) is a major player in technology consulting where it competes with
the likes of IBM (
), HP (
) and Deloitte Consulting. Through a large number of skilled
technology consultants, Accenture helps its clients to develop and
implement customized IT strategies to gain maximum benefits from
their IT investments.
We recently updated our
Trefis price estimate for Accenture to
, which is slightly ahead of the market price. We estimate that the
firm's three main business - outsourcing, technology consulting and
management consulting - make up 30%, 24% and 26% of the firm's
equity value respectively.
Accenture's Business Segment Comparison
In order to come up with the contribution of Accenture's 3 main
business segments to the firm value we have compared the segments
for drivers like headcount, headcount utilization, bill rate per
hour and EBITDA margin.
Headcount, which represents the total number of employees
available in a particular division for handling projects, is one of
the main drivers for Accenture's business segments. It determines
the number of projects Accenture could work on at any given point
Accenture's outsourcing business (including infrastructure,
application and business process outsourcing) is by far the most
important segment for the firm by headcount. With nearly 118K
employees, the outsourcing segment makes up 62% of Accenture's
total billable headcount.
The headcount of technology consulting and management consulting
businesses on the other hand are significant lower making up only
14% and 9% respectively of the firm's total billable headcount. The
total billable headcount represents the number of employees whose
services are charged on an hourly basis from the clients and does
not include 15K enterprise employees (involved in firm's internal
Utilization is the average ratio of headcount working on a
project at a given time averaged over the year, i.e. number of
employees being utilized versus the total headcount available to
Accenture. The outsourcing business in general has had higher
utilization rates then consulting.
In 2010, however, utilization was lowest for outsourcing
business at 80% compared to technology consulting and management
consulting which had a utilization of 84%. The lower utilization
for outsourcing in 2010 actually accounts for significant hiring in
the segment in 2010 which resulted in lower average billable hours
per professional. We have kept our average billable hours per
professional constant for the sake of consistency and accounted for
the decrease by reducing the utilization for outsourcing
Going forward, we expect the utilization for the outsourcing
business to be higher than that of consulting businesses.
Bill Rate per Hour
The bill rate per hour represents the average rate per hour that
Accenture charges its clients for its consultants/professionals
working on a project. The bill rate per hour has historically been
highest for management consultants followed by technology
consultants and outsourcing professionals as is also the case
We expect this trend to continue going forward.
Historically, the EBITDA margin has been the highest for
Accenture's management consulting segment followed technology
consulting and outsourcing respectively. We expect this trend will
continue in the future as well.
If we take the above in summary, outsourcing has the highest
headcount and utilization (except in 2010) and is the most valuable
business segment for Accenture despite its lower margin. Management
consulting has a higher bill rate and EBITDA margin than technology
consulting for Accenture despite having a lower headcount than
making it the second most valuable.
See our full analysis of Accenture