ACN
#Yes, so that's a very good question, and I'm glad you asked it.
When you use the word core, just to level set everyone, you're referring to that portion of our business that is not in the roughly 40% we identify as in The New.
So you're talking about the 60%.
And I think the important point to make there, and <UNK> has made this point several times previously as well, is that our investment agenda, and our innovation agenda, covers the full scope of our business, including the 40% that we identify with The New and the 60% that we identify outside of The New.
So again, we have a very vibrant business, outside of that which we identify as being digital, cloud, or security.
So the point is that we do invest to maintain vibrancy in our core business and our goal, just as it is in The New, is to grow our core faster than the market, and take share.
If you look at the year that we just completed, we estimate that our core grew ---+ had positive growth, albeit in the single digit, low single digit range, as by design, the vast majority of our growth comes from new, which is the essence of our strategy.
But nonetheless, our core business continued to grow, and we estimate that it grew faster than the market and we took share.
And we invest for that growth, and we focus on it as a key part of our business.
An example of that would be something that, again, I think <UNK>'s referenced, Bhaskar Ghosh, who leads technology, has talked about this in different forums.
But an example of that would be the investment that we've made in our myWizard platform, which fundamentally reinvents, if you will, innovates around the way we do core application services work, through the use of an automated tool that includes an intelligent agent or agents, in the case of this tool, and really just helps us deliver application services work in a way that is more efficient and more effective.
When you look at, for example, some of the investments that we've made in our strategy and consulting business, while our strategy and consulting business is focused on The New, consistent with our strategy, there are parts of our strategy and consulting business that are not in that bucket that we call The New.
When you look at the investments that we make in that part of our business, for example, the acquisition that we just announced of Kurt Salmon, which gives us an industry-leading strategy capability in the retail sector, and really strengthens our position there.
Certainly a part of that investment benefits us in The New, but there's a part of that investment that is the core strategy capability in retail, that is part of the 60% that we benefit from, as well.
So we invest in both parts of the business, and in both cases, our intent is to be a leader, to grow faster than the market and take share.
Good question.
And I have to say thanks for not asking me the margin question first.
You'll ask it second, I'm sure.
<UNK>, what I would say is that when you look at the maturity curve for The New, and I think this applies to digital, it applies to each of the three components within digital that we talk about, analytics, mobility and Accenture Interactive, it applies to cloud adoption, and it applies to security.
I would say across the board, universally, we are on the low end of the curve, if you will, or to say it differently, we are in the early innings of the adoption curve.
These are ways that we think have a lot of runway in front of them.
Paul Daugherty would give you a more eloquent view, as our Chief Technology Officer ---+ our Chief Technology Strategist.
But I feel comfortable that he would say that certainly this is a decade-long, if not beyond a decade-long adoption curve for these new technologies, and really the profound impact that they will each have on the way global businesses and governments operate.
And so I would say we're early stage in the adoption, and this wave has a long runway in front of it.
Well, it's ---+ again, I think you have to look at ---+ you have to look at the fact that ---+ I want to make sure that in the way I answer that question, that I start with the fact that we feel very good about the momentum in our business, and we feel very good if we were ---+ within the range that we guided to, and that would represent, we think, market leading performance.
Now having said that, why would it be different.
And I don't want this to sound negative, because in fact, we're very positive.
But when you think about the quarter, and when you think about the operating groups and the industries that have had really extraordinary double-digit growth, in many cases, not only for the last year but for the last two years, right.
As confident as we are in many of our industries, as we sit here in the first months of the year, to assume that all of those industries and all of those geographic markets are going to continue at this same level of extraordinary double-digit growth for a third year in a row would just ---+ probably wouldn't be prudent.
Does that mean that we don't have confidence in our industries.
No.
Does that mean that our business runners aren't working hard every day to hit the repeat button, and do again what they've done the last two years.
Absolutely not.
But <UNK> and I have a responsibility to be balanced and prudent in the way we set our expectations externally, and that's what's reflected in our guidance.
And again, that's not to say that our guidance is conservative in any way, because we don't.
We think it's very good guidance in the context of the market growth, and it's entirely consistent with our strategy to be a leader, and grow faster than the market.
But if some of these industries have strong, but let's say lower growth, than they've had the last two years, then that would put us in the 5% to 8% range, and that is the possibility in several of our industries.
I'll start at the end and then work back.
What's driving that assumption is that we don't see anything as we sit here today that would fundamentally change the dynamics that we see in the market, let's say, as we look out over the next four quarters.
We see more of the same.
And what we see is an organic market that would continue to grow in that 2.5% range, which means that we are making our own market through our differentiation, the uniqueness of our strategy, leveraging the power of our investments, to drive a level of organic growth that is meaningfully higher than that to take share.
But we don't see anything that would meaningfully change that underlying organic growth of about 2.5%.
So in other words, we're not speculating on ---+ you pick your black swan of the day.
We're not speculating on some black swan event, that would materially change the market.
If that were to happen, all companies will be revisiting the impact of something like that, should it occur.
In terms of the ---+ again, I almost hate to use the word deceleration, because in almost all cases our growth ambitions for the vast majority of our verticals continue to be quite strong, and well above the market, albeit at lower levels than, in many cases the very, very strong double-digit growth we've had the last year, if not two years.
And so deceleration, what I would say for many of our verticals, we've assumed lower but still strong growth, is the way I would characterize it.
Energy and chemicals and natural resources, we don't see a catalyst for change.
We think those industries are going to continue to be tougher, let's say, continue to be tough as we go through the fiscal year.
As I mentioned, we have seen some pressure in communications, in Europe in particular.
And although we are very pleased with our growth in financial services and banking and capital markets specifically, I would say that is an industry that we are watching through Richard Lumb's leadership, we are watching very, very carefully and very closely.
Yes, so the 2% would align very closely to an assumption that we spend about $1 billion, which is what we've assumed in our capital allocation strategy, if you will.
Could it be higher.
As <UNK> and I have said, we have the willingness and the courage, if you will, and the capacity, the fire power, to spend more than $1 billion, should we have the right opportunities.
And if the right opportunities presented themselves, then we have no reservations, no concerns, and complete flexibility to go above $1 billion, if the circumstances were right.
And so, in theory could it go higher.
It could go higher, and we'll just have to see how the year plays out.
A lot of it has to do with the timing of when those would occur.
Did I miss anything.
On DSOs, we are managing to have our DSOs in the 40-day range.
We had been signaling that DSOs, really for many years, that our DSOs would tick up but still be industry-leading.
And right now we're assuming DSOs in the 40 day range for next year.
Just in terms of color, I would say that we are investing in talent acquisition, in literally in every major market that we have around the world.
When you look at our five businesses, you can connect the dots, and see where we have more ---+ higher growth, let's say, in strategy and consulting, as an example but not just limited to strategy and consulting, and digital, I might add.
Certainly a lot of that talent acquisition investment is in each of the markets that we operate in around the world.
I would also point out though that digital ---+ that GDN also supports, and is very integral, very integral to a big part of The New.
We are investing in differentiated skills, and obviously in cloud and in security, in digital, in the GDN as well.
But again, we will ---+ we're very comfortable with our ability to acquire talent, and to ramp that up, as we need to, as the market growth evolves throughout the year.
Just quickly, as we're running out of time, I would say that I can't comment on our competitors.
What I can say is that the resiliency ---+ let me back up.
A key tenet of our strategy, our growth strategy, is to create durability and resiliency in our business, and that is reflected in our focus across five businesses.
It's focused in our investments to lead in The New.
And it's focused in ---+ it's rooted in the focused but diverse portfolio that we have across industries, and across geographies.
And whereas maybe some of our competitors ---+ you can apply this to who you want ---+ are more dependent on one or two or three verticals in one or two markets, that's not the case with Accenture.
And that is, in fact, the differentiator, and probably colors our comments and our results versus some of our competitors, all of whom we respect, but yet we think we're differentiated, for the reasons that I mentioned.
Again, in addition to chemicals and energy and natural resources, we've got our eye on communications and Europe in particular, and while we haven't seen any impact at this point in banking and capital markets, we're not blind to the dynamics of Brexit and how it could evolve.
And Richard Lumb, who is our Group Chief Executive for Financial Services is very focused on staying on top of that, and we'll see how it plays out.
I would say so far, so good.
Thank you very much.
Okay, so let me just close out the call, and thank everyone again for joining us on the call.
Hope you found it helpful and insightful.
As we enter FY17, we're very pleased with the ongoing momentum in our business, with the differentiated capabilities we're building, our continued rotation to The New, and our disciplined management of the business.
We're very confident in our ability to continue gaining market share and driving profitable growth.
On behalf of <UNK> and our entire leadership team, I want to thank all Accenture people around the world for their hard work, dedication, and commitment to our clients and our business, and to delivering another excellent year.
We look forward to talking with you again next quarter.
In the meantime, if you have any questions at all, please feel free to reach out to <UNK>.
Thank you.
