Tag Archives: Accenture

Accenture Q1: $7.2 billion in revenue, 45% outsourcing, 14.5% op margins

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Accenture reported Q1 earnings yesterday.  I knew that ACN was publicly traded, but never bothered to look at the numbers.  Here is what I found in their 10Q SEC filing.

  • Q1 Revenues of $7.22 billion, up 2% YoY
  • Q1 Operating income of $1.05 billion, up 7% YoY
  • Q1 Net income of $698 million
  • Cash balance of  $5.7 billion
  • DSO (days sales outstanding) of 32 days

ACN keeps growing.  Looking at the Investor 2012 presentation from October, ACN had a 8% CAGR between (2004-2012) which was almost double the industry average.

Accenture Historical GrowthProfitable business. Their operating margin was 14.5% and net margin was an impressive 9.6%.   Looking at the comparison here, you can see that ACN is more profitable than both Booz Allen (3.8%) and Towers Watson (7.5%).

In the annual chart below, margins continues to expand from 12.7% in 2007 to 14.5% in Q1 2013.   (For blog readers: look at the misleading axis on the left)

Accenture Operating MarginEveryone is working hard.  They did say in their Q1 press release here, that utilization of billable employees was 88%, and attrition was 11%.  To me, that means consultants are hard working, and also getting burned out.  Typical consulting model.

Earnings are up.  Earnings per share (EPS) grew at a phenomenal 15% CAGR for eight years.  Most of the growth came from revenue grow and share buybacks. Accenture Earnings Per ShareStock is down.  The stock had a good run-up from the recent low in July near $56.  It made it up to $71, but then dropped with the recent earnings release and outlook.  For the updated stock price look here.

Accenture stock chartAmerica and Asia are doing well.  In Q1, America and Asia Pacific saw revenues increase, while Europe / Middle East / Africa was down by 6% in US $ terms.

ACN revenues by regionMedia and Telecom were down.  All industry groups were flat or up in revenues YoY in Q1, with the exception of Media and Telecom.  I wonder if that means fewer promotions in that service area in 2013.

ACN revenue by ‌industryAccenture’s foci.  Investor relations presentations are a great way to peak behind the curtain and see what management is telling investors about their strategy and investments.  Here, Accenture showed that their big opportunities were in Analytics, Health, Mobility, and Software-related services.  If you want to read the words that accompany the slides, look here.

Accenture Growth InitiativesIt’s an outsourcing business.  Here is the surprise.  Looking at the numbers, outsourcing is 45% of their business and growing fast.  As Bloomberg reported here, “Outsourcing sales rose 9 percent to $3.26 billion as more customers hired Accenture to cut costs by shifting work overseas.”   It is a Flat World and getting flatter, faster.

ACN revenues consulting vs outsourcing

Accenture video: An advertisement for management consultants

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Management consulting video.  Just watched my first video advertisement for consulting. It was entitled The Science of Management Consulting; it was cool, visually appealing, and a bit inspiring actually.   Done by Accenture and on their website.

Accenture VideoIt covered a lot of the best things about consulting.  All these things about management consulting are true.  These things are hard to find and valuable:

  • “Harnessing this complexity takes ingenuity, vision, focus”
  • “Individuals who see things differently”
  • “Defining strategies, designing creative approaches”
  • “Combining business function and industry-relevant specialists”
  • “Turning theory into action, and action into value”
  • “Develop lasting relationships”
  • “Making change happen with pace, certainty and strategic agility”

Easy to watch.  It is only 2.5 minutes.  Has a good soundtrack, and good visuals.  I have seen lots of Accenture billboards (who hasn’t?), but never a video.  Give it a look.

Accenture VideoDifficult to Understand.   So here is the irony.  I understand what the advertisement is saying because I know Accenture and the type of work.  Many wouldn’t.  Lots of consulting jargon and business-y talk.  Lots of Fortune 500 executive speak.

It’s a running joke among consultants that none of their parents actually knows what they do.   I can already hear my father’s refrain:  So, what exactly do you do?

Consultant’s Tool: What is a maturity model?

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Management consultants are always looking for ugly problems and broken things to fix.  After all, we only get paid when we uncover difficult problems and fix them.

Clients do not always know what is wrong

What really surprises me is that many clients have trouble explaining what is exactly wrong and what they want done.  They often talk about symptoms – flat revenues, dropping margins, or increased receivables – not the root causes.  As a result, much of the burden of scoping the project often falls on the consultant’s shoulders.

Maturity Model is a Diagnostics Tool - Consulting blogThere are a number of diagnostic tools that consulting firms have created over the years to help identify problem areas: SWOT, benchmarks, McKinsey 7S, pricing waterfalls, financial analysis, BCG growth matrix, surveys, workshops and even simple checklists.  Borrowing the analogy of consultants as business doctors, these tools are like the x-ray, thermometer, blood pressure gauge or blood tests used in a physical exam.  It is not treatment, just the diagnostics to find the sickness.

Maturity model basics

A common tool is the maturity model which gauges the client’s maturity in a number of areas and points out the areas of improvement.  It’s actually a simple thing that often looks like a report card or an excel table.  It looks simple, but there is good stuff there.

In the example below, the different functions / capabilities are shown on the left and the different maturity levels are on top.  So in the first row, the supply chain planning group is performing at a level 3, which for this client, is about where they want to be.

Maturity Model - Maturity Asssessment - Consulting blogHere are some common questions people have about maturity models:

#1: Shouldn’t the target be level 5 (highest capability) for everything?

  • Probably not. Getting to level 5 (highest maturity) is usually prohibitively expensive, or potentially impossible.  How difficult will it be to be as efficient as Southwest, as customer-driven as Nordstrom, and innovative as Apple?  Probably smarter to choose the areas you want to really excel, and pick your battles

#2: What is the criteria for the maturity levels? 

  • The criteria is set ahead of time. The consultant has a “description” for each of the boxes in the grid.  So, there is a definition for planning L1, L2, L3, L4, L5.  It can be laborious putting it together, but without clear definitions, the bucketing of performance will not have meaning.   Click on the graphic below to see the detail or see the entire AICPA / CICA Privacy Maturity Model (March 2011) here.

AICPA privacy maturity model definitions - Consulting blog #3: Isn’t this all just subjective opinion?

  • Yes . . . There will be some subjective elements and room for interpretation.  In the AICPA example above, what does “adequate and qualified” privacy resources mean.   Is that a chief risk officer with a PhD or 2 college interns with online training?
  • . . . and no. a)  Many of the maturity models are industry-specific (e.g., healthcare vs, automotive) so it can be more detailed and relevant.  b) Good maturity models are based off of benchmark or survey data, so there is quantitative data to back up the definitions.  c) Finally, consultants survey a large enough group of people (e.g., executives, senior managers, line workers etc) so that the results are representative.  Don’t want to simply survey the CEO and keep that as gospel.

#4: Who decides the current level of performance?

  • The consultant can decide . . . The team can assess the client’s maturity (based on interviews, data analysis, comparison to competitors) and present it to the client.  If you have fine-tuned with the client, your assessment will be 80% right.
  • . . . or the client can decide.  Youcan poll the stakeholders ahead of time with an online survey or give them scorecards and ask them to self-evaluate during the middle of a workshop.  Both work well.  The hardest part is describing the maturity levels in a coherent and succinct way.  If not, it can get really boring, really quickly.

#5: Isn’t this a big marketing tool?

  • Of course.  This stuff works.  Take a look at Accenture’s Green Maturity Assessment online survey tool here.   Very slick and easy to use.  It has the added benefit of collecting  “baseline” data (company size, geography, performance) which creates more data points to compare future survey respondents too.

Maturity Model Accenture online assessment - Consulting blog

#6: Are there other formats of maturity models?

  • Yes. Deloitte has a Business Maturity Model that shows a zip-zag line here
  • Yes. AT Kearney has a maturity model that looks like a stair-step.  Click on the graphic below for more detail or see the entire report here.

AT Kearney Maturity Model - Consulting blog

#7: What happens after the maturity model?

  • Prioritize the opportunities.  Maturity models are usually the first step in a larger opportunity identification process.  TheBooz Allen Supply Chain Maturity Model white paper linked here shows this process clearly.

Maturity Model Booz Allen Approach - Consulting blog

#8: What else are maturity models good for?

  • Structuring the problem. One of the most insightful parts of the maturity model is not the detailed description and words, but it is the high-level structure or the “buckets” of capabilities that are being evaluated.  Usually, the consulting firms have spent a lot of time and heart-ache to pick the categories that are most relevant and also MECE (mutually exclusive, collectively exhaustive).  It helps to frame the discussion and ask the right questions, which is half of a consultant’s job.

Related Posts:

Photo credit: Flickr, Ernstl, AICPA website, Accenture website, AT Kearney website, and Booz Allen website

Why consultants love best practices

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Management consultants use the phrase “best practices” often.  Perhaps too often. You will see that magical phrase mentioned numerous times in white papers and research on these websites: Boston Consulting Group, Deloitte, PWC and Accenture.  A few pictures that help explain why best practices are so popular with consultants and clients.

Best practices are like good hiking trails. . . Hiking Trail - Consulting blog

. . . they are market-tested:  Many of these best practices have been around for years.  Clients have a sense of comfort that they are following a well-worn path.  You don’t have to read the most recent article in Harvard Business Review to know that the Toyota Management System for lean production still works today.

. . . they are repeatable: Consulting firms work with so many clients that they see what works and what does not.  Clients think they are unique (n=1), but a lot of the back-office functions are more alike than different.  No reason to “re-invent the wheel” on mundane processes.  Better to just follow the trail that is already there.

. . . they save time:  It might not be perfect or holistic, but best practices will get you most of the way there.  Not all clients want to spend the time or the money to dig into the problem.  They want the 80% solution.

Best practices are like powerful telescopes. . .

Telescope - Consulting blog

. . . they appeal to the curious:  Clients want insight into what competitors and other leading companies are doing.  There is a fine line between best practices, benchmarking, competitive intelligence – but the basic conformist tendency is the same: “Show me what other people doing.”

. . . they help you see farther:  Having access to best practices or other “special sauce” positions the management consultant as an expert who can bring new and external insights.  While the client can draw on 10-20 years of personal experience, the consultant can tap into the firm’s collective history (for Trekkie fans, think of the BORG) and dig up example after example of previous client projects on the same topic.

Danger: Best practices can also be like cookie cutters. .  .

Cookie Cutter - Consulting Blog

  • If abused or misunderstood, best practices can become the lazy person’s way to propose a quick, often ill-fitting solution without thinking through the problem
  • Best practices are excellent tools, but you cannot “copy” your way to operational excellence or strategic differentiation.  The most you will get is parity
  • Best practices cannot be simply a cut/paste into an organization.  They do not work without the necessary leadership, culture, resources, IT systems etc. . .
  • Large ERP implementations (read: SAP, Oracle etc) force companies to adopt industry-standard processes.  Whether these are best practices is up for debate\

Photo credit: Kid Cowboy, Flikr creative commons; Pale Side of Insomnia, Flikr, creative commons;