How did Accenture manage to secure $1 billion worth of GenAI deals?

The company is an early adopter of the tech and has leveraged its first-mover advantage, supported by clients' increased discretionary spending on GenAI

The recent second quarter performance numbers of the largest IT services and consulting firm Accenture may have pulled the Indian IT sector stock price down. Still the company managed to sign a total of $1.1 billion deals in GenAI.

The figures are staggering when compared to peers such as Tata Consultancy Services (TCS), Infosys, HCLTech and Wipro. The top-tier Indian IT services players are yet to share any substantial deal figures in the GenAI segment.

Accenture, in its recently announced quarter said that it had signed deals worth over $600 million in GenAI, taking its total GenAI book to $1.1 billion. Accenture, which follows a September-August financial year cycle, had signed GenAI deals worth $450 million in Q1.

The company also acknowledged that this is one of the fastest built-up of deal wins it has seen in a new technology category. “$1 billion sales in the first-six months of the year is the fastest we have ever built sales in an emerging technology. And what it tells you is that, clients understand the importance of AI that they’re going to have to reinvent every part of the enterprise,” said Julie Sweet, chair and chief executive officer, Accenture on the analyst call after the results.

Analysts tracking the company are of the opinion that Accenture’s ability to win such big numbers in GenAI reflects its position.

Eye for AI

*   Accenture’s Q2FY24 GenAI deal at $600 mn

*   In Q3FY24, TCS said four GenAI deals have turned from PoC to contract

*   In Q2FY24, TCS had 250 GenAI opportunities

*   In Q3FY24, Infosys said it is seeing strong traction in GenAI deal momentum

Sources: Company analyst calls, media reports

First-mover advantage

“Accenture performance is reflective of its positioning as the world’s leading tech services transformational firm as well as its larger scale. If you look at the percentage of AI to total revenue they are still leading but the gap narrows. Clearly, clients are eager to both pilot Gen AI as well as move these pilots into production. That said, we believe the bulk of this revenue comes from pilots as well as broader work which is AI infused,” said Peter Bendor-Samuel, CEO, Everest Group.

The company shares some of the reasons for its success which it owes to its first-mover advantage. “The strategy starts…we want to be the first-mover to help our clients use the technology. And that’s why what we’re doing with our investments of $3 billion is to create solutions for them and you see that coming through with our sales in Generative AI, which, as I’ve said on earlier, are the fastest we’ve ever seen…,” said Sweet, explaining how Accenture has managed to gain market share in GenAI deals.

Quick to adopt the tech

Sweet goes on to explain that other than being the first mover in selling these services, Accenture is also the first to use the technology itself. She shares that as they invest to be early and the first-mover, then the firm is able to capture all the opportunities.

“When we are able to be the first-mover, which we are already starting now to use GenAI and how we deliver, that enhances our competitive position. It makes us more differentiated and, of course, it also then allows our clients overtime the more we use the GenAI to achieve the results they need at a lower cost, which frees up their investment capacity to do the massive reinvention,” explained Sweet in the analyst call.

Discretionary spending

Analysts also added that what Accenture has achieved may not be what others may be able to capture. “…strong pick-up in gen AI bookings has not meant better discretionary spending. Cuts in other parts of discretionary spending have been used to fund generative AI experimentation budgets,” said a Kotak Institutional Equities report after the firm’s results.

The report further added that, “Accenture’s commentary indicates that plenty of generative AI PoCs may not get required results to be put into production at scale. Bulk of the cloud, data and core modernisation journey is yet to be accomplished and requires heavy lifting from services. These investments will be necessary to realize the full benefits of generative AI for enterprises.”

Bendor-Samuel also agrees that the conversion of AI pilots into production will take time. “We are still observing that most AI pilots are slow to move into production. Accenture is the premiere transformation firm and naturally they uncover the early opportunities.”