12:24 PM
Bob Evans
Bob Evans

Global CIO: Accenture Should Start Buying—Here's A Shopping List

Where is it written that IT services companies have to sit back and wait to be acquired by IT product companies? Accenture has the power to reverse that trend and offer new value to CIOs.

Accenture's name has been bandied about this week as one of several potential IT-services takeover targets in the wake of the recent Dell-Perot and Xerox-ACS deals. But while the inclusion of Accenture in these roundups of the usual suspects is predictable, it's also downright foolish because Accenture is as much like those other acquisition targets as Tiger Woods is like Sergio Garcia: they may both be very fine professionals, but one has skills, capabilities, and proven performance that are simply vastly superior to the other's.

I say it's time Accenture became the hunter, rather than letting itself be herded among the hunted.

The trap we have set for ourselves by following conventional wisdom is this: IT hardware and software vendors are finding that CIO customers aren't buying as much IT stuff as they used to, so the vendors must move up the value chain into services. Ergo, IBM bought PriceWaterhouseCoopers, HP bought EDS, and in recent days Dell has bid for Perot and Xerox for ACS.

Global CIO
Global CIOs: A Site Just For You
Visit InformationWeek's Global CIO -- our new online community and information resource for CIOs operating in the global economy.

And so we think that as night follows day, IT product companies must buy services companies—and I'm sure some more of that will happen, and should happen. But where is it written that, if the desired outcome is IT products + IT services, that a world-class IT services company can't start buying up the vendors that make IT products?

The chief factor would be purchasing power and leverage—well, Accenture's got plenty of both: a recent Barron's article predicted that Accenture shares could double in three years. And going in the other direction, most potential buyers would find Accenture, with its annual revenue of about $24 billion and its current market cap of about $28 billion, about as tasty-looking and tempting as an alpha-male porcupine.

Some quick comparisons:

--Dell paid 1.5x revenue for Perot Systems. With Accenture's revenue of about $24 billion, that would come to a price tag of $36 billion. Plus, that's based on valuing Accenture the same way one would value Perot, which simply will not happen. Perot is a fine company and will be a huge asset for Dell, but it is not in the same league as Accenture—and almost no one is.

--Dell is bidding a premium of about 67% for Perot's shares. An equivalent premium on top of Accenture's $28 billion market cap would push the purchase price up close to $46 billion.

--Xerox is offering a 34% premium for ACS shares—at that level of sweetener, Accenture would go for about $37 billion, assuming it would value itself as ACS values itself. But, as is the case with Dell and Perot, that simply does not reflect reality.

--Accenture has nine times the revenue of Perot and about 3.5 times the revenue of ACS, and it operates on a very different level in the engagements it wins, the connections it has, the brand equity it holds, and the market impact it creates.

Accenture is a premium global brand, and I think it's time Accenture presented a very different model to the global business community that is lulled into thinking that the food chain in the IT business always has the product vendors holding the knife and fork, and services companies always lying nervously on the plate. After all, Accenture didn't get to be Accenture by doing the same things the same way as everybody else does them.

So I've put together a little shopping list for Accenture to help it step comfortably into its new role as Hunter instead of the hunted. The companies below make this list not because they need to be acquired; quite the opposite. They've made this list because they're doing powerful and unique things for clients and are stepping into vital new areas that defy the constipated three-letter-acroynm universe pushed relentlessly by IT consultancy firms that not so coincidentally happen to offer subscription services built around three-letter-acronym categories, whether or not those slices still reflect reality.

And besides, if I'm going to recommend that Accenture start The Next Big Thing, it wouldn't be fair to recommend that it pair up with a bunch of also-rans, would it? So no, the companies on this list are dynamic and strong ones that could, in combination with the new Accenture as Hunter, revitalize and energize this business and give CIOs a new sense of the enhanced value that customer-focused IT partners can deliver.

Here we go:

--Informatica A premier data-integration player that helps everybody's software play with everybody else's software, and its expertise extends beyond tradtional ERP-type stuff into the hot new world of cloud computing. And a hunter's got to be a leader.

--Tibco Middleware, SOA, deliverer of real-time capabilities, Tibco is another highly gifted company whose products and services deliver the capabilities that Accenture will be looking to optimize.

--SuccessFactors The fast-growing public company's new strategy is around optimizing business execution—know any companies that aren't interested in that? And business execution is a huge part of the brand promise Accenture would offer.

--iRise This creator of the visualization category has an extraordinary list of global corporations on its client list as its products and services offer better ways to plan and execute extensive software projects. Could Accenture offer anything of higher value than that?

--Polycom Outstanding company and outstanding management in the soon-to-explode unified communications and telepresence fields. Polycom and its CEO Bob Haggerty offer better ways to enhance communication and business results, and that's what Accenture clients will expect.

--Fortify Software Unique approach to securing enterprise applications in ways that don't just lock out the bad guys but also extend business capabilities, and in this crappy economy Fortify says quarterly revenue grew 60%. CIOs are struggling with getting out ahead of security issues, and Accenture could, uh, fortify those efforts.

Not all "computer" companies are created the same—and in fact, there are no "computer" companies left. Oracle is redefining what a "software" company is, and we've seen the same type of innovative deconstruction take place in the traditional networking space, and security, and storage, and more. Leading examples are Cisco and EMC, both of which have moved aggressively and profitably into new areas offering greater value to customers.

In that context, it's time to stop looking at the world of IT services as if it's fixed and frozen back in 1998, with the inevitable outcome being that all services companies are the add-ons. Some are and that's fine, but not all. And the facts show that Accenture is in a position to shake up our preconceptions.

And remember: this isn't just about IT vendors and IT service companies. The larger message—the enduring message—is that nothing is written in stone; our futures are what we choose to make of them. And if in creating our future we choose to follow the conventional wisdom, we should not be surprised if we deliver conventional outcomes: average, predictable, unexceptional and low-reward.

Don't sit back, folks, and wait for your competitors to put you on the plate and prepare to stick a fork in you while deciding what part of you to attack first with the knife.

Make your own future. See the world in fresh ways through the eyes of your customers and the opportunities they offer.

Always be on offense. Be the Hunter, and pursue the hunted.

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Email This  | 
Print  | 
More Insights
Copyright © 2021 UBM Electronics, A UBM company, All rights reserved. Privacy Policy | Terms of Service