Accenture to Cut Jobs and Reduce Office Space to Reduce Costs
IT Services Bellwether Targets Cost Reductions
Accenture is cutting jobs thousands of jobs over the next 18 months and reducing office space as the IT services bellwether targets cost reductions.
Record Customer Bookings Despite Job Losses
The IT services giant announced 19,000 job losses as the firm reported sales worth $15.8bn and a profit of $1.9bn in its second financial quarter.
Accenture CEO, Julie Sweet, said the company wants to reduce structural costs, including wages and the cost of premises, despite record customer bookings. The company said there was a record of $22bn in new bookings during the quarter.
In a statement, she said: “Our record bookings reflect the confidence and trust that our clients have in us to create value and help them transform at speed. We are also taking steps to lower our costs in fiscal year 2024 and beyond while continuing to invest in our business and our people to capture the significant growth opportunities ahead.”
Dealing with Compounding Wage Inflation
In a call following the results announcement, she added: “We’ve been dealing with the challenges of compounding wage inflation. We’ve been doing that with pricing, but we’ve also been doing that with cost efficiencies and digitisation and we’ve identified an opportunity to go after structural cost.”
Expected Costs Related to Job Cuts and Office Consolidation
Accenture said it expects $1.2bn costs related to the job cuts and $300m for consolidation of office space.
Ignacio Rasero, vice-president for Moody’s Investors Service, said Accenture’s credit profile remains very strong following the results, with the job cuts reflecting a slowdown from the boom in business immediately after the Covid-19 pandemic.
Long-term Demand Prospects for Accenture’s Services Remain High
“The job cuts reflect stabilising demand, following explosive post-pandemic growth, and prudent cost management. Accenture’s diversified business and industry mix helps offset weakness in specific sectors, such as technology, and provides stability. Long-term demand prospects for Accenture’s services remain high as the company continues to benefit from digital transformation trends.”
Quick to Adjust its Workforce
In July 2020, at the height of the Covid-19 pandemic, Accenture cut 900 jobs in the UK as a result of the economic slowdown, but when the global economy restarted and businesses adjusted to the new reality, which include hybrid working, IT services firms saw huge demand.
In November 2021, Accenture announced that it was creating 3,000 tech roles in the UK as its customers look to tech to take advantage of the post-pandemic economic recovery.
Mark Lewis, a senior consultant at Macfarlanes who specialises in IT outsourcing contracts, said Accenture in the UK has, over the years, been quick to adjust its workforce to fit the mark.
“Accenture in the UK seems to go through this pattern of contracting and expanding very quickly every few years,” he added.
High Demand for Expertise in Areas Such as Cyber Security
Lewis said that there are cost pressures on everyone, but demand for expertise from companies such as Accenture, in areas that “require sharp coding, data science and cyber security”, remains high because “it is difficult to find in-house”.
He said Accenture’s announcement that it is reducing office space is not surprising. “Many companies in the sector are doing this as a result of new hybrid working patterns.”