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Accenture to Buy Phase One, Boost Salesforce Capabilities
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Moving ahead with its cloud first strategy, Accenture Plc (ACN - Free Report) recently entered into an agreement to acquire Alexandria-based Phase One Consulting, a cloud computing and digital services provider. However, financial terms of the transaction have not been disclosed.
Founded in 1997, Phase One offers Salesforce-based IT services and software solutions, mainly focused on federal market. Its services and solutions help federal agencies in modernizing and digitizing.
The company is currently owned by private equity firm – RLJ Equity Partners – which had acquired it in Jan 2015. Its strong hold in the federal market attracted investments from the venture capital arm of Salesforce.com Inc. (CRM - Free Report) , Salesforce Ventures in September last year.
Post completion of the acquisition, Accenture intends to integrate under its Accenture Federal Services subsidiary. We believe that the recent acquisition will not only strengthen the company’s Salesforce capabilities, but will also help it in gaining more and more federal contracts, thereby boosting its top-line performance.
Growing through acquisitions is an integral part of the company’s growth strategy. However, the market did not react much to the latest buyout. Nonetheless, shares of Accenture have outperformed the Zacks categorized Consulting industry in the year-to-date period. The stock has gained 8.1% compared with the industry’s gain of 6.6%.
Salesforce Capabilities Expansion Impressive
Since 2014, Accenture has been aggressively trying to fortify its position as a leading provider of Salesforce capabilities. The recent agreement is the company’s seventh acquisition in the Salesforce space, while this will be its first federal market acquisition related to Salesforce.
Notably, Accenture is already a global leader in the Salesforce implementation service space, with currently over 3,700 skilled consultants. Moreover, given that Salesforce is one of the largest providers of cloud-based applications and software, it is imperative that Accenture enhances its capabilities in delivering the former’s services.
Industry Forecasts Justify Strategy
The company’s strategy of enhancing its cloud capabilities through such acquisitions is a step in the right direction, as evident from the latest forecast provided by several independent research firms. According to Gartner, the SaaS and cloud-based business application markets are likely to grow from $38.6 billion in 2016 to $46.3 billion in 2017, reflecting a year-over-year growth rate of approximately 20%. Also, the research firm forecasts that the market will double by 2020 from the 2016 level.
Another research firm, International Data Corporation (IDC), predicts that the cloud software market will witness a compounded annual growth rate (CAGR) of 18.3% during the 2014–2019 period, reaching $112.8 billion by 2019 end.
Exponential growth in the amount of data, complexity of data formats and the need to scale resources at regular intervals compelled several companies to turn to cloud-computing vendors. Therefore, considering the growing need for cloud-based applications and software, we expect Accenture’s investments in this space to propel long-term growth.
Bottom Line
We are encouraged by Accenture’s strategy of growing through acquisitions. These buyouts have enabled the company to foray into newer markets, diversify and broaden its product portfolio, and maintain a leading position. We believe that regular acquisitions will significantly contribute to the company's revenue stream.
Nonetheless, Accenture’s announcement of creating 15K new jobs by 2020 and investment plan of $1.4 billion for employee training and opening of 10 innovation centers across the U.S. cities may dent its bottom-line results in our opinion. Furthermore, increasing competition from peers and an uncertain macroeconomic environment may deter its growth to some extent.
Currently, Accenture carries a Zacks Rank #4 (Sell).
A couple of stocks worth considering in the broader technology sector are Applied Optoelectronics, Inc. (AAOI - Free Report) and NV5 Global Inc. (NVEE - Free Report) . While Applied Optoelectronics sports a Zacks Rank #1 (Strong Buy), NV5 Global carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both, Applied Optoelectronics and NV5 Global, have long-term expected EPS growth rate of 20%.
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy...
Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early.
Image: Bigstock
Accenture to Buy Phase One, Boost Salesforce Capabilities
Moving ahead with its cloud first strategy, Accenture Plc (ACN - Free Report) recently entered into an agreement to acquire Alexandria-based Phase One Consulting, a cloud computing and digital services provider. However, financial terms of the transaction have not been disclosed.
Founded in 1997, Phase One offers Salesforce-based IT services and software solutions, mainly focused on federal market. Its services and solutions help federal agencies in modernizing and digitizing.
The company is currently owned by private equity firm – RLJ Equity Partners – which had acquired it in Jan 2015. Its strong hold in the federal market attracted investments from the venture capital arm of Salesforce.com Inc. (CRM - Free Report) , Salesforce Ventures in September last year.
Post completion of the acquisition, Accenture intends to integrate under its Accenture Federal Services subsidiary. We believe that the recent acquisition will not only strengthen the company’s Salesforce capabilities, but will also help it in gaining more and more federal contracts, thereby boosting its top-line performance.
Growing through acquisitions is an integral part of the company’s growth strategy. However, the market did not react much to the latest buyout. Nonetheless, shares of Accenture have outperformed the Zacks categorized Consulting industry in the year-to-date period. The stock has gained 8.1% compared with the industry’s gain of 6.6%.
Salesforce Capabilities Expansion Impressive
Since 2014, Accenture has been aggressively trying to fortify its position as a leading provider of Salesforce capabilities. The recent agreement is the company’s seventh acquisition in the Salesforce space, while this will be its first federal market acquisition related to Salesforce.
Notably, Accenture is already a global leader in the Salesforce implementation service space, with currently over 3,700 skilled consultants. Moreover, given that Salesforce is one of the largest providers of cloud-based applications and software, it is imperative that Accenture enhances its capabilities in delivering the former’s services.
Industry Forecasts Justify Strategy
The company’s strategy of enhancing its cloud capabilities through such acquisitions is a step in the right direction, as evident from the latest forecast provided by several independent research firms. According to Gartner, the SaaS and cloud-based business application markets are likely to grow from $38.6 billion in 2016 to $46.3 billion in 2017, reflecting a year-over-year growth rate of approximately 20%. Also, the research firm forecasts that the market will double by 2020 from the 2016 level.
Another research firm, International Data Corporation (IDC), predicts that the cloud software market will witness a compounded annual growth rate (CAGR) of 18.3% during the 2014–2019 period, reaching $112.8 billion by 2019 end.
Exponential growth in the amount of data, complexity of data formats and the need to scale resources at regular intervals compelled several companies to turn to cloud-computing vendors. Therefore, considering the growing need for cloud-based applications and software, we expect Accenture’s investments in this space to propel long-term growth.
Bottom Line
We are encouraged by Accenture’s strategy of growing through acquisitions. These buyouts have enabled the company to foray into newer markets, diversify and broaden its product portfolio, and maintain a leading position. We believe that regular acquisitions will significantly contribute to the company's revenue stream.
Nonetheless, Accenture’s announcement of creating 15K new jobs by 2020 and investment plan of $1.4 billion for employee training and opening of 10 innovation centers across the U.S. cities may dent its bottom-line results in our opinion. Furthermore, increasing competition from peers and an uncertain macroeconomic environment may deter its growth to some extent.
Currently, Accenture carries a Zacks Rank #4 (Sell).
A couple of stocks worth considering in the broader technology sector are Applied Optoelectronics, Inc. (AAOI - Free Report) and NV5 Global Inc. (NVEE - Free Report) . While Applied Optoelectronics sports a Zacks Rank #1 (Strong Buy), NV5 Global carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Both, Applied Optoelectronics and NV5 Global, have long-term expected EPS growth rate of 20%.
3 Top Picks to Ride the Hottest Tech Trend
Zacks just released a Special Report to guide you through a space that has already begun to transform our entire economy...
Last year, it was generating $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for those who make the right trades early.
Download Report with 3 Top Tech Stocks >>