Thursday, February 29, 2024

Accenture to axe 19,000 jobs

Must read

Accenture is to axe about 19,000 jobs over the next 18 months, the largest in a series of cuts across the consulting sector as companies battle rising costs and an uncertain economic outlook.

The New York-listed group said on Thursday that it expected to incur staff severance costs of $1.2bn and a further $300mn of expenses from the “consolidation of office space”. 

The retrenchment will hit about 2.6 per cent of Accenture’s 738,000 staff, who provide consultancy and outsourcing services to large companies.

Accenture has enjoyed explosive growth in recent years as demand for advice on tech projects from multinationals ballooned. It has been on a hiring binge, adding more than 230,000 staff since August 2020.

Half of the 19,000 employees will leave by the end of August, the company told analysts on Thursday. More than half of the cuts are expected to affect staff who work in corporate functions rather than serve clients directly, the company said.

On an earnings call with analysts, chief executive Julie Sweet characterised the cuts as “offensive” rather than defensive, to ensure Accenture kept to its long-term profitability targets in a high-inflation environment.

“We’ve been dealing with the challenges of compounding wage inflation,” she said. “We’ve been doing that with pricing, but we’ve also been doing that with cost efficiencies and digitisation and we’ve identified an opportunity to go after structural cost.”

Accenture is the latest big consulting group to cut jobs, following moves last month at McKinsey and KPMG’s US and Australian businesses.

McKinsey will dismiss up to 2,000 of its 45,000 workforce. KPMG is eliminating almost 700 jobs in its US advisory business and about 200 in Australia — about 2 per cent of its total in each country.

Accenture announced the cuts alongside its results for the three months to February, when it reported revenues of $15.8bn, a 5 per cent increase on the same period a year earlier.

Consulting revenues at the group fell 1 per cent to $8.3bn while sales by the managed services, or outsourcing, division grew 12 per cent to $7.5bn. Operating income dropped 5.8 per cent to $1.9bn in the quarter.

US technology companies — which have also been cutting thousands of jobs — had slowed their spending, Sweet said. “This will last for a bit of time, but it will eventually come back. These are great companies.”

Surinder Thind, analyst at Jefferies, noted that Accenture’s consulting revenues had fallen short of expectations, in contrast to a still-booming outsourcing business, saying “the need for cost-cutting raises questions of what growth will look like beyond the end of the fiscal year”.

Despite the economic outlook, the company said it had secured a record $22.1bn of bookings for new work during the three months to February. It has trimmed its estimated revenue growth for the financial year to the end of August to between 8 and 10 per cent from 8 to 11 per cent previously.

However, the company said it would continue to hire staff “especially to support our strategic growth priorities”.

Accenture said it estimated that about $800mn of cost-cutting expenses would be incurred by the end of August with a further $700mn in the following 12 months. It said it had already incurred $244mn in “business optimisation costs” in the three months to February.

Latest article