Happy Holidays – Getting from Here to There in HRO

We had quite a winter storm in the Northeastern U.S. this past weekend, setting snow total records in many areas.

My family was due to drive to North Carolina on Saturday. My area in Pennsylvania only had about six inches of snow and our destination near Charlotte got even less. It was the in-between areas that were blasted with up to 24 inches of snow, causing accidents and stranding travelers far and wide. In the Virginia area we had to travel through, the National Guard was called out to rescue people from their stranded vehicles.

Luckily we were able to wait and travel home on Monday instead, and the roads were dry and clear. Yet we could see evidence of the storm’s aftermath, with many still buried cars and trucks and slashing scars in the snow for those already towed.

Just like many of the areas I drove through last weekend, we are still in the in-between in many HRO areas. For example, I listened to the 1Q10 Accenture earnings call last Thursday and it had evidence of both the in-between and the coming recovery. The actual results for the quarter were stormy, down 11 percent. (See the full earnings analysis in the NelsonHall Tracking Service.) While not hit as hard as consulting and systems integration, which was down 15 percent, outsourcing was still down four percent  reflecting continue pressure to reduce the cost of resources used, lower pricing and volumes. Number of outsourcing contract signings were up, but were generally smaller in size and scope. Overall bookings for the quarter declined five percent, which kept Accenture’s earnings guidance for 2010 to – three percent to + one percent.

When you have been through a record setting blizzard, you take good news where you can, and there were signs of better travel ahead in the Accenture results as well.

Bill Green, Accenture’s CEO, said they were “looking towards the future again,” and Pamela Craig, CFO, said the decline in consulting revenues had likely bottomed out. Why the end of year optimism? It was the pipeline! Bookings are the predictor of near-term revenue; the business is signed and will soon be generating revenue. The path to the longer-term future is the pipeline of potentials and prospects. Accenture’s pipeline is up significantly for the first time since the downturn began, up 20 percent over 1Q09 and the highest in six quarters.

This is consistent with the positive pipeline news we have heard from other HRO providers. My advice is be prepared as the road ahead is not yet dry and clear. Pipelines are like a travel reservation on hold; they are not actual tickets (bookings). And a ticket to ride is no guarantee that the trip will be easy or profitable once underway. But as Martha Stewart would say, it is “a good thing.”  

This holiday season, travel safely and look for and celebrate the good things around you.  See you in the New Year!

Linda Merritt, Research Director, HRO, NelsonHall

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