Accenture's $1.8-bn acquisition plan to act as lesson for IT firms in India

Firm has been driving growth in digital technology areas by acquiring small firms

Accenture Plc, the global technology and consultancy firm, has taken an aggressive acquisition plan entailing an investment of $1.8 billion. The company, which has seen nearly seven per cent revenue growth in dollar terms for the past two years, has been driving growth in digital technology areas through the acquisition of small firms.

Accenture invested more than a billion dollars during the previous financial year, beginning from September 2016, to August 2017. The company further said that it would invest $1.8 billion in the following financial year, that is between September 2017 and August 2018. This is higher than the investment made in acquisitions by Accenture’s two large Indian technology service peers Tata Consultancy Services and Infosys in the past two or three years.

Wipro stood out among Indian Information Technology (IT) services players, investing close to a billion dollars in the past one-and-a-half years to acquire two major firms, including cloud-based service provider Appirio for $500 million last November.

David P Rowland, chief financial officer, Accenture, spoke about the acquisition plan during an earnings call with analysts last week.

Analysts say Accenture is primarily looking at technology-led growth and trying to build in-house capabilities by acquiring small firms.  

The Indian IT services industry has realised the need for faster transformation, since more clients are seeking services on digital technologies such as the cloud platform. Firms such as TCS, Infosys, Wipro, HCL Technologies have been trying to build automation and other in-house digital technology capabilities that may result in a slow-paced growth, opine analysts.

“Accenture is clearly putting its bet on technology-led business. While Indian IT services firms are focusing on building in-house platforms, which are taking a long time to turn around, Accenture has had a focused move in strengthening services by taking small firms on board and re-using their skills,” said Rajesh Gupta, India Partner at Research firm ISG.  

Accenture has been focusing on building capabilities faster through acquisitions and ultimately strengthen the managed services delivery. Rowland said the company expects to see the contribution from acquisitions to vary between 2 to 2.5 per cent in the current financial year and impact should be more visible from 2018 onwards.