Accenture Wins 5-Year BPO Deal - Analyst Blog

Recently, Accenture plc (ACN) announced that it had been awarded a 5-year business process outsourcing (BPO) contract by Norwegian energy company Statoil ASA (STO) to provide the latter with financial management services.

As per the terms of the agreement, Accenture will reengineer Statoil’s Accounts Payable processes with its Global Delivery Network. Accenture expects the delivery of its outsourcing services to begin in September 2010.

We believe that the successful completion of the project will help Accenture to win more deals from the energy sector, which is a relatively new market for the company. However, we remain unclear about the financial impact of the deal on Accenture’s revenue stream as economic details were not disclosed.

In the current economic environment, businesses need to be able to respond to changing market conditions, which require prompt actions with limited resources. Hence, organizations look for third party service providers who can carry out routine functions on their behalf, leaving the organizations free to focus on their core responsibilities. This has resulted in rapid growth of outsourcing across the world.

We feel that with the continuous delivery of skills, experience and efficiencies through its outsourcing services over the past few years, Accenture is well positioned to win large outsourcing deals.

Additionally, Accenture has had some success across different industrial sectors. Last month, Accenture won a seven-year application outsourcing agreement with Aviva's property claims repair service department, Asprea. As per the terms of this agreement, Accenture will provide application and infrastructure outsourcing services for Aviva’s buildings claims division in the U.K.

Last year, Accenture won a 7-year outsourcing contract from Scandinavian Airlines for providing financial management services. We look forward to seeing Accenture playing a key role in the aviation sector with the help of its subsidiary Navitaire, which provides technological support to more than 75 airlines worldwide.

Accenture operates in over 120 countries with about 181,000 employees globally. The company delivers a wide range of consulting, technology, and outsourcing services to its clients in industries such as communications, high tech, financial services, public service, products and resources.

Accenture reported an unexciting second quarter, with EPS of 60 cents missing the Zacks Consensus Estimate of 61 cents and revenue declining by 2.1% compared to the year-ago quarter.

Despite improving trends noticed in Accenture’s businesses, we prefer to remain cautious until the revenue growth rate accelerates. Moreover, we believe that the recent economic turmoil in Europe could considerably rationalize Accenture’s growth prospects.

We maintain a short-term Hold recommendation (Zacks #3 Rank) on Accenture.
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