Accenture and COVID-19: Challenges ahead
COVID-19 will pressure Accenture’s short-term performance but could accelerate adoption of automation as the company maintains pricing agility
While a global health pandemic is not something vendors typically prepare for as part of their business continuity plans, for many, including Accenture, the COVID-19 outbreak will certainly test the resiliency of their business models. As a company that came out strong after the financial crisis in 2008 and 2009 with total revenues more than doubled — from $20.9 billion in 2009 to $43.9 billion in 2019 — Accenture has certainly proved that it can navigate the influx dynamics of financially disrupted markets while taking advantage of the advent of emerging technologies.
At large, the shift toward working from home due to COVID-19 will certainly constrain Accenture’s high-touch consulting model, pressuring advisory-centric sales. However, we also see pockets of opportunities, particularly around change management services, where the company can support clients that have not previously adopted work-from-home policies. We see the larger opportunity around integration and management of digital workplace solutions enabled by technology platforms such as ServiceNow and Microsoft Teams. Managing internal knowledge sharing and shifting on-site frameworks to remote will likely be the biggest hurdle as Accenture strives to ensure standardized service delivery. While the company’s Future Systems framework provides a strong foundation to innovate at scale through adopting KPIs centered on outcomes rather than tactical financials, Accenture Interactive’s unit has an opportunity to demonstrate its core value proposition — being creative — as it determines how to best engage with clients during the COVID-19 outbreak.
While we expect Outsourcing, led by Accenture Operations and Accenture Technology, to provide a strong backbone for Accenture’s financial performance, we also anticipate the company’s high reliance on offshore hubs such as India and the Philippines will challenge its global delivery capabilities during the COVID-19 outbreak due to underdeveloped infrastructure, lack of iNet availability and the need for employees to work from home. During the company’s FY2Q20 earnings call, Accenture CEO Julie Sweet said, “We have already enabled a very significant percentage of our people to work from home, approximately 60% of our people in our centers in India and the Philippines. … In the Philippines, we’re probably about where we expect to be. In India, we’re still adding.” TBR estimates that over 44% of Accenture’s workforce is housed in India and the Philippines, raising questions about the company’s ability to leverage these two hubs at maximum capacity and the need for distributing workloads to other sites, where working remotely at 100% capacity is more feasible.
While Accenture’s deep relationship with many of its clients will help the company address these challenges, demonstrating pricing agility will be a must, likely providing an opportunity for greater use of automation for service delivery.
Note: The above text will be included as a scenario in TBR’s 1Q20 Accenture report, publishing April 9. For additional insights, please see this recent special report on Accenture Technology.
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