Pierre Nanterme

Wall Street is a fickle beast. Earlier in the week Oracle’s market valluation soared to an all-time high of $200 billion on the back of analyst perception that the firm had passed a cloud tipping point.

Yesterday Accenture turned in good numbers and announced that over half of its business now comes from digital and cloud - and saw its market cap tumble!

Net revenue rose to $8.87 billion from $8.43 billion in the third quarter ended 31 May, but net income fell to $669.5 million from $897.2 million a year earlier. In addition, Wall Street was deflated by cautionary sales outlook from the consulting and outsourcing giant, particularly in relation to the US healthcare market.

CEO Pierre Nanterne remains committed to the transition to The New - Accenture-speak for cloud and digital, as well as security services:

Our ascension to these new high growth areas, the differentiation of our capabilities in the market, and the diversity of our business have enabled us to continue to gain significant market share. The need to go digital remains a top priority for clients and we are investing aggressively to drive innovation and deliver digital transformation.

It’s all about expanding the Accenture footprint and the addressable C-suite audience, explains Nanterme:

Given the depth and breadth of all services, it is our ambition to increase the coverage of the leaders we might serve with clients from the CEO, the CFO, the COO, the CIO, now the Chief Digital Officer with the launch of Accenture Digital. There are new leaders under this terminology and we want to be the top choice for the newly appointed CDOs which should be a quite a natural act. We have all the business in the different parts of the business. So if I am looking at Accenture, we have now settled with the five businesses. We have in this businesses all the activities such as analytics, interactive, mobility, cloud, security.

A case in point is around digital marketing, he says, pointing to the work of Accenture Interactive to deliver improved customer experience:

As an illustration with Carnival, the cruise operator we are helping develop a new platform using wearable technology, the Internet of Things (IoT) and analytics to transform the guest experience with intelligent customerization. Carnival will be able to anticipate every passengers preferences, likes, and needs.

The IoT on a wider scale is also seen a growth opportunity, he adds:

Increasingly the work we do is enabled more and more by new IT including automation, robotics, and intelligent platforms. We are helping a global healthcare company embrace digital across its entire enterprise, ultimately using Accenture myWizard, our intelligence automation platform to improve application quality and productivity. We are working with the US Transportation Security Administration to modernize the enterprise applications using Agile and DevOps software development.

He adds:

We are working extremely hard as you know at Accenture on robotic automation and bringing intelligent capabilities to significantly improve our productivity especially where we have large-scale operations so with technology and in operations…Clearly the big game on this is to accelerate our investments in robotic automation and intelligent services.

The trick here is to make sure that Accenture gets into the game at the earliest possible stage. The firm has seen its early digital shift pay off. Can the same trick be pulled off in IoT and robotics? Nanterme argues:

As with all services, you have a kind of maturity curve where you are starting with more pioneering strategy, consulting-rich programs, kind of prototyping in the early phase of the maturity curve. What we see is now all these New capabilities - interactivity, mobility, identity, cloud, security - soon come into traffic, Artificial Intelliegence, Blockchain, Immersive Reality and certainly in the near future quantum computing. All of these New capabilities are getting more mature, are driving bigger programs, and as we are moving from small prototyping to bigger programs, suddenly it is expanding in several service lines from strategy to consulting., but as well to technology and to operations. This business is maturing very well at Accenture with a positive effect in all our five businesses if you will and indeed we see more bigger deals which is a sign of the market maturing.

Trump and Brexit

All that’s to come. For the moment, Accenture’s ‘traditional’ public sector business is a victim of the new regime in Washington where the Trump administration is talking up reform, but hasn’t yet delivered on the detail. This is creating a log-jam, says Nanterme:

There is an expectation that indeed the new administration will launch critical reforms in order to boost the business and economy growth. And [of] this economic reform probably I would say the ones which are the most important [are] the healthcare reform, the tax reform, the trade reform and anything linked to the infrastructure investments. All of these four were the ones supposed to indeed unleash more growth for the business so the business could invest and drive more growth. And by driving more growth and driving more investment we would have a positive impact. The fact of the matter is that we [haven’t seen] this to be honest. Three months ago…we believed that these four reforms would happen reasonably rapidly in the US. And the fact of the matter is they are not yet being announced or executed. So we are in this zone where the business is still waiting, it's still positive but waiting for these reforms to happen, to invest and [this] has a negative effect

To counter this, Nanterme sees less uncertainty in Europe, despite the onset of Brexit-negotiations and potential upheaval in other major economies:

We have a good prospect that probably Germany might re-elect Angela Merkel so it's a poll of stability. I guess, the election of Emmanuel Macron in France has been recognized and celebrated by the market, because he is pro-European which has created a very positive impact around whether Europe will disappear or not. I think Germany and France are being extraordinary for business, recreating a very solid coalition. The Brexit thing is moving at its pace but we know it is going to happen. So it's not an uncertainty. The uncertainty is what exactly [it will be] - is it going to be hard, soft, gentle?

My take

It’s interesting that it’s the US public sector reforms that are proving a pain for Accenture, particularly around healthcare, rather than Brexit-induced uncertainties in Europe. Nanterme is right to highlight the 50% of revenues now coming from The New. That’s no mean ahievement for a 44 year old company that ten years ago was associated with big ticket outsourcing and never-ending ERP implementations.