Technology services and outsourcing company Accenture Inc. (ACN) recently disclosed that it has won a four-year $73.0 million contract from the U.S. Defense Logistics Agency (DLA). As per the contract, the company will restructure DLA’s energy supply chain into the enterprise business system (EBS).
Under this agreement, DLA’s energy supply chain business will be incorporated into Accenture’s enterprise resource planning (ERP) architecture, which the company introduced in 2000. Accenture will develop the SAP-based ERP architecture of DLA, and has already replaced two of DLA’s major legacy systems.
Accenture is evidently winning good business deals at regular intervals. Recently, the company secured a 3-year contract from Norwegian aluminum producer Norsk Hydro ASA. Financial details were not disclosed. Accenture will provide technical support and maintenance services globally to two of Norsk Hydro’s SAP systems. With these outsourced services, Norsk Hydro expects to maximize efficiency and cost effectiveness of its SAP systems, which will help the company serve its customers innovatively. The service will be provided to Norsk’s customers worldwide with the help of Accenture’s Global Delivery Network, through its operating centers in Germany and India. The services will be offered by October 2010.
Recent analyst opinion indicates that pricing in the IT services sector, including services such as IT infrastructure outsourcing, back-office outsourcing and offshore application development were hit hard in 2009, but remains stable in 2010. Many of the tech companies, including big players like Cognizant, expect the pricing environment to be stable during the second half of the fiscal 2010. This apart, the cost rationalization initiatives adopted by services firms such as Accenture also influenced the analysts to increase their margin expectations.
On the flip side, Accenture witnessed mediocre business flow during the first half, but enjoyed increased demand for offshore application work from its Indian clients.
We remain cautiously optimistic on Accenture, despite its poor top-line growth in the recent past. We think that the stable pricing environment is encouraging, particularly because of the stiff competition it faces. Further, although management expects revenue growth of 5% to 9% in the upcoming quarter, we believe this could be overly optimistic.
Under this agreement, DLA’s energy supply chain business will be incorporated into Accenture’s enterprise resource planning (ERP) architecture, which the company introduced in 2000. Accenture will develop the SAP-based ERP architecture of DLA, and has already replaced two of DLA’s major legacy systems.
Accenture is evidently winning good business deals at regular intervals. Recently, the company secured a 3-year contract from Norwegian aluminum producer Norsk Hydro ASA. Financial details were not disclosed. Accenture will provide technical support and maintenance services globally to two of Norsk Hydro’s SAP systems. With these outsourced services, Norsk Hydro expects to maximize efficiency and cost effectiveness of its SAP systems, which will help the company serve its customers innovatively. The service will be provided to Norsk’s customers worldwide with the help of Accenture’s Global Delivery Network, through its operating centers in Germany and India. The services will be offered by October 2010.
Recent analyst opinion indicates that pricing in the IT services sector, including services such as IT infrastructure outsourcing, back-office outsourcing and offshore application development were hit hard in 2009, but remains stable in 2010. Many of the tech companies, including big players like Cognizant, expect the pricing environment to be stable during the second half of the fiscal 2010. This apart, the cost rationalization initiatives adopted by services firms such as Accenture also influenced the analysts to increase their margin expectations.
On the flip side, Accenture witnessed mediocre business flow during the first half, but enjoyed increased demand for offshore application work from its Indian clients.
We remain cautiously optimistic on Accenture, despite its poor top-line growth in the recent past. We think that the stable pricing environment is encouraging, particularly because of the stiff competition it faces. Further, although management expects revenue growth of 5% to 9% in the upcoming quarter, we believe this could be overly optimistic.
Accenture currently has a short-term sell rating, equating to a Zacks Rank of #4.
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