Analyst sees green in Accenture
American Technology Research maintains a "buy" rating on the tech consulting company, saying it is competing effectively with Indian IT services providers.
American Technology analyst David Garrity noted that Bermuda-based Accenture plans to expand its lower-cost overseas work force and called the stock a better value than shares of publicly traded Indian information technology services companies.
Accenture "has attained hourly billing rate levels that are competitive with those offered by the Indian IT services providers," Garrity wrote in a report. "Investors have been under the impression that North American-based consultants and systems integrators such as ACN would be at a permanent disadvantage relative to the cost advantage enjoyed heretofore by the Indian IT services providers as those companies bid aggressively to offer software solutions such as applications development and management."
Corporations have been turning to Indian IT services providers such as Infosys Technologies and Wipro, which offer low labor rates and industry certifications.
But Garrity cited a study from market research firm Gartner, saying that Accenture's billing rates are on average 5 percent below the top-tier Indian IT services companies. Garrity said Accenture's competitive rates come from its Global Solutions unit, which has 8,000 employees--or 11 percent of the company's total work force of 76,000--operating in various countries. Accenture expects to expand the Global Solutions unit to 10,000 to 12,000 employees by August, Garrity said.
Accenture "plans to displace the Indian IT service providers from North American and European corporate accounts where (it) believes the clients are being overcharged and underserved," Garrity wrote. "In effect, we believe (Accenture) has drawn a line in the sand in terms of the competitive prospects for the Indian...firms."
Garrity's report was based partly on comments that Accenture Chief Financial Officer Harry You made at an investor conference earlier in the week. During a presentation, You suggested Accenture's offshore plans are grand. "We can easily envisage in our senior management meetings that in three, four, five years, we'll (have) 25,000 to 30,000 (employees) in low-cost areas throughout the world," he said.
At the same time, Accenture said this week it is cutting 1 percent of its work force, or about 760 jobs, mostly in the United States. The move primarily effects management-level employees and is part of an ongoing "reshaping" of the work force, said Accenture spokeswoman Roxanne Taylor.