Accenture may become first nonheritage firm to lead growth in tech industry
BENGALURU: Since the turn of the century, a heritage firm has always led growth in the IT outsourcing industry. It has always been one of these four companies—Tata Consultancy Services Ltd (TCS), Cognizant Technology Solutions Corp., Infosys Ltd and Wipro Ltd.
This is set to change as Accenture Plc will outpace TCS, Infosys, Wipro and Nasdaq-listed Cognizant in the 2017-18 financial year.
Accenture is estimated to add $3.63 billion in incremental revenue, a shade less than the new business at the four other large companies put together, according to Mint research based on analyst projections. It’s a development that underscores the tardiness of India’s largest IT companies when it comes to rebooting their traditional business model. Accenture, which follows a September-August financial year, reported strong 11.8% year-over-year dollar revenue growth in the November quarter. The management raised its full-year growth outlook to 6-8% in constant currency (CC) terms, which eliminate the effect of currency movements.
Accenture does not outline full-year dollar-revenue growth but the management said that favourable currency movement will help it report higher growth.
This made at least one analyst, who still called the management’s revised guidance conservative, project 10.4% dollar revenue growth for Accenture in this fiscal, citing the prospect of a 260 basis point (bp) “tailwind” in foreign exchange terms.
“We are raising our FY18 revenue forecast to $38.48 billion from $38.23 billion, representing 7.8% y/y CC growth,” Keith Bachman, an analyst with BMO Capital Markets, wrote in a note dated December 21. Put simply, a 260 basis point improvement on 7.8% constant currency means Accenture, which reported $34.8 billion in revenue last year, will see 10.4% growth to end with $38.48 billion in revenue. Accenture’s strong performance over the last few quarters is in contrast with its smaller Indian rivals. TCS last reported double-digit, yearover-year growth in a threemonth period during the March quarter of 2016 while Infosys grew 10.9% in the June quarter last year. Cognizant has fared better than homegrown IT firms but even the Nasdaq-listed firm needs to improve upon its current growth when compared to Accenture.