Accenture will cut 19,000 jobs as it comes to terms with a slowdown in IT spending and rising inflation. News of the redundancies comes despite the consultancy company’s quarterly revenues growing.
Announcing the news yesterday, CEO Julie Sweet said the layoffs would be made at the business’s teams around the world over the next 18 months, and will predominantly affect corporate staff, rather than those in client-facing roles.
One of the world’s largest consultancies, Accenture provides professional and managed IT services to its clients, which number 9,000 globally. It employs 738,000 people, 10,000 of which are in leadership roles.
Why is Accenture making job cuts?
Sweet told investors on the company’s earnings call yesterday that it was taking “offensive” action to ensure the business would be in good shape moving forward. She said the tech sector slowdown, which has seen some of the industry’s biggest names cut thousands of jobs, has impacted spending on Accenture’s services.
She added that, like many businesses, Accenture has “been dealing with the challenges of compounding wage inflation,” adding: “We’ve been doing that with pricing, but we’ve also been doing that with cost efficiencies and digitisation and we’ve identified an opportunity to go after structural cost.”
Accenture weathered the Covid-19 pandemic well compared with many of its peers and has grown headcount rapidly in recent years.
Between 2020 and 2021 it added 118,000 staff as it put a growing focus on the cloud, launching a new $3bn business unit, Cloud First, in October 2020. Sweet said at the time that businesses were at "a new inflection point that requires every company to dramatically accelerate the move to the cloud.”
Since then the war in Ukraine and rising interest rates, and inflation, around the world have slowed spending on cloud and other IT projects. Nonetheless, Accenture's revenue has held up, and yesterday it reported year-on-year income growth of 5%, bringing in $15.8bn in the three months to the end of February. Its managed services division, which covers cloud and other IT infrastructure provisions, saw income leap 12% to $7.5bn, but consultancy revenue was down 1%, to $8.3bn.
Consultancies are starting to feel the pinch
Layoffs across tech have become commonplace in recent months - Amazon announced 10,000 new redundancies earlier this week - and consultancy companies, which work with these businesses and other companies on tech projects, are also starting to trim their workforces accordingly.
Last month McKinsey said it would be letting 2,000 people go. Its overall workforce is 45,000. Meanwhile, KPMG is making 700 redundancies in the US and 200 in Australia, mostly from its advisory business. This represents about 2% of the total staff working in each country.
Experts say that while these companies remain profitable, the period of rapid growth spurred by the pandemic has come to an abrupt end. “The market is still buoyant but we’re in a period of steady growth, rather than the hypergrowth that accompanied the post-pandemic deals frenzy,” Kevin Ellis, UK chair of PwC, told the FT last month.