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Crisis: Accenture puts expansion on hold

Ravi Menon in Bangalore | March 23, 2009 09:44 IST

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Consulting and tech outsourcing services firm, Accenture, is keeping on hold its expansion plans in Bangalore and Chennai, according to informed sources.

The company is said to be cutting back on recruitment for its consulting and services divisions and postponing expansion as it struggles to cut costs in a worsening global economic climate. Accenture employs around 40,000 people in India.

The company has deferred plans to add 200,000 square feet of space at its Chennai operations on Old Mahabalipuram Road, considered as the city's IT corridor, according to a real estate source familiar with the development. "It may add just about 400 people to its operations in Chennai but it is significant that despite rentals in the area falling marginally since October last year, Accenture is concerned about propping up its operating margins," the source said.

An Accenture spokesperson did not reply to questions seeking comment despite repeated attempts to contact the company.

The space was to have been added as part of the company's plans to expand its operations, but the pre-lease agreement fell through on anticipation of higher expenditure and decreasing business from key clients in the North American region who were to be serviced out of the proposed facility, sources added.

As its accounts in the BFSI and manufacturing sectors in India came under severe margin pressure in the quarter ended December 31, 2008, Accenture is also known to have cancelled plans to hire 100-120 people for its premier consultancy division.

"We were supposed to start hiring for Accenture's consultancy arm, which provides key value-adds to six different business verticals of the company, starting January this year. It is March now and we have still not seen any moves from Accenture in this direction," said the CEO of a staffing firm tasked with handling the recruitment needs of MNC clientele like Accenture, IBM, Honeywell [Get Quote] and Oracle.

Accenture has been having its share of troubles at home also. The Fortune Global 500 company has announced its decision to lay off 10 per cent of its US staff by the end of March this year. The $25.3-billion Accenture currently employs more than 186,000 people in 52 countries.

The company does not disclose revenues from its Indian operations. However, Business Standard reported earlier this month, citing Registrar of Companies figures, that Accenture's consultancy arm posted a net loss before tax of Rs 18.6 crore (Rs 186 million) for the year ending March 31, 2007, and Rs 48.8 crore (Rs 488 million) in the previous year.


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