Why Accenture Is Laying Off 19,000 Employees: 5 Things To Know

‘Over the next 18 months, these actions are expected to result in the departure of approximately 19,000 people (or 2.5 percent of our current workforce), and we expect over half of these departures will consist of people in our non-billable corporate functions,’ Accenture said.

Accenture will lay off 19,000 employees over the next 18 months in one of the $62 billion IT giant’s largest layoff rounds in its history.

Accenture has hired thousands over the past 12 months and acquired about two-dozen companies.

“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,” said Accenture in a filing with the U.S. Securities and Exchange Commission.

“Over the next 18 months, these actions are expected to result in the departure of approximately 19,000 people (or 2.5 percent of our current workforce), and we expect over half of these departures will consist of people in our non-billable corporate functions,” Accenture wrote.

[Related: Amazon’s AWS Layoffs: 5 Things To Know About ‘Devastating’ Cuts]

Accenture Reports Earnings

News of the layoffs come as the IT juggernaut released the financial results of its second fiscal quarter of 2023 today.

The Dublin-based IT services and consultancy superstar generated sales of $15.8 billion, representing 5 percent growth year over year. This was led by a 12 percent growth rate in its managed services sales that helped offset a 1 percent decline in consulting revenue. New bookings for the quarter were a record $22.1 billion.

“Our record bookings reflect the confidence and trust that our clients have in us to create value and help them transform at speed,” said Accenture CEO Julie Sweet during the company’s financial earnings report today. “We are also taking steps to lower our costs in fiscal year 2024 and beyond while continuing to invest in our business and our people to capture the significant growth opportunities ahead.”

With positive revenue growth and record bookings, the question arises of why exactly Accenture is terminating approximately 2.5 percent of its global workforce.

CRN breaks down five reasons why Accenture is likely terminating 19,000 of its global employees.

Accenture’s Headcount Explosion In 2022

One of the biggest reasons why Accenture is cutting 19,000 employees is due to its rapid hiring in 2022.

Accenture increased its headcount by a whopping 39,000 employees between February 2022 to February 2023.

The company now has around 738,000 employees, compared to 699,000 in February 2022, according to Accenture.

This means that even after the 19,000 layoffs the company will be conducting, Accenture will have about 20,000 more employees than it did in early 2022.

“The year-over-year increase in our workforce reflects demand for our services and solutions, as well as people added in connection with acquisitions,” said Accenture in its recent filing. “We hire to meet current and projected future demand.”

Accenture has acquired more channel partners than anyone else in 2022, helping in its headcount explosion.

Accenture Acquires More Companies Than Anyone

Accenture is the market leader in acquisitions in the channel partner community. The M&A behemoth acquired well over 20 companies in 2022 alone.

Furthermore, Accenture’s acquisition spree isn’t slowing down in 2023. In fact, just this week Accenture unveiled it will add over 120 new employees via its acquisition of India-based artificial intelligence company Flutura.

Accenture’s acquisitions are on a global scale, from Barcelona-based Alfa and Japan-based Trancom ITS to Norcross, Georgia-based Advocate Networks.

Each of Accenture’s roughly 25 acquisitions last year means the company is adding hundreds or thousands of new employees under the Accenture umbrella with each purchase.

This is also one of the main drivers to Accenture’s record-breaking $22.1 billion in bookings during its recent second fiscal quarter.

“New bookings [include] new contracts, including those acquired through acquisitions,” said Accenture in its SEC filing. “As well as renewals, extensions and changes to existing contracts.”

Accenture ‘Did Not Account For’ High Cloud Costs

CRN spoke with two solution provider executives regarding Accenture’s layoffs.

One top sales leader from an SP 500 company 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,” said the executive, who did not want to be identified.

Cloud costs are one of the biggest issues in the technology market today. In fact, a recent study by Flexera showed that cloud costs are the No. 1 challenge to businesses today.

Flexera said 2023 marks the first time in a decade that managing cloud spend has overtaken security as the top challenge facing organizations across the board. For example, Flexera respondents reported that public cloud spending was over budget by an average of 18 percent.

Another 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.”

Sales Growth, Office Space Reductions Can Offset $1.2 Billion In Severance

Accenture said it expects to record costs of $1.2 billion for severance, including $800 million in fiscal year 2023 and $700 million in fiscal year 2024.

However, with Accenture’s record-breaking $22.1 billion in bookings in the second quarter, as well as sales growing 5 percent for $15.8 billion—the company appears safe financially to pay out the $1.2 billion to employees.

Additionally, Accenture is optimizing operating costs by consolidating its our office spaces.

“During the second quarter of fiscal 2023, we initiated actions to streamline our operations, transform our non-billable corporate functions and consolidate our office space to reduce costs,” said Accenture in its recent filings.

Other Large Solution Providers, Tech Giants Are Cutting

Accenture isn’t the only massive solution provider laying off employees.

In fact, consulting superstar KPMG announced in February that it would be slashing nearly 2 percent of its U.S. workforce due to a slowdown in demand.

Additionally, McKinsey—another massive IT services and consulting firm—is likely to lay off up to 2,000 staff, according to a report by Bloomberg. If true, it would be one of the company’s largest layoff round ever.

And it’s not just large solution providers cutting their workforce. The largest technology companies in the world, including Amazon, Dell Technologies, Microsoft and Google, have all announced large layoff rounds in 2023.

Software and cloud giant Microsoft is laying off 10,000 employees.

Amazon is slashing a total of 27,000 employees, including a recent 9,000 layoff round that will include cloud computing market leader Amazon Web Services.

Server and storage market leader Dell Technologies will slash approximately 6,650 jobs, while search and cloud superstar Google will lay off around 12,000 employees.

Although the 19,000 layoffs at Accenture might appear to be massive, its on par with many fellow IT giants in 2023.