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Published: Mar 24, 2023
Updated: Mar 24, 2023

Accenture Announces Layoffs and Revenue Cut as IT Spending Slows

IT services and consulting company Accenture has revealed its plans to cut 19,000 jobs, or 2.5% of its workforce, due to wage inflation and cost streamlining. The company expects to incur a severance cost of $1.2 billion. The decision comes as other technology-product firms, such as Meta, Google, Microsoft, and Amazon, have also announced layoffs.

Impact on India operations still uncertain

Accenture's India operations, one of the largest talent bases of the company, might face immediate repercussions, although the exact impact remains unclear. The company had reported having 300,000 employees in India, which constitutes around 40% of its total workforce.

Going after structural costs

Julie Sweet, Chair and CEO of Accenture, stated that the company is trying to go after structural costs to create resilience and room in the P&L as they move forward. She mentioned that they have been dealing with a difficult situation of compounding wage inflation and pricing, and they have been managing this with cost efficiency and digitization.

Hiring outlook for the next quarter muted

The company reported that while they continued to hire to support their strategic growth priorities, they had initiated action to streamline operations and transform their non-billable corporate functions to reduce costs. Accenture stated that their hiring outlook for the next quarter would be muted.

Reduced revenue guidance for the financial year

Despite the company reporting strong performance in Q2, it has reduced the higher end of its revenue guidance for the financial year. Accenture now expects annual revenue growth of 8-10% in fiscal 2023, compared to the previous projection of 8-11%.

Record new bookings for the quarter

Accenture reported record new bookings for the quarter at $22.1 billion, with consulting bookings of $10.7 billion and managed services bookings of $11.4 billion. The company rang up $244 million in business optimization costs during the second quarter and expects to record a total of approximately $1.5 billion through fiscal 2024.

Accenture's decision to cut jobs and reduce revenue guidance for the financial year indicates a sluggish global economic outlook that is sapping corporate spending on IT services. While demand for larger transformational deals remains strong, companies are focused on executing deals and maintaining the guidance levels.