Accenture’s Results Bode Well for the Entire Channel


Solution provider is on a roll, and it has implications for you


What has 75,000 employees, ranks as one of the top 200 companies in the country and is bucking the current IT recession? Before you answer, let me add one more point. This company has also seen its stock rise 88 percent since last July. Believe it or not, the answer is a solution provider. The name of that outfit is Accenture, currently led by chief executive Joseph Forehand, who is the topic of this issue's cover story, for obvious reasons.

What makes the tale of Accenture timely is that, as we were putting the story to bed, the huge consulting and integration firm reported fiscal first-quarter financial results that reflected signs of health not only for consulting and outsourcing services, but also for technology solutions built around J2EE, Sun servers, Oracle databases and CRM software.

It may come as a surprise to learn the company actually reported the highest quarterly revenue in its history, despite a period that was severely affected by the events of Sept. 11. Accenture said sales climbed nearly 6 percent, to top out just a hair under the $3 billion mark ($2.99 billion, to be exact). During that period, the company says its outsourcing business grew 32 percent, bolstered by a focus on what Forehand said was business transformation. I like to refer to that as a way to help customers save money rather than transform their businesses, but who am I to argue with such success? No matter how you slice it, we are witnessing a boom in outsourcing evidenced not only by Accenture's results, but by those of its largest competitor,IBM Global Services. So, if you're looking for a harbinger of good news, you may find comfort in what Accenture has to say. There has also been good news from EDS, Fort Point, CSC and several others.

About the only thing putting a damper on the company's financial results were the investments it made during the past year, which have greatly devalued because of the stock-market's decline. Those investment write-downs affected the company's profit, but, nonetheless, it recorded first-quarter net income of $81.7 million. In our interview with Forehand, he states quite definitively he will not abandon Accenture's venture business, which has helped finance such companies as Asera, Jamcracker, Blue Martini and Entrust. The company has invested some $300 million in about 70 early-stage e-commerce companies.

Accenture could not have foretold the stock market's decline, but it was smart in picking some promising technologies that could extend its reach or bolster its core competency. There are many other vendors out in the marketplace, such as BEA or the ailing Vignette, that believe success in the channel is tied to deepening their relationships with not only Accenture but also with other members of the upper echelon of the consulting and integration community. That usually,except in Vignette's case,causes a trickle-down effect, in which the vendors start building relationships with more mainstream VARs to try to expand their indirect sales efforts. In some cases, these companies have to adapt their products to suit small or midsize customers the way

Oracle did with its small-business suite.

Quite often, mainstream VARs dismiss what's going on with those huge consulting and integration firms. I often hear, "They are just too big," or "Their business model is so different." If you believe that, you are fooling yourself. The old saying about missing the forest for the trees rings true. The success Accenture is experiencing represents the big picture when it comes to how CIOs and line-of-business managers spend their IT dollars. For instance, one of the main reasons Accenture is growing in this difficult spending period is that it sells its customers on savings from outsourcing back-office and human resource operations. That works not only for Fortune 500 companies, but for the guy who runs the local Italian restaurant on Main Street. Accenture is also supporting a client's customer care, network, billing and marketing applications. That approach works for large and small customers alike.

Joe Forehand may not be a household name, but he is certainly someone worth studying, and his company is worth watching very closely. He truly is no ordinary Joe.

Let me know what you think at rdemarzo@cmp.com.