60 Business The EconomistMarch 14th 2020
M
anagement consultantsthrive on a simple business mod-
el. First, scare companies by laying bare where they are fail-
ing. Then soothe them with counsel on how to improve. The scar-
ing part has grown easier as technology upends one industry after
another. Rare is the chief executive these days unconcerned about
cyber-security, artificial intelligence (ai) or their online offering.
The soothing, though, may have become harder. Who is a boss to
trust when consultancies themselves are only slowly getting to
grips with the meaning of technological upheaval?
To a growing number of ceos the answer is Accenture. The firm,
whose name is a portmanteau of “accent on the future”, certainly
has pedigree when it comes to tech. It is descended from Arthur
Andersen, an accounting-and-advisory giant which helped per-
suade General Electric to install a univac 1, corporate America’s
first computer, in 1954. In 2000 Andersen Consulting finally sev-
ered its strained ties to its parent (whose remaining accountancy
business was felled two years later by the Enron fraud scandal). It
changed its name and, in 2001, listed on the stockmarket at a value
of $14bn.
Since then its growth has been tentacular. Today around 200
clients are thought to pay Accenture at least $100m each annually
to keep their tech humming. Its 500,000 or so employees perform
menial functions (running clients’ overseas call centres or making
their sales software connect properly to accounting) and more
glamorous ones (uploading businesses to the cloud, designing
their apps, building ai chatbots, even imagining their next ad cam-
paign). Last year the firm’s revenues reached $43bn. Total share-
holder returns, including dividends, come to 118% over the past
five years, compared with 56% for the s&p500 index. In February
its market capitalisation hit $137bn.
Two things help explain Accenture’s rise. One was beyond its
control: technology’s role within companies has moved from the
back office to the core of what many of them do—hence those cor-
ner-office jitters. The second factor was a tech-heavy soothing
strategy. Pierre Nanterme, a Frenchman who led Accenture from
2011 until shortly before his death in January 2019, doubled down
on all things analytics, mobile, cloud and cyber-security. Each year
the firm spends roughly $1bn on around two dozen acquisitions toget on top of the buzziest tech trends. What Accenture calls “The
New” now accounts for around two-thirds of its sales, up from
one-third five years ago.
“The New” complements Accenture’s older capabilities in a
way that is hard for rivals to match. Unlike outsourcing competi-
tors such as India’s Infosys or Tata Consultancy Services, it has
management-consulting chops from the Andersen days. At the
same time, in contrast to august strategy firms like McKinsey or ac-
countant-advisers like Deloitte, ey or pwc, its army of relatively
cheap white-collar labour, roughly half of it in India and the Phil-
ippines, can be enlisted to perform labour-intensive tasks such as
taking down dodgy videos on social media (which Accenture does
for Facebook and Google). A global footprint helps insulate it
against downturns in any particular region. Despite rivals’ claims
of the superiority of the limited-partnership model, which still
dominates the industry, Accenture’s stockmarket listing does not
appear to have hurt its growth.
The result is an unusual ability to offer clients a comprehensive
service. Refocusing your business around a new app? Accenture
will be on hand to write the code—but can also supply designers to
make it look pretty. Need an ad blitz to sell it to consumers? Accen-
ture’s marketing arm grossed $10bn in revenue last year, placing it
among the five biggest ad groups in the world—it has become a cre-
ative agency not dissimilar from wpp or Publicis Groupe. Want to
expand into new markets? Just ring one of its more than 200 offices
in 51 countries.
The question for Julie Sweet, an American who took charge in
September, is whether Accenture can keep ballooning. She faces
three challenges. First, the sheer scale of the firm already feels
daunting. No listed corporation bar Amazon and Chinese hard-
ware-makers added more employees in the 2010s. It is tricky to
build a culture—and foster a sense of purpose that clever clogs
now demand of their employers—that appeals to both buttoned-
down database managers in Bangalore and tattooed creative direc-
tors in Spitalfields. Accenture has morphed into a white-collar
conglomerate at a time when investors favour focused businesses.
Its margins are less juicy than those of the Indian outsourcers.
The second challenge is an economic downturn, like the one
that looks increasingly possible as covid-19 goes pandemic. Reces-
sions hurt consultants as cash-strapped clients focus on survival
rather than expansion. Accenture weathered the financial crisis of
2007-09 but its revenues sank. Its share price has now fallen as it
did back then, this time by a quarter since its February peak, faster
than the covid-infected markets as a whole.
Ms Sweet’s final predicament is perhaps the most consequen-
tial. If her firm keeps doing such a bang-up job in convincing cli-
ents that technology is central to their success, more of them
might opt to build and run a bigger slice of it in-house rather than
splurging on outside advice. Accenture seems at times to suggest
that companies should let its consultants handle not just their
brand and tech innards, but also their power to innovate.Tech tonic
Still, the Nanterme-era digital strategy has life in it yet. Many com-
panies are behind in the technology race. Before most so much as
ask themselves how zippy 5gnetworks, the “Internet of Things” or
machine learning will transform their businesses, Accenture al-
ready has some answers. If someone, some day, finds a function
for blockchain, expect Accenture to be there to advise bosses on its
use—and to soothe frayed nerves. 7Schumpeter The rise and rise of Accenture
How a consultancy has ballooned into a white-collar leviathan