Global consulting firm Accenture has reduced its workforce by more than 11,000 employees over the past three months as part of a major restructuring effort. The company is focusing on adapting its workforce for the era of artificial intelligence, warning that staff who cannot be retrained for new skill sets will be asked to leave.
The job reductions are part of an $865 million program designed to manage costs and maintain profit margins amid slowing demand for some consulting services. The company's total headcount fell from 791,000 to 779,000 between June and August.
Key Takeaways
- Accenture's global workforce decreased by over 11,000 in a single quarter.
- The company is implementing an $865 million restructuring plan, with most costs related to severance.
- CEO Julie Sweet stated employees who cannot be retrained for AI-related skills will be exited.
- Accenture projects slower revenue growth of 2-5% for the upcoming fiscal year.
- Despite the cuts, the company reported $5.1 billion in new bookings from generative AI projects.
Details of the Workforce Reduction
Accenture confirmed the significant reduction in its global staff as it navigates a challenging economic environment. The layoffs, which began earlier in the year, are scheduled to continue until the end of November.
The financial impact of this restructuring is substantial. According to the company, it incurred $615 million in severance payments and related costs in the most recent quarter. An additional $250 million is projected for the current three-month period, bringing the total cost to $865 million.
During a call with analysts, Chief Executive Julie Sweet explained the company's strategy. She stated that the firm is moving to reduce roles where reskilling is not considered a viable option for the future skills required by the business.
"We are exiting on a compressed timeline people where reskilling, based on our experience, is not a viable path for the skills we need," Sweet said.
Maintaining Financial Targets
These cost-cutting measures are intended to help Accenture achieve its long-standing financial goals. The company announced it expects to continue expanding its operating profit margins by at least 10 basis points in the next fiscal year. This target had been a point of concern for some analysts given the broader industry slowdown.
Market Headwinds
For nearly two years, many corporations have become more cautious about hiring consultants for shorter-term projects. While demand for large-scale digital transformation remains strong, the hesitancy in other areas has impacted firms like Accenture. The company's latest actions reflect a broader industry trend of adjusting to shifting client demands.
The Strategic Shift to AI
While reducing its overall headcount, Accenture is aggressively investing in artificial intelligence. The company's leadership has made it clear that AI is central to its future growth strategy. This dual approach involves trimming roles that are becoming obsolete while expanding its talent pool in high-demand areas like data science and AI.
The investment in AI is already showing results. Accenture reported that new bookings from generative AI projects reached $5.1 billion in the past fiscal year. This is a significant increase from the $3 billion reported in the previous year, highlighting rapid client adoption of AI technologies.
AI Workforce Growth
Accenture's focus on AI is reflected in its internal talent development. The company now employs 77,000 skilled AI or data professionals, nearly doubling the 40,000 it had in this field just two years ago.
CEO Julie Sweet emphasized that upskilling remains the company's primary strategy. Despite the current layoffs, she indicated that Accenture's total headcount is expected to grow again in the coming year as it hires and trains for these new roles. "We are investing in upskilling our reinventors, which is our primary strategy," she noted.
Financial Performance and Future Outlook
Accenture reported steady financial results for the fiscal year ending in August. The company's revenues grew by 7% to reach $69.7 billion, while net income increased by 6% to $7.83 billion. However, the outlook for the year ahead is more cautious.
The company projects that its revenue growth will slow to a range of 2% to 5% in the new fiscal year. This moderated forecast reflects both the sluggish corporate demand for certain projects and a specific challenge in the public sector.
Impact of US Government Spending Cuts
Accenture stated that its revenue forecast would have been one percentage point higher without a clampdown on spending by the U.S. federal government. The U.S. government has historically represented about 8% of Accenture's total revenue.
A government-wide cost-saving initiative, reportedly influenced by Elon Musk under the Department of Government Efficiency, has led to the cancellation of existing IT contracts and increased scrutiny of spending on consultants. This, combined with layoffs across government agencies, has slowed the procurement process and impacted revenue streams for contractors like Accenture.
Following the announcements, Accenture's shares experienced a modest decline of 1.5% in early trading, reflecting investor reaction to the restructuring news and the conservative growth forecast.