GenAI: What Accenture got right, but Indian IT didn’t

Rising business from GenAI projects affirms how the IT services and consulting giant is gaining from the November 2022 launch of ChatGPT that made AI the biggest talking point in the technology world as a potential catalyst for disruptions in businesses.

“We continue to take an early leadership position in GenAI, which will be an important part of the reinvention of our clients in the next decade,” Accenture chair and chief executive officer Julie Sweet said in a post-earnings interaction with analysts on Tuesday.

If Accenture’s GenAI business continues to grow at the same rate, it could become a $4 billion business in the current financial year, an analyst said.

“The one bright spot is GenAI, with bookings of $450M in 1Q ($200M in 4Q23; $100M in 3Q). In our view, GenAI bookings could grow to over $4B in FY24, as projects scale,” Arvind Ramnani and John Nutt, analysts at investment firm Piper Sandler & Co. wrote in a note dated 19 December.

GenAI encompasses a wide range of technologies driving chatbots such as ChatGPT, and is capable of creating new forms of content including text, audio and video.

Accenture’s early gains in GenAI is in contrast to homegrown technology services giants such as Tata Consultancy Services Ltd, Infosys Ltd, and HCL Technologies Ltd which still struggle to define an AI roadmap, and do not share their earnings from the technology that many believe poses the biggest risk to the outsourcing industry.

Accenture, which follows a September-August financial year, reported $18.4 billion in order bookings in the first quarter, while revenue totalled $16.2 billion. This implies GenAI work is about 2.4% of total work at Accenture.

Order bookings for GenAI projects were about 0.6% of its $17.2 billion deal wins in March-May, and have picked up pace.

Understandably, many analysts are enthused with Accenture’s progress in GenAI, and consequently, how the firm is making itself future-proof.

“The growth (in GenAI) is impressive, and we think Accenture can hold a leading position in generative AI relative to the IT services industry with advantages in investment scale and relationships,” Keith Bachman, an analyst with BMO Capital Markets, wrote in a note dated 19 December. “Broadly speaking, we think generative AI bookings and revenues will start in Strategy & Consulting and shift to Technology and Operations business units over time as companies move more into the scale and execution phase rather than the experimentation phase.”

“The company also noted that while CY23 was a year of GenAI experimentation, CY24E would likely be a year of realizing value from it at scale,” wrote Nomura analysts Abhishek Bhandari and Krish Beriwal in a note dated 20 December.

“According to the company, implementation of GenAI is complicated and requires a digital core with cloud, matured data and modern ERP as it aims to take early leadership in GenAI.”

Accenture’s bet on AI emerges from its confidence in replicating the successes of its cloud journey. Earlier this year, the firm announced that it will invest $3 billion over three years for its data and AI practice.