Accenture, an Irish-American IT consulting company, announced its plans to cut 19,000 jobs worldwide last week as it seeks to reduce costs amid a gloomy economic outlook.
In a quarterly statement filed with the Securities and Exchange Commission on March 23, the company said it will cut 2.5% of its workforce of approximately 738,000 people.
The layoffs will take place over the next 18 months and the majority of the job losses will be back-office roles, according to the company’s filing.
It will continue to hire new employees but has initiated actions to streamline its operations and transform its non-billable corporate functions to reduce costs.
The move will cost roughly $1.2 billion in severance pay, with an additional $300 million allocated to consolidate Accenture’s office spaces.
Accenture has downgraded its revenue growth outlook for the 2023 fiscal year from 8% and 11% to 8% and 10%, per The Wall Street Journal.
Accenture CFO KC McClure said during the Q2 2023 earnings call that revenue growth for its communications, media, and technology group came in flat in local currency, whereas an increase of 12% in local currency was logged in Europe.
CEO Julie Sweet explained that this was due to North American clients becoming more cost-cautious. Despite having “record sales this quarter,” business in North America “[tended] towards the bigger transformational deals, not the smaller S&C [strategy and consulting] and to some extent, SI [systems integration] deals.”
Sweet identified compounding wage inflation as an ongoing challenge for the company.
Wages increased 2.7% in 2021 and another 4.7% in 2022, per the U.S. Bureau of Labor Statistics. Wage inflation is expected to fall between 4 and 5% for the year 2023, per Fortune.
Nonetheless, Sweet suggested during the call that Accenture’s wide range of offerings has helped it perform relatively well during this challenging time.
“[The] diversity of our business really plays to our strength and [this is] why we’re continuing to deliver strong financial results,” Sweet explained.
Shares in Accenture rose by 3.9% to reach $263 per share in early trade following the layoff announcement, per the WSJ. But the New York-listed stock is down by more than 5% over the past year.
The impact of the current economic challenges is not limited to Accenture alone.
Accenture’s rivals are also making efforts to cut their costs. KPMG, another consulting giant, announced a reduction of its U.S.-based workforce last month by nearly 2%.
Overall, the tech industry has seen a huge number of layoffs these past few years.
In 2023, a total of 544 tech companies worldwide have released 157,688 employees, per Crunchbase. Despite it still being early in the year, this number has almost reached the total of layoffs tallied in 2022, which was 161,411.
Facebook’s parent company Meta announced that it would reduce its headcount by 10,000, as The Dallas Express reported. It had already released 11,000 employees back in November.
The recent rise seen in recent months is due to the pullback in advertising and consumer spending caused by higher interest rates, inflation, and recession fears.
The outlook for IT workers — including those soon to be let go by Accenture — isn’t too gloomy.
“What we are seeing is still a big demand for IT skills,” Ray Wang, founder and principal analyst at IT consulting firm Constellation Research Inc., told the WSJ.
“While Accenture is managing to its shareholders, there are a large number of firms with 20% to 30% attrition that are happy to pick up folks from Accenture,” Wang added.