The titan of the software services industry, Accenture, announced on Thursday that it will reduce its annual revenue and profit forecasts and eliminate roughly 19,000 jobs as a result of macroeconomic concerns and uncertainty.
Accenture claimed that its decision to lay off employees was directly influenced by currency headwinds and pay inflation.
India is home to 7.38 lakh of the company’s workforce, or close to 40%. How the recent round of layoffs would affect employment in India is not yet known.
“The people’s impact is expected to be 2.5% of our present worldwide workforce. This may differ by market and by region, as a consequence of our different footprint and growth, and should not be interpreted as a statistic relevant to all geographies,” said an Accenture spokesman.
Relative to an average 13,000 global net personnel addition over the preceding three quarters, the corporation recorded a headcount gain of a measly 424 workers this quarter.
The company stated it anticipates somewhat lower order bookings in the March–May quarter compared to the record order bookings in the prior quarter and forecasted third-quarter revenue below street predictions, signifying budget cuts from business.
Accenture’s earnings serve as an indicator of how the Indian software services sector, in particular, will perform during the upcoming earnings season, which begins in the second week of April.
TCS will disclose its earnings on April 12, followed by Infosys on 13, and HCLTech on April 20.
The company now forecasts annual sales growth to be in the range of 8% to 10% in local currency, compared to 8% to 11% projected previously.
Accenture started taking steps to reduce costs during the second quarter by streamlining operations, modernising non-billable corporate functions, and consolidating office space.
The business optimisation project should be seen as a strategy to increase shareholder value, according to Julie Sweet, chair and CEO of Accenture.
Accenture’s decision to cut personnel follows significant layoffs in the North American large tech sector, where organisations like Amazon, Microsoft, Meta, among others, have announced repeated rounds of layoffs. IT hiring had slowed down, according to a December study from ET, amid macroeconomic worries brought on by inflationary pressures.
“Compounding wage inflation has posed severe obstacles for us to overcome. That’s what we’ve been doing with prices. But we’ve also been digitising and improving cost savings. And we’ve found a way to pursue additional structural expenses in order to build that room’s and the P&L’s resilience going future,” Sweet said.
Over 19,000 of our present employees, or 2.5%, are projected to be impacted by these actions, and more than half of them work in non-billable corporate tasks. By the end of the fiscal year 2023, nearly half of the 19,000 employees would have left the company, Accenture Chief Financial Officer KC McClure informed analysts on the earnings call.
The company forecasts $1.2 billion expenditure for severance and $300 million costs for consolidation of office space, with about $800 million of these costs estimated to be incurred in fiscal 2023 and another $700 million in fiscal 2024.
She noted that the company does not intend to grow headcount during Q3 as well but expressed hope of some demand spike during the fourth quarter (June-August) of the year.
Business Prospects
The consulting business posted adjusted earnings per share of $2.69 for its second quarter ended in February. In local currencies, revenue increased by 9% to $15.81 billion over the same period the previous year.
New deal bookings for the quarter were a record $22.1 billion, with consultancy bookings of $10.7 billion and managed services bookings of $11.4 billion. The management said that it sees some pressure on smaller projects, especially in North America and in the consultancy business. In North America, the communications and media budget is also under pressure, they added.
“We do feel comfortable about our pipeline, even after our record bookings this quarter, our sales estimate for Q3 is solid. In comparison to the record quarter we just had, we anticipate slightly fewer, lighter bookings, according to McClure.
The company forecasts strong growth in Europe and other areas, Sweet continued, in spite of pressure in North America. Speaking about the banking crisis, Sweet claimed that Accenture had little exposure to the tiny regional banks affected by the fallout from the failure of Silicon Valley Bank.
