Accenture’s share price has dropped from $280 to below $120 within a year. The same pattern can be seen across Capgemini, Cognizant and many others in the technology consulting world. I have read lots of posts written by analysts, or by people who are not in the sector day to day, and I think they have it wrong. The reasons usually cited for this drop are:
- AI & automation: Investors are worried that the rise of generative AI will replace people and coding tasks with Claude Code and other tools.
- Global challenges : Clients are holding back on IT spending and deferring major, large-scale projects due to global conflicts.
- Government & corporate cuts: Major cuts to US public & private sector budgets.
Whilst these all maybe contributing factors, the many global conflicts are the only constant now, the federal and UK governments ebb and flow with spend & AI is nowhere near replacing human tasks at scale as we stand here now.
The Number 1 reason for me is; a huge shift in buyer habits. C-suite execs are simply not writing cheques for large transformation projects without a tangible link to value; they are asking their suppliers to link these projects to value or conduct smaller engagements to prove their hypothesis. This is pushing suppliers to become true partners and share some of the risk and reward. A trend towards smaller engagements that minimise the risk and where possible they link this work back to milestone payments linked to outcome and value.
This model does not suit a large consulting firm who relies on large long-term engagements, lots of people billable on time and materials and no incentives for measuring and delivering value quickly. I am not saying all consulting firms are finished, far from it. The way traditional consulting firms are set up does not put them in a good space for the next revolution of outcome-based contracts.
McKinsey delivers 25% of its work on an outcome-based approach. This is not a new concept, but doing it at scale is. It requires consulting firms to change their operating models, partner remuneration, hiring models and commercial agreements. These are all tough to change in large companies that have operated the same way for many years. Accenture and others will no doubt reinvent themselves, but it will be a tough journey requiring significant change from shareholders through to employees and partners.
esynergy uses small, pre-formed teams of SMEs to deliver our work. They are paid on outcomes and linked to value, whether social, political or economic. We are not perfect, but we have grown substantially over the last couple of years while many others have contracted, so demand for what we offer is growing. Accenture needs to look at pivoting towards outcomes and value at scale to create better value for its shareholders.
