Accenture has announced plans to lay off 19,000 employees over the next 18 months after a year in which it made 25 acquisitions and increased its headcount by 39,000.
The Dublin-based global services provider said in a US Securities and Exchange filing that the layoffs, focused primarily on the back office side, are coming even as the company continues to hire employees.
"While we continue to hire, especially to support our strategic growth priorities, during the second quarter of fiscal 2023, we initiated actions to streamline our operations and transform our non-billable corporate functions to reduce costs," Accenture wrote.
"Over the next 18 months, these actions are expected to result in the departure of approximately 19,000 people (or 2.5 per cent of our current workforce), and we expect over half of these departures will consist of people in our non-billable corporate functions."
Accenture is a global services powerhouse, with fiscal year 2022 revenue of $61.6bn. The company is ranked No. 1 on the CRN 2022 Solution Provider 500.
The planned cuts come after Accenture increased its headcount between February 28, 2022 and February 28, 2023 by about 39,000 to 738,000 employees.
The cull also come after a massive acquisition spree. Accenture in 2022 made 25 acquisitions worldwide, including Barcelona-based Alfa Consulting; Argentina-based Ergo; Brussels-based Greenfish; and Minnesota-based The Stable.
The group also reported fiscal second quarter 2023 sales growth of five per cent year over year to reach $15.81bn thanks to a 12 per cent growth in managed services revenue which more than offset a one-per cent drop in consulting revenue.
Bob Venero, president and CEO of Future Tech Enterprise Inc., Fort Lauderdale, No. 95 on the 2022 CRN SP 500, said he sees the Accenture layoffs as a sign of the times with Fortune 500 companies passing on high priced consulting firms that are focused on business strategy recommendations rather than business outcome based IT solutions.
"Right now companies need business outcomes not high-priced business recommendations," he said.
"When you have an economy like we are in now with companies looking to do more with less they are not going to spend money with consultants making strategic recommendations."
Accenture slashes financial outlook
Accenture also said it expects revenue growth for all of fiscal 2023 to be up eight per cent to ten per cent in local currency, compared to its earlier guidance of eight per cent to 11 per cent.
The company also cut its guidance for GAAP operating margin for fiscal 2023 to 14.1 per cent to 14.3 per cent, down from its previous expectations of 15.3 per cent to 15.5 per cent.
Accenture also now expects GAAP earnings per share for the full year of $10.84 to $11.06 compared to its earlier expectations of $11.20 to $11.52.
In addition to the layoffs, Accenture during its second fiscal quarter 2023 also took other actions to streamline its operations, including transforming non-billable corporate functions and consolidating office space, to reduce costs.
Because of those actions, the company recorded $244m in business optimisation costs during the second quarter and expects to record total costs of approximately $1.5bn through fiscal 2024.
Overall, Accenture said it expects to record costs of $1.2bn for severance and $300m for consolidation of office space, with approximately $800m expected in fiscal 2023 and $700m in fiscal 2024.
The top sales executive for an SP 500 solution provider, who did not want to be identified, said he was not surprised by the Accenture layoffs given the buying spree by the systems integrator.
"Big companies like Accenture always over-rotate when they are pursuing a growing market like cloud," the executive said. "Their sales go up for several years but they fail to anticipate economic factors that could slow growth down. Three years from now they will be rehiring people when the economy is good again."
The sales chief for another SP 500 company, who did not want to be identified, said he sees the layoffs as a sign that Accenture is seeing a slowdown in the "rapid lift and shift" move to the cloud that came in the wake of the Covid-19 pandemic.
"Accenture over-rotated with the move to the cloud and did not account for the higher costs that Fortune 500 companies see when they moved to the cloud without anticipating the technical debt that comes with moving mission critical applications to the cloud," he said.
