Goldman Sachs: India IT: Accenture (ACN, Buy, $44.22)

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Accenture (ACN, Buy, $44.22) 
 Strength and rapid growth of global delivery resources – Accenture highlighted the
evolution and strength of its global delivery model – 116,000 out of the company’s
203,000+ headcount is now in global delivery locations, with 50+ delivery centers
driven and skills in al major languages, all driven by one consistent process
methodology. At 58,000 resources (2/3 IT, 1/3 BPO) at the end of FY10 India is the
largest country for ACN in terms of headcount and has grown 51% organically on a
CAGR basis over the last five years.

 Focus on offshore services shifting to business outcomes – Conversations with
customers on offshore adoption is easier in the sense that it is much more specific and
pointed, and the focus has shifted to longer-term and strategic importance of offshore
and process re-engineering. While labor arbitrage remains a motivator for offshore, it
is not the only factor of considerations anymore, and customers are looking at India
more and more as a source of talent pool in specific business areas to drive
productivity gains and business outcomes.
 Ability to handle complex projects a significant differentiator – ACN’s
differentiation lies in its ability to handle large and complex projects across multiple
geographies and multiple layers in the service stack, including consulting, at a
competitive cost structure given its large global delivery footprint. The company
believers that there are very few companies that can commit and deliver business
outcomes, and its brand and deep industry knowledge remain competitive
differentiators both from a demand and talent supply perspective. In addition, the mix
of sole-sourced work for ACN remains high, which is a benefit for pricing.
 Higher BPO demand for niche skills, strong IT capabilities a differentiator – For
BPO, there has been increased focus and client demand for niche skills, as clients focus
on business outcomes (vs. pure cost savings) has increased. ACN believes that having
strong capabilities in both IT and BPO is a differentiator and noted that a lot of the
deals that it has won over the last two years require a combination of IT and BPO skills.
Unlike some of the company’s peers in BPO, ACN has not seen clients delaying
transitions in large and complex deals, which management believes is a function of
relative maturity and experience in handling transformational deals, which the
company has done for many years.
 Cloud engagements focus on strategy and consulting projects – Longer-term, ACN
sees emerging services such as cloud, SaaS, embedded systems, and business
intelligence/analytics as enablers of future differentiations. ACN focuses and has
invested heavily in industry specific assets and reusable templates to drive non-linear
revenue growth. From a client perspective, the engagements ACN is seeing right now
in cloud computing is still early in the sense that they are more about strategy and
consulting than actual implementations, which remain some way off as the cloud
model continues to evolve