Accenture’s On-site Expansion

According to a recent report by technology research firm Information Services Group, the annual contract value of global outsourcing contracts fell 3% over the year last year to $21.2 billion. During the final quarter of 2012, commercial outsourcing contracts with annual contract values of more than $5 million fell 27% over the year to $4.8 billion. By scope of work, annual contract values of business process outsourcing (BPO) contracts grew 14% over the year to $7.9 billion. The increase was dampened by an 11% reduction in the contract values of IT outsourcing projects to $13.3 billion.

Accenture’s Financials
Leading IT outsourcing and consulting services provider, Accenture (NYSE: ACN) saw their quarter’s performance being driven by growth in the outsourcing sector. Q2 revenues grew 4% over the year to $7.06 billion, falling marginally short of the market’s projected revenues of $7.07 billion. EPS of $1.00 was better than the previous year’s and the market’s projections of $0.97 for the quarter.

During the quarter, total new bookings grew 15% over the year to $9.1 billion, with consulting bookings of $4.4 billion and outsourcing bookings bringing in the remaining $4.7 billion. However, for the quarter, consulting revenues fell 1% to $3.8 billion and outsourcing revenues grew 9% to $3.3 billion. Utilization for the quarter was 88%, compared with 88% for the first quarter of fiscal 2013 and 87% for the second quarter of fiscal 2012. Attrition for the second quarter of fiscal 2013 was 11%, compared with 11% for the first quarter of fiscal 2013 and 12% for the second quarter of fiscal 2012.

For the current quarter, Accenture projects revenues of $7.25 billion-$7.5 billion, falling short of the Street’s projections of $7.59 billion.

Accenture’s Global Expansion
As part of their continued geographical expansion, they are expanding their onsite presence in the U.S. They recently opened a 300-person technology center in Austin, Texas. The software office will focus on developing products for state health and human service agencies. It is expected to produce five different software applications that will enable functions such as benefits administration and will cater to human services organizations. Earlier this quarter, they opened another office in Calgary, Alberta, to keep with the growing need for office space in the region.

They also announced a five-year tie-up with the Massachusetts Institute of Technology to develop advanced analytics solutions. Through the alliance, Accenture will leverage MIT’s scientific and technological leadership to develop products that will cater to addressing big data issues and evolve analytics tools to help organizations in decision making capabilities.

The increasing focus on growing jobs in the U.S. is indicative of another trend that was recently highlighted by a survey conducted by Boston-based research firm, HfS Research. According to the survey conducted on 617 organizations, the United States is among one of  the preferred destinations for IT and business outsourcing services – second only to India. The outsourcing service providers have realized the importance of local presence of their employees to be able to deliver better customer service while ensuring that they understand and adhere to domestic policies. Most organizations are now establishing a bigger presence on-site and are choosing quality operations over more cost-effective labor arbitrage driven ones. By establishing centers locally, Accenture will be able to address this growing trend of re-shoring.

Last week, Accenture’s CFO announced her plans to step down from the position. Pamela J. Craig will retire from Accenture starting August of this year and will be replaced by David P. Rowland, senior vice president of finance. The market has been pleased with Accenture’s performance. Their stock is trading at $75.85 with a market capitalization of $51.86 billion. It touched a 52-week high of $78.46 last month.