Are highly competent and make a commitment to excellence, teamwork, and the success of our clients

• Respect for the Individual : Treat each person as we would like to be treated

ACCENTURE’S STRATEGY FOR GROWTH AND POSITIONING

“Companies who have vision and are willing to change the rules are those who will successfully gain and maintain competitive advantage.”

Accenture, since its inception, has always been a global company which believes in continuous innovation and rapid transformation and these have been the primary themes throughout its history. In the process, it sought to build experience, comprehensive capabilities across all industries and business functions through extensive researches on the functions and requirements of world's most successful companies and also, collaborating with the clients to help them become high-performance consulting and technology service provider. In this way, Accenture have been able to create a sustainable value for their customers and the shareholders. Also, Accenture identifies new business and technology trends and develop solutions to help clients around the world which enable the company to:

• Enter new markets• Increase revenues in existing markets

• Improve operational performance• Delivery of products and services more effectively and efficiently

Strengths that distinguish Accenture in the marketplace are:

• Extensive industry expertise. • Broad and evolving service offerings.

• Expertise in business transformation outsourcing. • History of technology innovation and implementation, including our

research and development capabilities.

These core competencies allow Accenture to serve clients along the entire deal life cycle, independent of the actual entry point into the project and are able to support customers on pan-geographic deals with local resources available across different countries. The workforce is an essential ingredient to achieving its business objective. With approximately 177,000 people in 52 countries, deep industry and business process expertise, Accenture is able to mobilize the right people,

27

skills and technologies to help clients improve their performance. We need to further study the factors that determine the strategies that Accenture has adopted and also the shortcomings associated with these strategies.

EXTERNAL ANALYSISThe external analysis can be defined under:

DEMOGRAPHICAccenture’s major clients are high profile large - complex organizations that consistently feature in the Fortune 500 companies. Now, Accenture has taken its core business and investment into new and emerging areas – with special emphasis on the BRIC countries, South Korea and Mexico, to expand its market share and growing business. This move has presented Accenture a large expanding and dynamic market whose customers are willing to try world class products/services but at the same time are cost and quality conscious. These countries also present a conducive base to support for further growth of business and an array of quality & technically efficient pool of human resources which Accenture can pick to not only enhance its core competencies but as well as leave a footprint. The ability of Accenture to replicate its model or refine the model to suit the complexities of these countries will enhance the Accenture brand in these markets.

ECONOMIC & LEGALDue to weak currencies, low labour cost, the need to be closer to the customers and its objective to expand the market geography, Accenture need to think of strategies to derive optimal benefit from other locations. There is already strong competition in these countries (especially in India like TCS, Infosys, Wipro, Patni Computers and Mahindra Satyam), leveraging on the local resource pool and benefits of these markets. The impact on Accenture’s business effectiveness and its revenue may take a hit.

Due to business constraints inherent in these countries, new kinds of cooperative relationships are being formed between the private sector and local and national governments wherein the private firms build infrastructure and provide services through a variety of mechanisms, such as contracts and concessions, build-operate transfer arrangements, joint ventures, and informal and voluntary cooperation (Example: case of low cost Indian IT and related services industry, the stakeholders are - government of India, private firms and NASSCOM). Accenture, in order to succeed in these markets need to adopt a similar kind of model.

27

TECHNOLOGICALSince IT represents Accenture one of its core business, at present uses it efficiently in managing their operations of consulting and providing IT & technology services to clients across the globe. The IT system is fully integrated into Accenture’s operations with capabilities of providing solutions and knowledge sharing & management (the KM System).

GLOBALIn the face of globalization, rapid advancement in technology and increasing demands placed on scarce resources (financial, social and environmental) Accenture need to expand into countries that offer low cost location in order to lower transaction & delivery cost of their products/services. This will enable Accenture to localise as well as cater to the local preferences. The critical market for Accenture will be the BRIC nations, South Korea, Taiwan, the ASEAN countries and some countries in South America, Africa and the Middle East. The endeavour of many of these countries in relaxing of entry & trade norms and its quest to build a welcoming business environment for IT & related services and technology would help Accenture reduce its transaction & bureaucratic cost during its expansion activities.

SWOT ANALYSISAccenture is one of the largest integrated consulting, technology and outsourcing services providers. Its global reach and scale enhances the company's brand image and provides it continuous business. However, intense competition can affect the market share of the company.

Strengths Weaknesses

Global reach and scale

Strong customer base Broad offerings

Low margins compared to competitors

Opportunities Threats

Growing worldwide IT spending

New health and public service operating group

Acquisition of professional services unit of Nokia

Intense competition Increasing regulation in

government Contractors

Contract terminations

Negative publicity related to place of incorporation

27

STRENGTHS1. Global reach and scale

The company operates in over 200 cities across 52 countries (2009) providing outsourcing services in almost all the developed countries and also, through 50 site delivery centers in Eastern Europe, India, China and the Philippines, as well as, professionals working at client sites around other parts of the world. The company benefits from the resources from around the world concerning specialized technology skills, foreign language proficiency, proximity to clients and time zone advantages, to deliver solutions under demanding time constraints.

2. Strong customer baseIts global reach, scale and broad offering have equated to a strong customer base - serves about 96 of the Fortune Global 100 companies, three-quarters of the Fortune Global 500. Its customers include companies like: Unilever, AIG Europe, Thomas Cook Group, ING, Petrobras, BP, China National Offshore Oil, Barclays, Deutsche Bank, BMW, Nokia Siemens Networks, Fiat etc., and several US government agencies.

3. Broad offeringsHas one of the broadest offerings in management consulting, technology services and outsourcing - caters to 18 industry groups, under its five operating groups. It is the second largest integrated consulting, technology and outsourcing services provider in the world. The company offers a broad array of consulting services is one of the leading technology services companies in the world and also, provides a broad range of outsourcing solutions. We note that these broad offerings also act as a deterrent to the entry of competitors.

WEAKNESSES1. Low margins compared to competitors

When compared to Indian off-shore service providers that offer similar services, Accenture recorded low margins - 12% to 13% range over the period 2006-2008, much below the margins of the Indian outsourcers. In 2009, it reported operating and net profit margin of 12.3% and 7.3% (competitors: Infosys, TCS and Wipro reported operating margin of 29.5%, 23.8%, and 16.3%,respectively, and net profit margin of 27.5%, 19.1%, and 13.6%, respectively). Low margins to competitors indicate, there is scope to improve the cost structure and business model of the company- it is expected that over the long term, as outsourcing becomes a larger part of the business, there is the opportunity for margin expansion.

OPPORTUNITIES1. Growing worldwide IT spending

27

According to sources, worldwide IT spending is expected to reach $3.4 trillion in 2010, a 4.6% increase from 2009. The worldwide IT services spending is expected to increase from $780.9 million in 2009 to $824.2 million in 2010, an increase of 5.6%. This growth represents a significant improvement from the decline witnessed in the period 2007- 2009. IT spending growth in emerging markets (Latin America, Middle East, Africa and Asia Pacific) is expected to lead the way while, in Western Europe, the US and Japan will start more slowly, with Western, US and Japan. Accenture, a market leader is poised to capitalize on the positive outlook.

2. New health and public service operating groupThe worldwide healthcare IT spending is forecast to grow in coming years. Healthcare industry spent $88 billion worldwide on IT products and services worldwide in 2008. Accenture combined its health and public service businesses to take advantage of the opportunities around health care information technology. Further, in October 2009, Accenture launched the Accenture Innovation Center for Health in response to the growing global demand for insights into and strategies to confront the top health issues and challenges affecting citizens worldwide. Positive outlook for health care IT spending would ensure steady revenues for the company's healthcare practice in coming years.

3. Acquisition of professional services unit of NokiaThe acquisition of professional services unit of Nokia (responsible for Symbian customer engineering and customer support) was completed in October 2009 and along with it, the transfer of approximately 165 Nokia professional services engineers/consultants in the UK, Finland, Japan, Korea and Australia to Accenture. This unit is dedicated on providing global companies with a broad range of embedded software services and capabilities for mobile devices (called Accenture Embedded Mobility Services). The newly acquired capabilities will complement and enhance the product engineering and software development services that Accenture already provides and will help support growth.

THREATS1. Intense competition

Accenture competes with many companies that are expanding or re-emphasizing their provision of consulting services. Some major competitors include: Booz Allen Hamilton, CGI Group, Capgemini, CTS, Deloitte Touche Tohmatsu, Infosys Technologies, IBM, Patni Computer Systems, Dell Perot Systems, Mahindra Satyam, TCS and Unisys. The company also face greater competition from companies that have increased in size/scope as a result of strategic mergers or acquisitions

27

( for example: in 2008, EDS was acquired by Hewlett Packard and changed its name to HP Enterprise Services or, Dell acquired Perot Systems in 2009). Intense competition would negatively affect the market share of the company.

2. Increasing regulation in government contractorsW.e.f. from December 2008, new regulations governing US government contractors was amended to impose: disclosure obligations and enhanced compliance program requirements. The disclosure clause demand reporting to federal agency any knowledge of evidence fraud, conflict of interest or bribery, a violation of the Civil False Claims Act or receipt of a significant overpayment from the government. Failure to make disclosures could result in suspension and/or debarment from federal government contracting. Accenture is one of the US government contractors and is subjected to new regulations. Any noncompliance with the new regulations would adversely affect the company's operations.

3. Contract terminationsAccenture has suffered from short notice contract terminations in the recent past – contracts less than 1 year in duration, that permit a client to terminate the agreement with as little as 30 days notice and without significant cost. The termination charges embedded in the shorter duration contracts might not be sufficient to cover costs for anticipated profits lost. There has been cases of loss anticipated revenues or inability to eliminate associated costs in a timely manner when other revenue sources hasn’t done financially well. Future contract terminations pose problems to revenues and profit margins of Accenture.

4. Negative publicity related to place of incorporationIn the US, there has been instances of negative publicity and criticism of companies that conduct business in US but, are headquartered in other countries. These companies have been criticized as improperly avoiding the US taxes or creating an unfair competitive advantage over the US companies. There is a possibility that Accenture may be criticized on these grounds.

INTERNAL ANALYSISA mixture of unique resources combined with capabilities and activities undertaken have given Accenture a competitive edge over other major organisation that competes in the same market sphere. We will internally assess Accenture by undertaking the resource based view.Accenture’s main assets are:

Resources – infrastructure/knowledge, leaders, global delivery network system, R&D (Innovation Center), proven track record and its employees;

27

Activities - best practice methodologies, knowledge management, learning organisation, collaborations, the activities that focus on building skills and capabilities;Capabilities - use of disruptive technologies, broad offerings of its products/services, deep industry and business process expertise.

The core business of Accenture is consulting – providing high quality consulting and in the process, “helping clients innovate to become high performance business”. Accenture is an example that has successfully managed the disruption of consulting model, doing away with the traditional ‘single tier’ of services provided and in place, developed a ‘three tier model’, bringing in-house functions that were sourced by multiple companies. Such practice adopted by Accenture has changed the way business is conducted. Together with its industry and business process expertise, charismatic leaders, broad quality offerings of its products/services and efficient global delivery network comprising of 50 centers in more than 200 cities in 52 countries with 177,000 employees, Accenture is able to deliver services that deliver infrastructure from multiple global locations providing unique and relevant benefits like: increase in productivity, align service levels/spending with business priorities, rationalize technologies, reduce total cost of ownership, improve process quality, etc., to large companies. As customers become increasingly sophisticated and demanding, it will be imperative for Accenture to continue to reinvent its service offerings and methods of delivery.The practices (Best methodologies, KM, Learning Organisation and Alliances/Collaborations) followed by Accenture is also a source of competitive advantage. Accenture has been able to capitalize on the FMA in the outsourcing space and subsequently is placed number one in this business. It has developed a knowledge base of industry-specific process methodologies, each of which they can repackage and re-used when working with other companies in the same industry. Continuous improvement is achieved by using the results of this analysis to make necessary changes to the methodology.In recent years the company has also changed its business model to collaborate or form alliances with major companies, with the idea that each collaboration/alliance would be able to provide its customers with an area of expertise. Accenture has formed alliances with numerous companies in an attempt enter new market and innovate the delivery methodology.Accenture has always been aware of the innovations within companies and thus offers clients the services of Accenture Innovation Centre which provides the clients the opportunity to brainstorm with its leading

27

technologist to help generate new ideas and become increasingly competitive.Another core component to building Accenture’s repeatable process is the new hire training that all client-facing employees undergo. In order to ensure consistency, all employees from around the globe experience training at a single facility. The teachers are consultants at higher levels, also from across the globe. The trainings are not only a way to bring up the newest ranks, but also an idea exchange platform.“By developing a self-reinforcing system replete with training, continuous process and methodology improvement, idea generation and sharing, and consistent application of these components across geographies, Accenture has successfully created a repeatable and credible process. Within the Accenture competing world, this is a key differentiator”.

COMPETITOR ANALYSISRivalry creates the strong need to understand competitors. In this analysis we seek to reveal & understand Accenture’s competitors, under the dimensions of: future objectives, their current strategy and what are their strengths & weaknesses. The main competitors in various industries are:

1. Global IT Consulting & Other Services IBM Global Services, HP Services &Fujitsu Ltd

Global IT Services accounts for 3.7% of the global IT services industry's value of which the company share of the top three IBM Global Services, HP Limited and Fujitsu Business are 3.7%, 2.1% & 2.1%, respectively. The industry is fragmented with small players competing with large MNC’s. Overall there is a moderate degree of rivalry in this industry where the dominant players continue to grow intensifying the rivalry at the top.IBM Global Services: remains the biggest player and continues to expand through inorganic growth. It draws upon the world's leading systems, software, and services capabilities. The company leverages strong financial standings, industry & business process expertise and on its wide operations in 170 countries across North America, Latin America, Europe, the Middle East, Africa, and the Asia Pacific. Through its two divisions: Global technology Services (GTS) and Global Business Services(GBS), it is able to offer a wide array of services like infrastructure & business processes services and professional services & application outsourcing services. Presently, it is expanding its business into new geographies and market segment through a number of acquisitions ( Logicalis Group, Daksh, India's third largest business outsourcing company, Trigo Technologies), launching a broad array of new open standards-based software and technologies to give organizations the

27

choice and flexibility to build the front end of their collaborative solutions on a variety of client devices, expanding its innovation & global delivery centres and strengthening its operations both through inorganic(acquisitions of Argus semiconductor software and related intellectual property from Infocon) and organic initiatives. Threats to IBM are: contraction in end markets due to slow down in economy which has created challenging business environment and intense competition in all segments which could adversely affect revenues & profitability.

2. Global Management & Marketing Consultancy: Deloitte Touche Tohmatsu, Ernst & Young International and KPMG International

There is significant fragmentation within the market among smaller specialized companies, which weakens rivalry overall. Overall, rivalry with respect to the management and marketing consultancy market is moderate. Due to the economic slowdown, the global management & marketing consultancy market’s growth rate slowed in 2008, with decline in 2009 followed by a return to low levels of growth and has had a significant impact on the market thus lowering revenues and increasing rivalry. The major competitors in this industry are Deloitte Touche Tohmatsu, Ernst & Young International and KPMG International are worldwide organizations with exceptionally strong brands.Deloitte Touche Tohmatsu: provides a broad range of professional services including audit, tax, consulting and financial advisory services, with operations in nearly 150 countries through 70 member firms. The company serves national and middle market enterprises, public institutions, privately owned companies and public sector organizations. It provides its services to all major sectors Deloitte's services can be categorized into four broad functional areas: audit, consulting, tax and advisory services. The strengths of Deloitte have been its ability to manage in downturn (Aggregate CAGR was 9.4% in 2004-2009 and 14.7% from 2005-2008), its reputation as a market & industry leader leveraging on it to attract steady business flow to its members. The company has been actively forming consulting alliances (3M Company, BEA Systems, HP, IBM, Oracle Corporation, SAP, Siemens Medical Solutions USA and Sun Microsystems), established Deloitte ASEAN with member firms in six countries: Singapore, Malaysia, Indonesia, Thailand, the Philippines & Guam, Deloitte Caribbean/Bermuda, a new cluster of six member firms, to strengthen their position in the Asian & Americas to expand opportunities for growth in the region. Collaborative strategy is being followed as is the instance of the global initiative among Deloitte member firms and SAP AG to develop and deliver enterprise solutions to better serve clients in sustainable governance, risk and compliance management processes.

27

Recently, the acquisition of substantially all of the assets of BearingPoint’s North American Public Services brings in additional capabilities to help Deloitte serve more clients in federal, state and local governments in the US practice. Deloitte has a weak presence in the business process outsourcing (BPO) as compared to its main competitors such as KPMG international, McKinsey doesn’t enable it to benefit from one of the fasting growing global services. The threats to Deloitte are from larger companies/organizations that employ in-house business analysts and marketing teams, act as a strong substitute threat to management and marketing consultancy services.

BUSINESS LEVEL STRATEGIESCan be classified based on two frameworks: Cost leadership/Differentiation Strategy & Miles & Snow Adaptive strategies:Accenture follows both the Cost leadership and Differentiation strategies. Thus Integrated Cost Leadership/ Differentiation Strategy is followed by Accenture by the following approaches:

• Cost Leadership:

1. It achieves lower cost to competitors due to its wide operational footprint which cuts down significantly on the delivery cost;

2. Industry & market expertise that expedites towards lesser product & implementation cost.

27

• Differentiation:1. It differentiates itself from its competitors by providing client

suited products and services derived from in-house R&D and collaborative research with the client assessing its needs & requirements.

According to Mile’s and Snow’s Adaptive Strategies, Accenture can be classified as a Prospector because of the following characteristics:

• It has built its entire business on use of disruptive technologies & innovation to service to customers. Accenture practices efficiently the philosophy of ‘first mover advantage’;

• It continually modifies its existing delivery system, its products and services to match the dynamic industry & market environment and unique set of needs of the customers.

The many competitors have found it hard to imitate their business model/strategy.

CORPORATE LEVEL STRATEGIESIts strategies can be classified based on four frameworks – Ansoff Matrix, BCG Matrix, GE-Directional Policy Matrix and Levels of Diversification.

27

Based on the Ansoff Matrix, Accenture follows the following Strategic Directions:

• Market Consolidation and Product Development by bringing in the innovative & unique products/services from the design stage to distribution, much shorter than the industry average.

• Market Development by introducing products/services to new markets by opening up regional offices and operations in new locations and countries. We note that, Accenture has a global delivery network of over 50 centers with offices and operations in more than 200 cities in 52 countries.

• Diversification into industry to expand market, as is evident from the case on creation of a new Health & Public Service Operating Group and BPO Platform.

27

Accenture is operating in segments of Industries of high growth, namely, Global Management and Marketing Consultancy - market grew by 1.7% in 2008 with value of $315.3 billion, Global IT Services Industry - grew by 6.7% in 2008 with a value of $1,057 billion and Global IT Consulting and Other Services - market grew by 4.7% in 2008 with a value of $501 billion. Accenture has high market share all the different industries it serves and in most of the developed countries (though it has a minor presence in the continents of Asia, Africa and South America). This places Accenture as a Star Category in the Growth-Share BCG Matrix.

Though "One of the dominant features of the consulting & outsourcing market over the last 12-15 months has been the emphasis on cost above all else." - Morrison & Foerster's Report. The current corporate strategy that is followed by Accenture has been expansion and diversification through investment in new and emerging growth areas & through integration/collaboration/alliances/acquisitions, as is evident through the integration of a new platform for health & public services and BPO in 2009, alliance between Accenture and Adchemy, the provider of audience relationship management (ARM), formed in October 2009 and many similar stories like with Cisco, Connecticut Light & Power

27

Company, etc., and the acquisition of professional services unit of Nokia. This only suggest that the strength of its business is high geared towards adapting to the changing needs of its customers all the while not losing focus on cashing in on the opportunity provided by emerging market & also consolidating on its existing market where it competes. Thus we can place Accenture in the Investment and Growth direction grid of the Directional Policy Matrix.

Level of Diversification:An analysis of the 2009 revenue sheet of Accenture reveal the following contribution to its total revenue

• By operating group:1. Communication & High Tech – 22%2. Financial Services – 20%3. Health & Public Services – 26%4. Products – 14%5. Resources – 16.7%6. Others – 1.3%

• By type of work:1. Consultancy - 58%2. Outsourcing – 42%

27

Since less than 70% of the revenues comes from the dominant business and all the businesses share product, technological and distribution linkages. We can categorize Accenture to be an organisation that is adopting a Related Constrained Diversification Strategy by which it has been able to build upon its existing resources and capabilities to create value for the customers and its stakeholders.

INTERNATIONAL CORPORATE LEVEL STRATEGY

INTERNATIONAL TO TRANSNATIONALAccenture chose to compete internationally since its inception as a separate stand-alone business unit (Andersen Consulting). It’s first major outsourcing assignments in 1991 involved managing BP Exploration's accounting, finance and support functions. Accenture did not follow any localization, it shifted the company’s headquarter to Dublin, Ireland and, chose to serve the US and the European market where most of the Fortune 500 listed companies are established. Currently, Accenture operates through a global delivery network of over 50 centers with offices and operations in more than 200 cities in 52 countries employing 177,000 people. Accenture focused on the notion of high performance growth and the belief that management can systematically manage for this outcome. As a result, Accenture has explored both the concept of high performance and the strategies that consistently deliver high performance. Thus the firm used the strategy to achieve efficient operations through resource sharing and facilitating coordination & cooperation across country boundaries and offer standardized products across countries with the competitive strategy being controlled form home. It emphasized on opportunities to take innovations at the corporate level and use them in other markets. During its first 10 years, Accenture evolved from a systems integrator to a global management consulting and technology services establishment by identifying new business & technology trends and developing solutions to help clients around the world enter new markets, increase revenues in existing markets, improves operational performance, and deliver their products and services more effectively and efficiently.

The main factors that have helped Accenture achieve global competitiveness are:

• Fast growth in US & European markets• Development & use of IT in conduct of business by major companies

in developed countries• Ability to use disruptive technologies to bring into the market new

quality-differentiated products/services and to redesign/remodel its delivery network

27

• Shared resources and capabilities• Good rivalry given by other large companies and its mission to stay

ahead of competitorsWith increasing sophistication of markets with greater information flow (due to diffusion of internet), growing number of global competitors which heightens the need to hold the cost down, the desire to meet the specialized needs of the customers and difference in culture & institutional environment has pressured Accenture to differentiate and even customize their local markets. Accenture has sought to achieve both global efficiency and local responsiveness through activities like:

• Merger & Acquisitions • Strategic Alliances • Collaborations – ongoing research with clients allows Accenture to

customise their products/services specific to needs• Expansion

Thus from the Global Strategy Grid, we can conclude that Accenture has moved from its international strategy to transnational strategy.

FINANCIAL ANALYSIS

*** For data’s, please refer the tables given in the Appendix (page # 24, 25 & 26)

27

The company recorded revenues of $ 23,170.97million during the financial year ended August 2009 (FY2009), a growth of -8.5 over FY2008. Below are the breakups of revenues generated to the total:

• By operating group:1. Communication & High Tech – 22%2. Financial Services – 20%3. Health & Public Services – 26%4. Products – 14%5. Resources – 16.7%6. Others – 1.3%

We note that all operating groups with the exception of the Products Group (growth of 4%) saw a decrease in the revenues generated in FY 2009 over FY2008.

• By type of work:1. Consultancy - 58%2. Outsourcing – 42%

• By geography:1. EMEA, largest geographical market - 45.9%, a decrease of 14.2%

over FY2008.2. Americas - 43.6%, a decrease of 3.3% over FY2008.3. Asia Pacific - 10.5%, an increase of 7.3% over FY2008.

As is evident comparison (from FY 2004-FY2009), from the tables given below, Accenture has been able to post positive Revenue, Net Income and Profit margin growth till FY2008. In FY 2009 with the exception of profit margin, growing at a positive rate of 6.86%, Accenture witnessed a fall in revenue & net income generated.

INDUSTRY OVERVIEW

IT SERVICES AND CONSULTINGThe global IT Services and Consulting market was valued at $501 billion in 2008 accompanied by a growth of 4.7%. In 2013, the global IT Services and Consulting market is forecast to increase by 22.6% since 2008, to reach market value of $614.3 billion. The integration and development services segment generates 49.5% of the market's value of the IT Services and Consulting market and thus is central to the market. The Americas represent 52.5% of the global IT Services and Consulting market in value and is the largest market. IBM Global Services control 12.2% of the global IT Services and Consulting market.

27

GLOBAL OUTSOURCING• In FY 2009 - Cost Cutting was one of the most influential drivers in

the outsourcing market;

• In Q4 of FY 2009 - global outsourcing market had its best performance in six quarters – shows a slow but steady recovery in the industry;

• In FY 2008: the market produced $56 billion in total contract value

• Market for Business Process Outsourcing (BPO) struggled in the Q4 of FY 2009;

1. Total contract value in this segment rose almost 29 percent sequentially;

2. But, remained 33 % below the same period in FY 2008;

3. For FY 2009, the BPO market's total contract value fell 38 percent to $18.5

Billion, its lowest level since 2001;

• Although the market's total contract value declined in FY2009, industry pipelines are healthier and more stable in 2010 than in 2009 – good sign for the industry.

According to the Global Opportunity Rank, India was ranked 1st followed by China while during the same year the Future Opportunity Rank – 2015

27

ranked China as 1st followed by India as 2nd, with the other BRIC countries featuring in the Top 5.

Global Opportunity Rank - 2005 Future Opportunity Rank - 2015

Rank

CountryGlobal Opportunity Rating

Rank Country

1 India 2.02 1 China

2 China 2.16 2 India3 Costa Rica 2.24 3 USA4 Czech Republic 2.26 4 Brazil5 Hungary 2.28 5 Russia6 Canada 2.40 6 Ukraine

MANAGEMENT CONSULTINGThe global management and marketing consultancy market was valued at $315.3 billion in 2008 accompanied by a growth of 1.7%. The operations management segment is the largest in the management and marketing consultancy markets, generating 30.5% of the market's overall revenues. Americas accounts for 50.7% of the global management and marketing consultancy market's value and leads the market.

ACCENTURE, FINANCIAL CRISIS & BEYOND:

“…we took steps to position Accenture in important ways for the future by enhancing our core business and investing in new and emerging growth areas.”

- A statement by William D Green, Chairman and CEO of Accenture

27

In the past few years, cost cutting was one of the most influential drivers in most of the markets especially in the outsourcing market to tide over the financial crisis that has affected every organisation competing in all industry across all nations. Accenture was not immune to the effects of the global economic downturn; their disciplined management of the business enabled the organisation to deliver strong profitability and cash flow in FY 2009. Accenture chose to be close to their clients, adapting to their changing needs in areas such as cost management, operational improvement and customer retention and also continued to help clients with complex, industry-leading and transformational projects, which are Accenture’s core competency. Accenture focus and efforts paid off - with solid new bookings of $23.9 billion in FY2009, returned cash to shareholders through dividends and share repurchases ($1.9 billion of Accenture shares).To position Accenture for the future the following were the activities/initiatives undertaken:

• Enhancing their core business and investing in new and emerging growth areas.

• Revitalized their offerings and made efforts in reducing their delivery costs.

• To ensure that it is properly aligned to capture growth opportunities, made important organizational changes—combining Health & Public service businesses into a new Technology growth platform

• Creating a Business Process Outsourcing (BPO) growth platform and recognizing the importance of BPO to its long-term growth.

• Focused on growing market share and expansion of business in key geographic markets, with a special emphasis on BRIC nations, South Korea and Mexico.

• Launched several new businesses: Accenture Mobility Operated Services (helps enterprises develop/deploy new revenue-generating mobile applications) & Accenture Interactive (helps companies develop world-class digital marketing capabilities & optimize their marketing investments.

• Continued to invest in assets & innovations that differentiate it in the market.

• Invested significantly in training and professional development – approximately $800 million in FY 2009 alone.

Readings on the financial indicators suggest that the economy is starting to show early signs of recovery in certain industries and markets. Accenture seeks to remain intently focused on their clients to generate

27

value for them while ensuring that it is also well-positioned to take advantage of growth opportunities.

CONCLUSION

We recommend:

1. Intensified attention to Developing nations for long term survival:

Most of the business of Accenture is based out of developed nations like USA, UK and others. For future growth in this sector attention has to be given to developing nations like the BRIC countries as there are a lot of companies coming up in these nations.

2. Emphasis on Outsourcing:

With the economy on the mend and technology spending expected to spike, "Outsourcing is one way for organizations to position themselves to capitalize on the recovery and show that their overall strategy is about value creation, not merely cost containment," - Morrison & Foerster's latest annual global sourcing report.

More emphasis has to be given to outsourcing division. As companies and industries come up, the competition evolves & intensifies. Consequence would be the need for cost reduction which can be achieved by outsourcing their various functions.

3. Building Development Centres at Developing countries to cut Tax Break cost:

With cut in tax breaks on outsourcing by Obama, the margins for the outsourcing business from US going to further decrease. Company already has fewer profit margins as compared to its competitors. They should look for building development centers in counties like Brazil and Ghana where cost of outsourcing is lesser

27

than countries like India and China. Current outsourcing cost is around $25-30 but with this tax break cut cost will be $40-50.

4. Diversification into other sectors to remove cyclicality:

Cyclicality in their business can be removed by diversification into sectors like Retail and government /public service organizations. Retail sector is growing in with high pace in BRIC countries so they should look for retail business in these countries.

5. Look for opportunities into business of IT cost optimization:

Most of the competitors are getting into new business of IT cost optimization e.g. Cognizant etc. So they should look for the opportunities in this sector also.

APPENDIX:

Table for Financial Analysis are given below:

Table 1. Income Statement for Period 2006 - 2009

27

Table 2: Revenue & Profitability for the Period 2004 - 2009

INCOME STATEMENT

In Millions of USD 12 Months Ending 2009-08-31

12 Months Ending 2008-08-31

12 Months Ending 2007-08-31

12 Months Ending 2006-08-31

Total Revenue 23,170.97 25,313.83 21,452.75 18,228.37Cost of Revenue, Total

16,329.85 18,128.24 15,411.27 13,234.19

Gross Profit 6,841.11 7,185.59 6,041.47 4,994.18Selling/General/Admin. Expenses, Total

3,947.98 4,151.13 3,522.49 3,201.08

Unusual Expense (Income)

249.27 22.87 26.37 -47.97

Total Operating Expense

20,527.10 22,302.24 18,960.13 16,387.31

Operating Income 2,643.86 3,011.58 2,492.62 1,841.06Other, Net -3.29 -2.21 -21.76 -27.81

Income Before Tax

2,677.74 3,107.76 2,618.92 1,923.67

Income After Tax 1,938.15 2,197.19 1,723.06 1,433.13Minority Interest -348.18 -505.44 -479.91 -459.8Net Income 1,589.96 1,691.75 1,243.15 973.33

Diluted EPS Excluding Extraordinary Items

$2.44 $2.65 $1.97 $1.59

DPS - Common Stock Primary Issue

$0.5 $0.42 $0.35 $0.3

Diluted Normalized EPS

$2.67 $2.66 $1.99 $1.55

27

Table 3: Chart for Revenue & Profitability for the Period 2004 - 2009

Table 4: Comparison of Net Revenues for the FY 2008 & FY2009

REVENUE & PROFITABILITY

Year 2004 2005 2006 2007 2008 2009

Revenues15,113.00

17,094.00

18,228.00

21,453.00

25,313.00

23170.97

Net Income

691 940 9731,243.00

1,691.80

1589.96

Profit Margin

4.60% 5.50% 5.30% 5.80% 6.70% 6.86%

27

Net Revenues Full Fiscal Year12 months ended Aug. 31, 2009 and Aug. 31, 2008

In Millions $ Fiscal 2009 Fiscal 2008% Growth(in $)

% of FY09 Net Revenue

Total Revenue 23170.97 25313.83 -8.5 100Net income 1589.96 1691.75 -6.01By Operating Group

In ‘000 $ Revenues(2009)Revenues(2008)

% Growth(in $)

% of FY09 Net Revenue

Commu & High Tech

48,30,880.00 54,49,737.00 -11.4 22

Financial Services

43,22,896.00 50,05,039.00 -13.6 20

Health & Public Services

55,30,232.00 60,68,589.00 -8.8 26

Products 29,84,304.00 28,70,765.00 4 14Resources 38,79,711.00 39,63,477.00 -2.1 16.7Others 30,421.12 31,122.03 -2.3 1.3By Type of Work

Consulting 1,25,55,652 1,41,17,186 -11.06 58

Outsourcing 90,21,198 2,33,86,802 -61.4 42

27

BIBLIOGRAPHY

• Marketline - Datamonitor Reports:

1. Accenture Plc - Company Profile, 2009;2. Global Outsourcing Report, 2009;3. IT Consulting & Other Services Report, 2009;4. Management & Consulting Report, 2009;5. Global IT Services Report, 2009;6. Deloitte Touche Tohmatsu, IBM International, KPMG, HP

Services – Company Profile Report, 2009• Accenture –By Elisabeth Diana, Shanna Forbes, Hilary Seling, Matt

Chew Spence, 5/15/2008, Haas School of Business;

• Morrison & Foerster's Report, 2009;• Sources for Accenture’s financial tables – www.Wikipedia.com;• Yahoo! Inc, “Accenture Ltd Company Profile-Yahoo! Finance”;• Supply Chain Management View Point – Accenture;• Accenture Five Hallmarks of Operational Excellence, Accenture;• Strategic Management – Ireland, Hoskisson & Hitt, CENGAGE

Learning 2008 e.

27