Accenture results hold out hope [DNA : Daily News & Analysis (India)]
(DNA : Daily News & Analysis (India) Via Acquire Media NewsEdge) A fortnight before Indian information technology stalwarts begin reporting their fourth-quarter and full-year results, the results of Accenture, the second largest technology consulting firm, for the February-ending second quarter, indicate an uptrend in outsourcing.
This comes on the back of a better-than-expected set of data from Oracle, the enterprise hardware giant. Indian coders also derive a lot of revenues from implementing Oracle packages.
At the same time, the Accenture numbers also show that the onsite-offshore staff ratio of multinationals such as Accenture, IBM, HP and others are moving dangerously closer to those of India technology companies, which could spark cut-throat rivalry for the flattish-to-slightly-higher budgets expected from customers.
The US technology consulting major reported revenues of $6.8 billion, up 12% in dollar terms and 13% in local currency in the second quarter.
Revenue growth was driven majorly by outsourcing, which shot up over 20% in the quarter compared with over 8% growth in consulting.
Surendra Goyal and Rishi V Iyer, analysts with Citigroup, believe this is a positive for the local players. "While overall (it is) positive for IT spending patterns, the results are in sharp contrast to the cautious commentary of Indian IT majors," they said.
Accenture's outsourcing revenue continued to outpace consulting in an environment where most US and European companies were relying more on offshoring to cut costs. It has also raised its full-year guidance to 10-12% from 7-10% on robust bookings outlook. The technology major's headcount in the lower-cost locations such as India, China, the Philippines and others inched to 60%, tilting its onsite-offshore employee ratio closer to Indian companies.
This spells tougher price competition for local firms, which are struggling to protect the pricing power they had a few years back.
A senior executive from a leading Bangalore-based IT services firm, who did not want to be named because his company is in silent period, said the trend of transforming business model of global tech majors was not a major concern.
Last week, another US giant, Oracle Inc, also signalled an improved market environment when it reported a sequential growth of 16% in software revenues in its fourth quarter ended February.
Bhuvnesh Singh and Vaibhav Dhasmana, analysts with Barclays, said this would translate into better business for Indian tech firms by enhancing their package implementation revenues. "While these results cannot be directly extrapolated to a stronger business outlook for IT services, they do suggest to us that corporate demand for software and services remains healthy, with companies continuing to spend on software and services to improve efficiency and productivity," they wrote in their report.
"Like they are extending their footprint in the backend services, we are doing the same in the front-end services. In today's scenario, every tech project involves more than 2-3 companies and so Indian companies are being increasingly considered for most deals," he said.
The executive also said multinationals are playing a major role in the growth of the Indian IT services sector.
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