In an indication of worsening macroeconomic conditions and its impact on the IT sector, Accenture Plc on Thursday announced that it would cut about 19,000 jobs or 2.5 percent of its workforce over 18 months and lowered its annual revenue projections for FY23, sending tremors across the sector.
The company pegged annual revenue growth to be in the range of 8-10 per cent in local currency, compared to the 8-11 percent forecast earlier. It also estimated a foreign-exchange impact of negative 4.5 per cent. The company has trimmed its FY23 revenue growth guidance band at the upper end, amidst worries that recession-wary enterprises will cut technology budgets.
It also forecasted its third-quarter revenue below street expectations in the range of $16.1 billion and $16.7 billion. Analysts on average were expecting revenue of $16.64 billion, according to Refinitiv data.
Julie Sweet, chair and CEO, Accenture, said the company was taking steps to lower its costs in fiscal 2024 and beyond, “while continuing to invest in our business and our people to capture the significant growth opportunities ahead.”
This comes at a time when the US and European banks are seeing a crisis due to the relentless hike in interest rates and contributing to a stalling of the growth momentum in the IT services sector. Last month another IT major Cognizant had indicated muted growth in deals in the pipeline and its first-quarter revenue forecast was below market expectations.
Kotak Institutional Equities had already warned of a negative impact on the IT sector following the banking woes in US and Europe. “This will likely impact growth for Indian IT in H1 FY24, and bring down overall growth for FY2024.
Spending on cost take-outs will pick up, but will yield benefits in H2 FY24 or later,” it said. “Current woes in the banking sector can impact sequential growth by 1-2 percent in Q1 FY24,” it added.
Indian IT giants such as Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, Mphasis, and LTIMindtree have exposure to some of the troubled banks.
Sector experts added that increasing economic woes for IT firms are an indication for these companies to look into serious reorganisation strategies.
Sanchit Vir Gogia, CEO and Chief Analyst at Greyhound Research said, “IT companies are experiencing pressure on all sides. From worsening macroeconomic conditions to the banking crisis in the States to the onslaught of generative AI. This is an indication that IT companies need to deliberate serious reorganisation of their businesses to be leaner, more IP oriented and forward-looking.”
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Published on March 23, 2023
