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MOSL: TECHNOLOGY-Momentum intact – Takeaways from Accenture’s commentary

Technology: Momentum intact – Takeaways from Accenture’s commentary; Growth in outsourcing – a positive from Indian IT’s perspective

 

Appended below are key thoughts on the industry impressed on us following Accenture's 2QFY19 results and commentary:

• Demand trends holding up well…: Accenture's (ACN) revenue growth (+9% YoY CC v/s 9.5% in 1QFY19) and particularly order bookings in 2QFY19 are indicative of the sustained demand trends. Consulting order bookings registered book-to-bill of 1.2 while that for outsourcing deal bookings was 1.1x.
• …but potential macro risks may impact 'run the business' spend, and not digital: On the back of the 1HFY19 performance (9% YoY CC, 7.5% organic), the upper end of the company's full-year guidance is raised to 8.5% (7% organic). ACN had been citing the potential for some slowdown in overall economic growth toward the latter half of 2019. While that has not changed, volatility has been the new normal for several years. The pace of disruption in client-industries implies that companies cannot hit the pause button on the new, but can certainly double down on the cost-rationalization agenda.
• Outsourcing growth is a positive: Outsourcing grew 9% YoY CC, catching up with Consulting after six quarters. This bodes well for demand, not just in Digital but also in run-the-business services.