Accenture Lay Off: Global IT firm to fire 19,000 employees
After the announcement of Amazon’s impending 9,000 job layoffs, another major international corporation has revealed plans to fire 19,000 of its staff. International company, Accenture, joined the sacking trend on Thursday by announcing that it would reduce its staff by 19,000 employees
Accenture started taking steps to decrease costs during the second quarter of fiscal 2023 by streamlining operations, modernizing non-billable corporate functions, and consolidating office space.
The move marks the first major layoff announcement by a large IT services company this year.
With this, Accenture joins the ranks of Big Tech companies, including Alphabet, Amazon, Meta, and Microsoft, all of which have announced about 70,000 job cuts since January amid fears a global recession will affect growth.
Accenture’s decision to let go of employees, for now, could be a sign of worry for engineers at homegrown technology services firms, including Tata Consultancy Services Ltd, Infosys Ltd, and HCL Technologies Ltd, which until now have avoided any company-wide layoffs.
Accenture does not spell out the exact number of employees it has in India and only says it has a workforce of more than 300,000. But Mint learns about 47% of its global workforce or about 350,000 employees are stationed in the country.
During the company’s latest December-February quarter, Accenture added a net of 424 employees to take its total workforce to 7,38,143. This is the slowest pace of net employee addition in 10 quarters after the company saw its workforce decline by 7,496 people during the June-August quarter of 2020.
“These actions are expected to impact roughly 2.5% or 19,000 of our current workforce, of which over half are non-billable corporate functions and include over 800 of our leaders across our markets and services,”
Accenture’s chief financial officer K.C. McClure said. “Nearly half of the 19,000 people will depart by the end of FY23.” “During the past two years, almost half of the new hires were made in India. So, we can expect to see anywhere between 2% and 2.5% of our India-based employees getting impacted because of these actions,” an executive said on the condition of anonymity.
“The people impact is estimated to be 2.5% of our current global workforce. This may differ by market and by country, as a consequence of our different footprint and growth, and should not be taken as a figure applicable to all geographies,” said a spokesperson for Accenture, declining to comment on what percentage of its employees in the country will be impacted.
In the last 10 quarters, i.e. From 1 September 2020 up until 28 February, Accenture added 232,410 employees.
On Thursday, Accenture, which follows a September-August financial year, reported tepid earnings as some of its clients in the communications, technology, and media industry cut back work.
Revenue grew 5.1% from the year-ago period to end with $15.81 billion in the December-February quarter, the slowest business growth in over 10 quarters. Accenture last reported a 3.5% year-over-year growth in the September-November period of 2021.
At the heart of Accenture’s underperformance is soft growth in its consulting business, which accounts for about 52% of total revenue. During times of a slowdown, clients, from big banks to large retailers, first cut down on any transformational work, thereby impacting the likes of large consulting work undertaken by firms like Accenture and EY.
During the latest quarter, consulting revenue totaled $8.28 billion, a 1% decline from the year-ago period. Clients from communication, technology, and media accounted for $2.88 billion in revenue, a 4% decline from the December-February period last year.
Operating margin slipped 140 basis points from 13.7% in the year-ago period to 12.3% in the latest quarter, although the company expects to have full-year profitability between 14.1% and 14.3% in the year ended August 2023.
The website, Layoffs. Yi, which keeps track of tech job cuts, says 517 companies and startups globally have let go of 152,858 people in the first three months of 2023.
Analysts, for now, continue to maintain most homegrown IT giants will continue to hire fewer people instead of going for large-scale layoffs.
“Our channel checks don’t suggest that anything significant has changed since the companies declared third-quarter earnings. So, we will be surprised if any of the large firms announce any company-wide layoffs,” said a Mumbai-based analyst at a foreign brokerage.
Many expect demand to pick up in the next 12–18 months. “The collapse of Silicon Valley Bank, Signature Bank, and the merger of Credit Suisse/UBS due to liquidity concerns have brought uncertainty to banking tech budgets. Company commentaries on the BFSI sector have started to become more cautious.
Banking is a key vertical with a revenue mix of 15–35% across our coverage,” Rahul Malhotra and Sanjit Shinde, analysts at Alliance Bernstein, wrote in a 22 March note.
“We expect growth recovery in H2FY24 and growth to even out on a two-year cycle. The digital transformation led by the cloud still remains a multi-year trend and will help sustain double-digit growth momentum in the medium term. We don’t see the current banking crisis as a GFC-like contagion when revenue growth for IT companies decelerated by 15+ QoQ ppt and valuations declined to all-time depressed multiples (5–10x).”
During the December quarter, TCS saw its sequential headcount decline by 2,197, while Wipro Ltd.’s workforce declined from 259,179 at the end of 30 September to 258,744 at the end of 31 December, a drop of 435.
Tech Mahindra Ltd, the fifth largest technology services firm, saw its headcount shrink, sequentially, by 6,844, the largest ever quarter-over-quarter reduction in the workforce at a large IT services firm in the last two decades.
Meta also recently announced the layoff of 10,000 more employees in the name of saving money. The company had already fired 11,000 workers earlier this year, claiming that it is doing so on the basis of performance and that this will also save money for the betterment of the firm. Facebook’s parent company also stated that the move is also because of the slower growth and reduction in revenue because of the economic downturn.