Accenture In The Cloud

| About: Accenture plc (ACN)

The Accenture (NYSE:ACN) Cloud Platform will assist clients in getting the most business value from cloud computing. The company is investing $400 million globally over the next two and a half years in cloud technologies. This will allow the company to provide the right cloud services to its clients from its network of vendors. An increasing number of businesses are going digital and as technology trends like mobile increase, Accenture will use the cloud initiative to provide further support to businesses making this transition.

According to industry analyst firm IDC, the total market size for cloud will grow from approximately $40 billion in 2012 to $98 billion in 2016. This includes projections for software as a service (SAAS) to reach $37 billion, infrastructure as a service (IaaS) to reach $30 billion, system infrastructure software as a service to reach $20 billion, and platform as a service (PAAS) to reach $10 billion by 2016.

According to Jack Semple, Global Senior Managing Director of Accenture's cloud initiative:

We are not doing data centers, nor are we creating horizontal solutions, or becoming a CRM provider. Instead, this is about integrating those kinds of offers together. So we're going toward a platform that does self-service cataloging with provisioning. Everything will be pre-integrated and pretested by us before we offer it.

Our intention is to move up the stack as time goes on so that we can reach further into business processes. So we will make more announcements as time goes on, as we roll out additional enhancements and new services to be offered on the platform. Over the course of time, we intend to push more deeply into critical business services, which are really industry aligned solutions, and our intent is to use the platform to enhance our service capabilities and our software solutions over the long term.

Accenture realizes that cloud computing is the way of the future. The company has already worked on over 4000 cloud projects for its clients. Half of the Fortune Global 100 have used Accenture cloud services. Currently, Accenture has 6,700 employees trained in cloud-related services working on 200 projects using Accenture's Cloud Platform.

Why Accenture's Cloud Initiative Is Exciting

Accenture aims to be the provider of choice as more and more companies transition to the cloud. Accenture's strategy is to be an independent advisor to their clients and integrate across other company's platforms. The company currently has agreements with 25 different cloud providers including Amazon (NASDAQ:AMZN), Cisco Systems (NASDAQ:CSCO), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), (NYSE:CRM), Netsuite (NYSE:N), and VMware (NYSE:VMW).

What this allows for is that customers no longer have to deal with different software vendors. They can sign up with Accenture and Accenture will customize according to the client's needs. Accenture is offering its customers a prebuilt and customizable cloud brokering platform. This helps to minimize the IT governance and integration headaches that commonly occur with multiple providers.

In effect Accenture is becoming a cloud broker. Accenture aims to provide its clients with full access to all providers. Accenture's role will be in managing it all seamlessly.

Outlook For Accenture Stock

Last quarter's earnings report from Accenture was mixed. The company reduced its forecast for revenue growth on the back of sluggish corporate spending. European corporate spending is particularly slow for Accenture. Accenture forecasts that its revenue growth will be below the midpoint of its prior forecast of 5 to 8 percent growth for the year ending August 31. In the second quarter consulting revenue fell by 1 percent to $3.8 billion. Outsourcing revenue was however up 9 percent to $3.3 billion.

A bright spot for the company is that booking trends are coming in strong. New bookings for this year are expected to come in at the high end of the $31 billion to $34 billion forecast. Current bookings for the second quarter were $4.4 billion, up from $4.05 billion last year.

Accenture reiterated its full-year forecast of $4.24 to $4.32 per share in earnings. The average earnings estimate from analysts is $4.26 per share. Of the analysts that follow the stock, 7 have it rated as a Strong Buy, 8 a Buy, and 11 a Hold. The target price on the stock ranges from $72 to $88 with $80 being the median target. I'm bullish on the stock over the long-term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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