Accenture's Q4 orders, outsourcing biz growth fuel optimism for Indian IT

The better-than-expected performance in the outsourcing business has indicated the recovery of revenue growth for Indian IT firms too, and may happen sooner than expected

Even as Accenture’s fourth-quarter earnings missed estimates, and the company expects lower growth in the first half of FY21, some of its metrics like order bookings and growth in outsourcing business are seen as positives for Indian IT services companies. The NYSE-listed company follows September to August financial accounting year.
 
Accenture’s overall revenue in the June-August period fell 2 per cent to $10.84 billion, compared to the same period last year, primarily owing to its lacklustre performance in the consulting segment, which fell 8 per cent quarter-on-quarter (QoQ). Outsourcing revenue, however, rose 6 per cent to $5.15 billion. The performance in the outsourcing business has signalled the recovery to revenue growth for Indian IT firms, too, may happen sooner than expected.
 
This is seen as a huge positive for Indian IT firms, especially because of the fact that they are not as consulting heavy as Accenture which derives close to 55 per cent from this segment.

“Accenture’s revenue mix is different from Indian IT companies. One should also note that financials and communications vertical’s year-on-year (YoY) revenue decline has also moderated. These constitute the largest verticals for Indian IT firms’ revenue,” said Sanjeev Hota, vice-president (research head) at Sharekhan.
 
New bookings for Accenture grew 9 per cent YoY to $14 billion, their second-highest ever. New bookings in consulting and outsourcing increased by 7 per cent and 10 per cent to $6.5 billion and $7.5 billion, respectively. The uptick in bookings is a “positive surprise”, brokerage firm Jefferies said in a note.
 
According to Motilal Oswal Securities, Accenture’s management has hinted at a robust deal pipeline, which is quite encouraging for Indian IT companies.  “We understand these bookings could be lumpy, but they still indicate demand is on the path to normalisation and recovery, with the worst behind us.”