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Quest for cloud talent drives Accenture mergers and acquisitions

Accenture's pending acquisition of Cloud Sherpas aims to help the company quickly assemble cloud expertise and sharpen its vertical market focus. Other systems integrators have joined the hunt.

Accenture's recent move to purchase Cloud Sherpas will help the systems integrator (SI) more rapidly amass cloud talent and bolster its vertical market strategy.

That's the view of Saideep Raj, managing director of Accenture Cloud First Applications -- a newly formed unit that will focus on delivering services around cloud-based platforms, including Google, NetSuite, Salesforce, ServiceNow and Workday. Raj described the pending Cloud Sherpas acquisition, announced Sept. 15, as "one of the most significant in our company's history."

Raj said Cloud Sherpas will strengthen Accenture's Salesforce capabilities, while also extending the company's position in ServiceNow and Google for Work for enterprise clients.

"Talent is a key factor," Raj said, noting that with the addition of Cloud Sherpas, Accenture's cloud team will consist of more than 18,000 professionals, with more than 3,200 of that number focused on Salesforce alone.

Indeed, the need to rapidly amass cloud experts to meet rising customer demand drives not only Accenture's acquisition strategy, but also that of other large integrators and professional services firms. Earlier this month, Computer Sciences Corp. closed its acquisition of Fruition Partners, a transaction that expands its cloud service delivery footprint in the ServiceNow market. And on Monday, IBM announced plans to purchase Meteorix LLC, a company that offers consulting and integration services around Workday's cloud-based financial management and human capital management offerings.

We are entering a period of rapid market consolidation, as the large SIs seek to acquire skills and operational experience from the cloud-native SIs.
Katy Ringresearch director of cloud and IT services, 451 Research

Katy Ring, research director for cloud and IT services at 451 Research LLC, a New York-based IT research and advisory company, said the acquisitions are a sign of a shifting market, in which customers are beginning to pursue cloud deployments on a larger scale.

"The enterprise market is just entering the next phase of cloud delivery, where it is looking for larger, more integrated SaaS [software as a service] deployments, because they are quicker and more agile than extending existing on-premises application investments," Ring said. "Consequently, we are entering a period of rapid market consolidation, as the large SIs seek to acquire skills and operational experience from the cloud-native SIs."

Ring emphasized the importance of acquiring operational experience, noting that SaaS engagements differ from traditional app services. She said cloud-based projects are iterative, and call for more architects and fewer developers compared with an integrator's usual way of delivering services. Because of those differences, the big SIs need agents of change to help build this new approach internally, she added.

Hiring cloud talent

Acquisitions aren't the only path to cloud growth, however. Bozhidar Hristov, analyst in the Professional Services Practice at Technology Business Research Inc., based in Hampton, N.H., suggested that Accenture will actively recruit cloud talent and retrain employees, as well as obtain expertise via acquisition.

"Accenture will continue to hire in bulk and reskill its existing talent to maintain its cloud headcount expansion at a double-digit rate, well above the corporate headcount growth rate," Hristov said.

But as the IT services landscape shifts to the "as a service" model, the ability to capture top talent and market-relevant intellectual property at speed will help vendors differentiate themselves, Hristov noted. This situation will compel Accenture to "remain aggressive on the acquisition front," he said.

Overall, Accenture's cloud business has benefited from an aggressive "tuck-in acquisition strategy," in which Accenture has purchased 40 to 50 companies within the past three years, Hristov said. He said Accenture's recent acquisitions of Tquila and Solium have extended the company's cloud capabilities in Europe.

"The potential purchase of Cloud Sherpas will be larger than the company's typical acquisition targets, leading us to believe integration will take longer than the small tuck-ins that typically arm Accenture with IP," Hristov said. "However, we don't anticipate major hiccups with the integration," he said, noting that Accenture will apply expertise gained from previous purchases.

Vertical market push

The acquired cloud talent, meanwhile, will also contribute to the cloud application platform services Accenture provides for clients within particular vertical markets. Raj said Cloud Sherpas will help Accenture focus "on key industry verticals, such as consumer products, financial services, hospitality and communications."

Ring said this verticalized cloud strategy is in keeping with integrators' traditional go-to-market orientation.

"The SI community goes to market with vertical sector offerings, and so it is completely logical that they would seek to do this with cloud-delivered apps," Ring said. "This is the biggest opportunity for them and their SaaS partners to add value -- and margin -- above a standardized platform."

The vertical push, she noted, suggests that "we are moving to another level of market maturity," she said.

Accenture's cloud business generates more than $2 billion in revenue, according to information disclosed at the company's 2014 investor and analyst conference. That figure, while sizeable, represents a relatively small piece of Accenture's total revenue. Accenture reported revenue of $31 billion for its fiscal year ended Aug. 31.

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