Services weekly preview: Nov. 5-9, 2018

Well into the third quarter of industry earnings and our periodic assessments of IT services vendors, TBR’s analysts this week will also share their semiannual analysis on vendors in the management consulting space

Monday: In 3Q18 Infosys signed 12 large deals with a total contract value over $2 billion, but the company’s delivery framework remains fragile as Infosys maintains its margin-first culture. In our full report on Infosys, Senior Analyst Boz Hristov notes that open-source solutions will support Infosys’ efforts to compete on price as it morphs its value proposition toward becoming a platform-based company. Returning to sustainable double-digit revenue growth will remain a mirage in the next two years.

Tuesday: Senior Analyst Jen Hamel’s initial take on IBM Services’ 3Q18 earnings performance noted that while internal transformation efforts expanded margins, stalled revenue growth shows the company’s work is far from over. The full report expands upon the implications of IBM’s ongoing transformation, including the recent announcement of plans to acquire Red Hat, for IBM Services’ future as a leading IT services vendor.

Wednesday:

• Analyst Kevin Collupy’s initial report on DXC Technology’s (DXC) quarterly earnings will explore the company’s approach to software and partnerships and its continued use of acquisitions to fill talent and portfolio gaps. We expect tepid growth through the remainder of the year and likely modest organic year-to-year declines, highlighting the importance of strategic acquisitions.
• In the last edition of the McKinsey & Co. Management Consulting Benchmark profile, I anticipated a slowdown in the firm’s acquisition pace and questioned whether McKinsey could assimilate new capabilities and roll out new offerings, especially around digital, design and analytics. This profile publishing this week will detail how McKinsey performed through the start of this year and how the firm has positioned itself well to benefit from competitors preparing the market for digital transformation.

Thursday: Analyst John Caucis’ initial response to DXC’s earnings and the fiscal performance of the company’s healthcare IT services (HITS) business will cover a mix of positive and negative developments in the fiscal quarters ended 2Q18 and 3Q18 (semiannual report). DXC continues to execute strongly in APAC, particularly in Australia, but indications of difficulties in Europe began to surface in 3Q18. Meanwhile in DXC’s core U.S. market, disruptions appear to be lingering from the spin-merge with Hewlett Packard Enterprise (HPE) Enterprise Services, delaying a rebound in healthcare IT services growth.

Friday: In this edition of the semiannual look at Accenture’s management consulting practice, Boz will note that the company will rely on patented, artificial intelligence-enhanced solutions to maintain revenue growth momentum and withstand threats from the Big Four and IBM. However, adding tech-centric offerings and engineering-trained resources may pressure its management consulting brand, while a potential large-scale management consulting acquisition could help the company address buyers’ perception.