Accenture to cut 19,000 jobs as IT spending slows; India impact unclear

Lowers revenue, profit forecast; India impact unclear

IT services and consulting major Accenture has announced it will lay off 19,000 people, or 2.5 per cent of its headcount, on account of wage inflation and cost streamlining. It expects a severance cost of $1.2 billion.

Accenture joins the list of companies that have announced layoffs. They are technology-product firms such as Meta, Google, Microsoft, and Amazon.

Of the 19,000, over half are from non-billable functions with more than 800 of its 10,000 leaders across services and markets. Nearly half the 19,000 people will depart from the company by the end of the financial year, said the management during the earnings call.

It could not be ascertained what the immediate impact would be on the company’s India operations. India is one of the largest talent bases of the company. In 2022, the company said it had 300,000 people in India, about 40 per cent of the total workforce.

“We’re going after structural costs ... we have been dealing with a difficult situation of compounding wage inflation, and also with pricing,” said Julie Sweet, chair and chief executive officer, Accenture. 

She added: “We’ve also been doing that with cost efficiency and digitisation. We have identified an opportunity to go after more structural cost to create resilience and room in the P&L as we go ahead.”

The company in a regulatory filing said while it continued to hire to support its strategic growth priorities, during the second quarter of fiscal 2023, it had initiated action to streamline operations and transform its non-billable corporate functions to reduce costs.

More importantly, the company stated the hiring outlook for the next quarter would be muted.

“In the previous two quarters we added 28,000 people. This quarter we had 91 per cent utilisation. We have skills and all the people we need to deliver ... We did not add people from Q1 to Q2. We see that being the same for Q2 and Q3. We may add headcount in Q4,” added Sweet.

Uncertain times

• More than 50% of the jobs to be cut will be in non-billable corporate functions
• 800 of the over 10,000 leaders across services and markets may be laid off
• Move comes as worsening global economic outlook is sapping corporate spending on IT services
• Accenture now expects annual revenue growth of 8-10% in fiscal 2023, compared with previous projection of 8-11%
• Companies remain focused on executing ‘compressed transformations’, CEO Julie Sweet said

The trend ties in with what is happening in the sector. TCS had negative headcount growth in Q3FY23. The hiring numbers of Infosys and Wipro too were softer than expected and several players are yet to hit campus.

Even though the company reported a strong Q2 performance, it reduced the higher end of its revenue guidance for the financial year. In a statement, Accenture said for fiscal 2023, it expected revenue growth to be in the range of 8-10 per cent in local currency compared to 8-11 per cent previously.

Revenues for the second quarter of fiscal 2023 were $15.81 billion compared with $15.05 billion for the second quarter of fiscal 2022.

New bookings for the quarter were a record $22.1 billion, with consulting bookings of $10.7 billion and managed services bookings of $11.4 billion.

The impact of the current macro uncertainty was seen in the company’s consulting business, which was down 1 per cent. Managed services revenues were $7.54 billion, an increase of 12 per cent in US dollars.

Commenting on the demand environment, K C McClure, chief financial officer, said: “We do feel good about our pipeline and even after a solid booking this quarter and our sales outlook for Q3 is strong. We expect to have lighter bookings than the record booking we just had.”

Sweet, however, said there was strong demand for larger transformational deals, in particular the need to build digital core.

The company rang up $244 million in business optimisation costs during the second quarter and expects to record a total of approximately $1.5 billion through fiscal 2024.

Accenture estimates $300 million for consolidating office space, with approximately $800 million expected in fiscal 2023 and $700 million in fiscal 2024.