Company CEO C Vijayakumar also mentioned that the drop in discretionary spend in the hi-tech and telecom verticals have been more than what the company had expected, and to add to this headwind, incremental price increases were not going to be easy with macroeconomic challenges.
Accenture, which recently reported its earnings for its first quarter ended November, stated that there is a delay in decision-making, and clients were pausing smaller deals. “All of this (macro challenges) impacts the smaller deals more than the bigger deals because we’re continuing to see that big transformation focus,” the company said in its earnings call.
The opportunities to crack big deals was a common factor in the commentary of both Accenture and HCL.
Phil Fersht, CEO and chief analyst at HFS Research, told TOI that pipelines for next year are, by and large, weaker than at the same stage last year and there is definitely a drop off in smaller deals. “There are some large ‘consolidation deals’ out in the market as firms look to bring more services under one provider to drive down costs and beat inflationary pressure. I expect to see some large deal announcements in Q1 2023,” he said.
Analysts noted a sense of caution in Accenture’s guidance. ICICI Securities, in its report after Accenture’s quarterly numbers, stated, “Accenture has maintained its FY23 YoY CC (constant currency) revenue guidance despite strong growth in Q1 implying caution over demand ahead.”
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The company’s consulting bookings declined 13.7% YoY in dollar terms and this decline and slowing consulting revenue growth imply contraction in discretionary spending, ICICI Securities said. Consulting revenue growth moderated to 10% YoY in constant currency terms as against 22-32% in the past four quarters, it pointed out.
The brokerage firm went on to state that from the third quarter, management commentary of Indian IT services will start to weaken and the impact on revenue growth will be visible in the first two quarters of FY24.
Analysts, however, feel that the pressure on margins will ease as supply side pressures, including attrition, ease out.
