Accenture CEO: ‘Companies need to reinvent the way they do business with AI at their core’

June 22, 2023 at 4:27 PM EDT

“Our clients are at different starting points. Everyone is interested in AI, especially generative AI. We recognize that work is needed to reinvent, we need a strong modern digital core,” said Accenture CEO Julie Sweet.

Artificial intelligence, especially generative AI, represents a huge new opportunity for Accenture, thanks to customer demand for new ways to transform their businesses and the investments we have made.

That’s according to Accenture CEO Julie Sweet, who said in remarks prepared for financial analysts on Thursday during the company’s third quarter 2023 financial conference call that the company He said the company remains focused on reinventing the entire enterprise as it implements a compact transformation to achieve cost savings, strong growth and increased agility. and better resilience.

“Our strategy is to be at the heart of our customers’ businesses, helping them continuously reinvent themselves to reach new levels of performance and establish themselves as industry leaders,” said Sweet. said. “And each of our clients is at a different starting point. Everyone is interested in AI, especially generative AI. We recognize that further work is needed to reinvent, we need a strong modern digital core, and clients embarking on this journey will have unparalleled global scale, industry and functional We ask for in-depth knowledge. [and] We provide a wide range of services from strategy and consulting to technology and managed services. “

[Related: Accenture CEO Julie Sweet On Layoffs, Belt-Tightening, And Going After ‘Structural Costs’]

Sweet said no previous wave of technology has captured the intentions of leaders and the public as quickly as generative AI.

“We are now entering the age of AI, and companies will need to reinvent how they operate with AI at their core,” she said. “That’s too early. Think of it like the cloud was 10+ years ago. The underlying model and the products based on it are still mature and many products have been announced, but it’s not in the general availability stage. there are a few that are ready for broad deployment, and our position as the largest partner with most major technology companies allows us to help our clients navigate their choices in an evolving landscape. We are central and supportive.”

Accenture, ranked #1 on the 2023 CRN Solution Provider 500, has long invested in AI, with generative AI being a key part of its digital core and an even bigger and bolder enterprise-wide reinvention of the future. I believe it will be a great catalyst. Said.

“In fact, in a survey of global executives we completed just last week, 97% of executives said: [ generative] AI is transformative for businesses and industries, with 67% of organizations planning to increase their level of spending on technology prioritizing investments in data and AI,” she said.

Accenture’s approach to AI is similar to its approach to the cloud, with investments to take early leadership and position itself for future opportunities, Sweet said.

“Last week, we announced a $3 billion investment in AI, a major step forward in accelerating our clients’ reinvention journeys. This includes doubling to 80,000, including the expansion of the Advanced AI Center we opened today,” with over 1,600 generative AI experts. …and in all of this, we are committed to leveraging responsible AI to be the most trusted source of information to help our clients mitigate risk in driving value,” she said. rice field.

Sweet gave some examples of the more than 100 generative AI projects Accenture has sold over the past four months. A project to help a global broadcaster explore how generative AI can help drive audience engagement and growth through deeper, more personalized customer experiences. We are also partnering with chemical industry giant LyondellBasell to empower the enterprise with his data and analytics capabilities to help unlock new value.

“Companies come to us for help with strategies and business cases to understand where and how to apply AI. [generative] Specifically, AI is shaping the digital core, assessing which ecosystem partners and models to use, rewiring processes to be AI-driven, upgrading and retraining talent in new ways of working, Avoid risks and risks. Please be responsible and try,” she said. “In a nutshell, we believe our clients need our full range of services, and as companies move from exploration to experimentation to reinvention, we are the leading AI company they can rely on. We are in an advantageous position as partners.”

When asked by analysts on the Q&A conference call about how generative AI will affect Accenture’s managed services in the future, Sweet said a good way to think about it is to use the analogy of SaaS. I answered.

“You remember when we talked about what the opportunities are when SaaS comes along,” she said. “And there was a lot of worry about how SaaS would disrupt IT services. And obviously it was a big opportunity.”

Generative AI presents a huge opportunity for Accenture to help its clients as well as its own, Sweet said.

“In the context of managed services, at least 10% of [increase in] I’m more productive,” she said. “That’s why we talk a lot about platforms like myWizard. It’s all AI-enabled. Only in operation from the beginning of the year to now, we haven’t used it.” [gnerative] AI, we have automated 13,000 jobs and reskilled and redeployed those people.Our business model requires at least 10% productivity [increases] Year after year and year after year. We believe that generative AI is a capability that will continue to provide at least 10% productivity, as automation and AI are maturing before generative AI. [increase] All year long. “

Generative AI will also help drive automation in software development, especially around Accenture’s system integration and major transformation around its platform, Sweet said.

But Sweet cautioned that generative AI is still in its early stages as a technology, and that Accenture is currently doing a lot of experimentation with it.

“They’re very good for things like documentation, but they’re also great for complex integrations because you can use them for highly architected systems, which is what our big companies do. . [generative] AI doesn’t exist yet,” she said. “So it will take some time. I am asking for.”

That said, Sweet said Accenture is very much aware of the potential for generative AI to impact its service capabilities.

“I’m very excited about the new kinds of productivity that we’re getting, especially in things like consulting and systems integration, but it’s early days,” she said. “And we are aggressive because we see it as a huge opportunity for us to differentiate ourselves. That is why we are investing $3 billion over the next three years. We see this as something of a new cloud-first moment in which we started early and invested heavily.”

Steady Earnings, High Profitability

In his prepared remarks, Sweet noted that, despite the overall uncertainty, Accenture continued to invest heavily in its business, yet had very strong profitability and very strong free cash flow. The company said it achieved solid earnings and sales.

He said revenue was impacted by lower-than-expected small-deal sales, particularly in strategy and consulting and system integration, as well as lower-than-expected results in the quarter for telecommunications, media and tech industry groups. said he did.

Sweet said Accenture is on track with its business optimization activities to cut costs beyond fiscal year 2024. To help optimize that, the company made five strategic acquisitions this quarter. These include US-based Nextira, UK-based Objectivity, Norway-based Einr for cloud, data and AI capabilities, Brazil-based Green Domus for sustainability, That includes the acquisition of Australia-based Bourne Digital for its latest ERP services, she said.

Year-to-date, Accenture has invested $1.3 billion in acquisitions, primarily in 20 transactions.

Sweet said training is a key investment for Accenture.

“We continue to invest in employee learning, delivering 9 million hours of training during the quarter, equivalent to an average of 13 hours per employee and growing as customer needs evolve. We provide our employees with the skills,” she said. “We are very pleased that seven countries from Argentina, Brazil, Chile, India, Mexico, the Philippines and the United States have named our company among the top 10 best places to work. accounts for nearly 70%.”

analyze the numbers

Accenture reports revenue of $16.56 billion for the third fiscal quarter 2023, which ended May 31, up from $16.16 billion for the third fiscal quarter 2022 by approximately 2.5% .

According to Seeking Alpha, this exceeded analyst expectations by $80 million.

The company reported sales in North America of $7.72 billion, up slightly from $7.61 billion. European sales were $5.62 billion, up from $5.35 billion. Growth Markets revenue was $3.23 billion, up slightly from $3.19 billion.

Consulting revenue reached $8.69 billion in the quarter, down from $9.03 billion, while managed services revenue increased 10% to $7.87 billion compared to $7.13 billion a year ago bottom.

By industry, Accenture’s financial services revenue was reported to be $3.14 billion, up 2 percent. Health and public service revenues increased 12% to $3.23 billion. Product revenue increased 3 percent to $4.97 billion. Resource revenues were $2.31 billion, up 8%. However, telecoms, media and technology revenue fell 11% to $2.88 billion.

For the quarter, Accenture reported GAAP net income of $2.05 billion, or $3.15 per share. On a non-GAAP basis, Accenture reported net income of $2.07 billion, or $3.19 per share. That beat analysts’ non-GAAP estimates by 19 cents per share, according to Seeking Alpha.