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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended August 31, 2002
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 000-49713
ACCENTURE SCA
| Luxembourg |
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98-0351796 |
| (State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
1 rue Guillaume Kroll
L-1882 Luxembourg
(Address Of Principal Executive Offices)
(352) 26 42 35 00
(Registrant’s Telephone
Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Class I common shares, par value €1.25 per share
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
The aggregate market value of the common equity of the Registrant held by non-affiliates of the Registrant on October 29, 2002 was approximately $8.7 billion, based on the
closing price of the Accenture Ltd Class A common shares, par value $0.0000225 per share, reported on the New York Stock Exchange on such date of $16.75 per share, for which the Registrant’s Class I common shares, par value €1.25 per
share, are redeemable.
The number of shares of the Registrant’s Class I common shares, par value €1.25
per share, outstanding as of October 29, 2002 was 909,729,115 (which number does not include 48,816,504 issued shares held by subsidiaries of the Registrant).
Portions of the Annual Report on Form 10-K of Accenture Ltd, the general partner of the Registrant, filed on November 8, 2002, are incorporated by reference in Part III.
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| Part I |
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| Item 1. |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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| Part II |
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| Item 6. |
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| Item 8. |
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| Item 9. |
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| Part III |
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| Item 14. |
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| Part IV |
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PART I
Overview
Accenture is one of the world’s leading management consulting and technology services organizations. We had approximately $11.6 billion of revenues before
reimbursements for the fiscal year ended August 31, 2002. As of August 31, 2002, we had more than 75,000 employees based in over 110 offices in 47 countries delivering to our clients a wide range of consulting, technology and outsourcing services.
We operate globally with one common brand and business model designed to enable us to serve our clients on a consistent basis around the world. We work with clients of all sizes and have extensive relationships with the world’s leading
companies and governments.
Our business consists of using our industry knowledge, our service offering expertise
and our insight into and access to existing and emerging technologies to identify new business and technology trends and formulate and implement solutions for clients under demanding time constraints. We help clients around the world identify and
enter new markets, increase revenues in existing markets and deliver their products and services more effectively and efficiently.
Management Consulting and Technology Services and Solutions
Our management consulting and
technology services and solutions business is structured around five operating groups (formerly referred to as global market units), which together comprise 18 industry groups. Our industry focus enables our professionals to provide business and
management consulting, technology and outsourcing services with an understanding of industry evolution, business issues and applicable technologies, and ultimately to deliver solutions tailored to each client’s industry. Two capability groups,
Business Consulting and Technology & Outsourcing, support the operating groups and provide access to the full spectrum of business and information technology solutions. Our capability groups comprise service lines and solution units: service
lines are responsible for developing our knowledge capital, world-class skills and innovative capabilities, and solution units — which are either Accenture affiliate companies or separate groups within Accenture — are
responsible for creating, acquiring and managing certain key assets that are central to our delivery of innovative solutions to clients.
Client engagement teams typically consist of industry experts, service line and solution unit specialists, and professionals with local market knowledge. Our client teams are complemented by professionals in our delivery
centers, part of our strategic delivery capability, who help us capture replicable components of methodologies and technologies to create tailored solutions for clients quickly, predictably and cost-effectively.
Operating Groups
The following table shows the organization of our five operating groups and their 18 industry groups.
| Operating Groups |
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| Communications & High Tech
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Financial
Services
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Products
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Resources
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Government
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| Ÿ Communications Ÿ Electronics & High Tech Ÿ Media & Entertainment |
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Ÿ Banking Ÿ Capital Markets Ÿ Health Services Ÿ Insurance |
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Ÿ Automotive Ÿ Industrial Equipment Ÿ Pharmaceuticals & Medical Products Ÿ Retail & Consumer Ÿ Transportation & Travel Services |
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Ÿ Chemicals Ÿ Energy Ÿ Forest Products Ÿ Metals & Mining Ÿ Utilities |
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Ÿ Government |
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Communications & High Tech
We are a leading provider of management and technology consulting, business transformation outsourcing and new-business development
services and solutions to the communications, high technology and media and entertainment industries. We offer services that help our clients exploit and stay ahead of major technology and industry trends, including mobile technology, enterprise
services, advanced network optimization, systems integration services, customer care and workforce transformation, and we help our clients exploit the opportunities presented by the convergence of new technologies. We have also established research
facilities that study how new technologies can be applied in new and innovative ways.
Our Communications &
High Tech operating group comprises the following industry groups:
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Communications. Our Communications industry group serves many of the world’s leading wireline, wireless, cable and
satellite communications companies. We provide a wide range of services designed to help our communications clients increase margins and market share, improve customer retention, increase revenues, reduce overall costs and accelerate sales cycles.
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Electronics & High Tech. Our Electronics & High Tech industry group serves the aerospace, defense, electronics,
high technology and network communications industries. This industry group provides services in areas such as electronic commerce and strategy and supply chain management. |
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Media & Entertainment. Our Media & Entertainment industry group serves entertainment (television, music and movie),
print and publishing companies. Professionals in this industry group provide a wide array of services, including digital content solutions designed to help companies effectively manage and distribute content across numerous channels.
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Financial Services
Our Financial Services operating group focuses on the growth opportunities created by our clients’ need to adapt to changing market conditions, including increased
cost pressures, industry consolidation, regulatory changes, the creation of common industry standards and protocols, and the move to a more seamless and interconnected industry model. We help clients meet these challenges through a variety of
offerings, including outsourcing strategies to increase cost efficiency and transform businesses, and customer-relationship-management initiatives that enable them to acquire new customers, retain profitable customers and improve their cross-selling
capabilities.
Our Financial Services operating group comprises the following industry groups:
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Banking. Our Banking industry group works with traditional retail and commercial banks, diversified financial enterprises
and a variety of niche players and innovators. We help these organizations develop and execute strategies to target, acquire and retain customers more effectively, expand product and service offerings, comply with new regulatory initiatives, and
leverage new technologies and distribution channels. |
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Capital Markets. With a reinvention of the securities industry underway, our Capital Markets industry group helps
investment banks, broker/dealers, asset management firms, depositories, clearing organizations and exchanges improve operational efficiency and transform their businesses to remain competitive. |
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Health Services. Our Health Services industry group serves integrated health care providers, health insurers, managed care
organizations, biotech and life sciences companies and policy-
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making authorities. We are helping our clients in the health plan and health insurance area in North America accelerate their business by connecting consumers, physicians and other stakeholders
through electronic commerce. In Europe, we are helping create new connections between governments, physicians and insurers. As of September 1, 2002, we began transitioning the Health Services industry group to the Products operating group in
recognition of the increasing synergy between the healthcare and pharmaceutical industries. |
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Insurance. Our Insurance industry group helps property and casualty insurers, life insurers, reinsurance firms and
insurance brokers improve business processes, develop Internet insurance businesses and improve the quality and consistency of risk selection decisions. Our Insurance industry group has also developed a claims management capability that enables
insurers to provide better customer service while optimizing claims costs. |
Products
Our Products operating group comprises the following industry groups: Automotive, Industrial Equipment,
Pharmaceuticals & Medical Products, Retail & Consumer, and Transportation & Travel Services. As of September 1, 2002, we began transitioning the Health Services industry group to the Products operating group in recognition of the
increasing synergy between the healthcare and pharmaceutical industries.
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Automotive. Our Automotive industry group works with auto manufacturers, suppliers, dealers, retailers and service
providers. Professionals in this industry group help clients develop and implement solutions focused on customer service and retention, channel strategy and management, branding, buyer-driven business models, cost reduction, customer relationship
management and integrated supplier partnerships. |
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Industrial Equipment. Our Industrial Equipment industry group serves the industrial and electrical equipment, construction,
consumer durable and heavy equipment industries. We help our clients increase operating and supply chain efficiency by improving processes and leveraging technology. We also work with clients to generate value from strategic mergers and
acquisitions. Our Industrial Equipment industry group also develops and deploys innovative solutions in the areas of channel management, collaborative product design, remote field maintenance, enterprise application integration and outsourcing.
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Pharmaceuticals & Medical Products. Our Pharmaceuticals & Medical Products industry group serves pharmaceuticals,
biotechnology, medical products and other industry-related companies. With knowledge in discovery, development, manufacturing, supply chain, and sales and marketing issues, we help companies identify and exploit opportunities for value creation,
such as reducing the time it takes to develop and deliver new drugs to market through process improvements and implementation of technology. Our Pharmaceuticals & Medical Products industry group also helps clients integrate new discovery
technologies, realize the potential of genomics and biotechnology, become more patient-centric and create new business models that deliver medical breakthroughs more rapidly. |
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Retail & Consumer. Our Retail & Consumer industry group serves a wide spectrum of retailers and consumer goods
companies, including supermarkets, specialty premium retailers and large mass-merchandise discounters, as well as food, beverage, tobacco, household products, cosmetics and apparel companies. This industry group adds value to companies through
innovative service offerings that address, among other things, new ways of reaching the retail trade and consumers through precision consumer marketing, maximizing brand synergies and cost reductions in mergers and acquisitions, improving supply
chain efficiencies through collaborative commerce business models, and enhancing the efficiency of their internal operations. |
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Transportation & Travel Services. Our Transportation & Travel Services industry group serves clients in the
airline, freight transportation, third-party logistics, hospitality, gaming, car rental, passenger rail and travel distribution industries. We help clients develop and implement strategies and solutions to improve customer relationship management
capabilities, operate more-efficient networks, integrate supply chains, develop procurement and electronic business marketplace strategies and more effectively manage maintenance, repair and overhaul processes and expenses.
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Resources
Our Resources operating group serves the energy, chemicals, utilities, metals, mining, forest products and related industries. With market conditions driving energy companies to seek new ways of
creating value for shareholders, deregulation fundamentally reforming the utilities industry and yielding cross-border opportunities, and an intensive focus on productivity and portfolio management in the chemicals industry, we are working with
clients to create innovative solutions that are designed to help them differentiate themselves in the marketplace and gain competitive advantage.
Our Resources operating group comprises the following industry groups:
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Chemicals. Our Chemicals industry group has significant resources in Europe, Asia, Japan and the Americas and works with a
wide cross-section of industry segments, including specialty chemicals, industrial chemicals, polymers and plastics, gases and life science companies. We also have long-term operations contracts with many of the industry leaders.
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Energy. Our Energy industry group serves a wide range of companies in the oil and gas industry, including upstream,
downstream and oil services companies. We help clients create cross-industry synergies and operational efficiencies through our multi-client outsourcing centers, forge alliances to advance integrated industry solutions, build and enhance trading and
risk management operations, and exploit new business technologies. |
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Forest Products. The Forest Products industry group helps our clients in the pulp and paper business achieve improvements
in business performance. We also help our Forest Products clients use electronic commerce and the Internet to drive incremental value. |
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Metals & Mining. Our Metals & Mining industry group serves metals industry companies located in the world’s
key mining regions, including North America, Latin America, South Africa, Australia and South East Asia, working with clients in areas such as electronic commerce, including procurement, supply-chain management and customer service.
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Utilities. Our Utilities industry group works with electric, gas and water utilities around the world to respond to an
evolving and highly competitive marketplace. Our work includes helping utilities transform themselves from state-owned, regulated local entities to global deregulated corporations, as well as developing diverse products and service offerings to help
our clients deliver higher levels of convenience and service to their customers. These offerings include trading and risk management, supply chain optimization and customer relationship management. |
Government
As the world’s largest employers, governments face the challenge of improving the efficiency of their service delivery by creating new citizen-centric business models that harness the power of new technologies. Our Government
operating group works with government agencies in 22 countries, helping them transform to meet the demands of citizens and businesses. We typically work with defense, revenue,
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human services, justice, postal, education and electoral authorities, and our clients typically are national, provincial or state-level government organizations, and to a lesser extent, cities
and other local governments.
We advise on, implement and in some cases operate government services, enabling our
clients to use their resources more efficiently and to deliver citizen-centric services. We are also working with clients to transform their back-office operations, build Web interfaces and enable services to be delivered over the Internet. And, as
governments are pressed to do more with less, Accenture is introducing innovative contract models from the private sector that are becoming increasingly popular with governments.
Capability Groups
Our two capability groups,
Business Consulting and Technology & Outsourcing, are the innovation engines through which we develop and deliver a full spectrum of services and solutions that address business opportunities and challenges common across industries. Together,
our two capability groups comprise eight service lines and five solution units. Our service lines are responsible for developing our knowledge capital, world-class skills and innovative capabilities. As of August 31, 2002, more than 8,000 Accenture
professionals were dedicated full-time to specific service lines, helping to develop knowledge and assets for clients across all of the industries we serve. These subject matter experts complement the approximately 54,000 professionals working
within our operating groups who apply their knowledge of specific service lines to clients within specific industry groups.
Through our solution units we develop asset-based scalable solutions that can be offered to multiple clients, often incorporating the capabilities of our service lines, alliance partners and affiliates. Our solution units, which are
either Accenture affiliate companies or separate groups within Accenture, are responsible for creating, acquiring and managing key assets that are central to our delivery of innovative solutions to clients. The five solution units within the
capability groups serve clients across multiple industries. We also have solution units that are dedicated to specific industries; these are managed through the respective operating groups.
Business Consulting Capability Group
Our Business Consulting capability group comprises five service lines and three solution units. The five Business Consulting service lines are Strategy & Business Architecture, Customer Relationship Management, Supply Chain
Management, Human Performance and Finance & Performance Management. Our three Business Consulting solution units are Accenture HR Services, Accenture Learning Solutions and Accenture Finance Solutions.
Strategy & Business Architecture
The professionals within our Strategy & Business Architecture service line work with individuals at the highest levels of our clients’ organizations on their most crucial strategy and
information technology issues. To help clients unlock new sources of value, we provide a wide array of strategic planning and design services and advise clients on significant decisions relating to corporate governance, post-merger and acquisition
integration, information technology organization and governance, marketing strategy and other transformational issues. In addition, our professionals analyze current and emerging market trends to help clients identify new business opportunities.
Customer Relationship Management
Professionals in our Customer Relationship Management service line help companies increase the value of their customer relationships and enhance the economic value of their
brands to acquire new
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customers and retain existing ones. We offer a full range of capabilities that have positioned us as a pioneer in the reinvention of marketing and customer relationship management. These include
proprietary approaches to improving the return on marketing investments, innovative methods for uncovering insight into customers’ purchasing preferences and habits and tailoring products and services based on that insight, and sophisticated
techniques for integrating information so that it is available to customers at any point of interaction. Together with our alliance partners, we bring in-depth skills to our clients, helping them create superior customer experiences and enhance the
value of their customer relationships.
Supply Chain Management
We help clients gain competitive advantage by working with them to optimize their supply chains and build networks to facilitate
collaboration with suppliers and business partners. Professionals in our Supply Chain Management service line are dedicated to developing innovative approaches to solve supply chain problems across a broad range of industries. This includes
designing more-efficient procurement processes, optimizing product planning, strengthening supplier relationships, and streamlining product development cycles. In addition, our Supply Chain Management service line uses its expertise in areas such as
strategic sourcing, manufacturing strategy and operations, and logistics to provide strategic advice and technology solutions that leverage the Web for procurement, fulfillment and product design.
Human Performance
The professionals in our Human Performance service line help our clients solve human performance issues that are crucial to their operational success, including recruiting and motivating key employees and management. Our
integrated approach provides human resources, knowledge management, learning and performance management solutions that increase the efficiency and effectiveness of our clients’ employees and operations, while reducing recruiting and training
costs. Professionals in our Human Performance service line, who work closely with professionals in the Accenture Learning Solutions and Accenture HR Service solution units, help companies and governments reduce employees’ time to competency,
increase knowledge retention, lower the costs of administering complex training content, and manage multiple learning delivery vehicles and vendors.
Finance & Performance Management
The professionals in
our Finance & Performance Management service line work with our clients’ key financial managers, including chief financial officers, treasurers and controllers, to support management of and reporting by finance departments. Among the
services we provide are strategic consulting with regard to the design and structure of the finance function, particularly post-merger or acquisition, and the establishment of shared service centers for streamlining transaction processing. Our
professionals, who often leverage the resources of Accenture Finance Solutions, work with financial executives to develop and implement solutions that help them align their companies’ investments with their business objectives, use the Internet
to manage the treasury functions, and establish security around the exchange of information to reporting institutions. Our services also address pricing and yield management, billing, credit, lending and debt recovery.
Accenture HR Services (formerly e-peopleserve)
Launched in August 2000 as an Accenture affiliate, our Accenture HR Services solution unit is a provider of outsourced human resources services, which it delivers through
self-service tools such as
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Web-based technology, Accenture HR Services’ network of resources service centers, and counseling from skilled caseworkers. Often working closely with professionals in our Human Performance
service line and in Accenture Learning Solutions, Accenture HR Services offers efficient, secure, integrated human resources services across the employee lifecycle, from recruitment and payroll to pensions, providing large organizations with more
efficient and effective human resources management systems.
Accenture Learning Solutions
Accenture Learning Solutions draws on Accenture’s extensive experience with enterprise-wide workforce performance
transformation, including the capabilities of professionals in our Human Performance service line and Accenture HR Services solutions unit; the strength of our business processing outsourcing capabilities; our internal training and knowledge
management solution, myLearning; and the expertise of our Indeliq affiliate, which develops scalable performance simulation electronic learning applications. Professionals in this solution unit work with companies and governments to provide
outsourced transformational learning solutions that reduce employees’ time to competency, increase knowledge retention, lower the costs of administering complex training content, and manage multiple learning delivery vehicles and vendors.
Accenture Finance Solutions
Accenture Finance Solutions provides outsourced financial management services to help clients streamline financial management, improve working capital and cash flow, and
deliver permanent cost savings from operational activities. Professionals in this solution unit, who work closely with the professionals in our Finance & Performance Management service line, provide finance operations, applications management,
financial accounting and management reporting services, helping clients transform their finance organizations from internal cost centers to client-focused service providers. We also leverage our global network of Accenture delivery centers to bring
our high-volume transaction processing capabilities and extensive experience in financial shared services to enhance clients’ service capabilities.
Technology & Outsourcing Capability Group
Our
Technology & Outsourcing capability group comprises three service lines and two solution units and also manages our more than 100 alliances with technology companies. The three Technology & Outsourcing service lines are Technology Research
& Innovation, Solutions Engineering and Solutions Operations. Our Technology & Outsourcing solution units are Avanade and Accenture Technology Infrastructure Services.
Technology Research & Innovation
Professionals in our Technology Research & Innovation service line research, invent and commercialize cutting-edge business solutions using new and emerging technologies. We continually identify and dedicate significant resources
to the new technologies that we believe will be drivers of our clients’ growth and sources of first-mover advantage by enabling clients to be first to market with a unique capability or service offering. The Technology Research & Innovation
service line includes Accenture Technology Labs, a dedicated technology R&D organization within Accenture.
Solutions Engineering
Professionals in our Solutions Engineering service line design,
build and deploy complex industry-specific, reusable and scalable solutions that typically integrate business processes, technology and
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human performance components. Among other things, they maintain and enhance our methods and practices for building technology-based solutions in an efficient and predictable manner. We have
expertise and capabilities in a wide range of areas, including electronic commerce infrastructure, security, enterprise resource planning, enterprise application integration, data warehousing and pre-packaged business solution delivery.
Solutions Operations
Our Solutions Operations service line provides a range of outsourcing solutions for managing technology infrastructure, applications and business processes. This service
line is also our primary source of strategy and capability for executing initiatives in transformational outsourcing, which is the term we coined to describe Accenture’s combination of outsourcing, consulting and other capabilities to help
clients improve key business functions and achieve significant, sustainable improvements in enterprise-level performance. We are differentiated in our delivery of outsourcing services through our creation of solutions that help transform the way
industries work and our ability to combine industry, technology and functional expertise with outsourcing capabilities. In addition, we are expanding our outsourcing capabilities through a variety of shared-service solutions, including customer
information, billing systems, information technology services, supply chain management and human resources administration.
Avanade
Our Avanade solution unit, which is also an Accenture affiliate, focuses on
large-scale technology integration surrounding Microsoft’s enterprise platform. Combining Microsoft’s understanding of operating platforms and technologies with our experience in delivering solutions to our clients, Avanade capitalizes on
the advanced capabilities of the Microsoft Windows and .NET platforms to build customized, scalable solutions for complex electronic business and enterprise infrastructure. With development centers in Europe, Asia-Pacific and the Americas, Avanade
delivers secure, reliable, scalable Microsoft-based solutions to help large global companies optimize their technology investments.
Accenture Technology Infrastructure Services
Our Accenture Technology
Infrastructure Services solution unit combines Accenture-owned and -operated capabilities with select products and services from our preferred supplier network to design, develop and deliver an end-to-end set of IT infrastructure services. The
solution unit utilizes a global network of delivery assets and capabilities to enable Accenture’s transformational outsourcing strategy.
Alliances
Alliances are central to our strategy, our client service business, and the way
we deliver value to our clients. We have more than 100 alliances with established and early-stage technology companies whose capabilities complement our own, either by enhancing a service offering, delivering a new technology, or helping us extend
our services to new geographies. By combining our alliance partners’ products and services together with our own capabilities and expertise, we create innovative, high-value business solutions for our clients.
Due to the highly focused nature of these business relationships, some alliances are specifically aligned with one of our eight service
lines, adding skills, technology and insights that are applicable across many of the industries we serve. Other alliances extend and enhance our offerings specific to a single industry group. Our alliances help us to deliver innovative solutions far
faster than we — or any other company — could do alone.
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Almost all of our alliances are non-exclusive. While individually none of our
alliances is material to our business, overall our alliance relationships generate revenue for us, primarily in the form of consulting services to implement the alliance-based business solutions.
Strategic Delivery Capability
Our global
strategic delivery approach emphasizes quality, reduced risk, speed to market and predictability. Our ultimate goal is to deliver to clients price-competitive solutions and services that create value. One of our key strengths is our ability to
create and capture replicable components of methodologies and technologies, which we can customize to create tailored solutions for our clients in a cost-effective manner and under demanding time constraints. Our global network of delivery centers
— facilities where teams of Accenture professionals use proven methodologies and existing assets to create business solutions for clients — enhances our ability to capitalize on our vast array of methodologies, tools and technology to
deliver value to our clients. Client teams use these centers to complete comprehensive, effective and customized implementations in less time than would be required to develop solutions from the ground up. Our delivery centers improve the efficiency
of our engagement teams through the reuse of solution designs, infrastructure and software, and by leveraging the experience of delivery center professionals. Reuse also increases solution longevity and reduces technology risks and application
maintenance.
Affiliates
We may form a new business, sometimes with one or more third parties, to develop a capability that we do not already possess. We call these businesses affiliates. If an affiliate provides a service or
solution across many industries, it serves as a solution unit or part of a solution unit within one of our capability groups. If an affiliate provides a service or solution specific to only one industry, it may serve as a solution unit within one of
our operating groups. These entities can rapidly advance a particular opportunity by building upon our global platform of clients, professionals and business expertise. Our affiliates include Avanade, Accenture HR Services, Imagine Broadband,
Indeliq and Navitaire. Avanade focuses on large-scale technology integration surrounding Microsoft’s enterprise platform. Accenture HR Services (formerly e-peopleserve) is a provider of outsourced human resources services. Imagine Broadband
provides interactive broadband solutions and platform implementation to cable, satellite and telecommunications network operators worldwide. Indeliq develops scalable performance simulation electronic learning applications based on our patents and
technology, which we contributed to the company. Navitaire provides airlines with reservations, ticketing and revenue management services.
Avanade, Accenture HR Services, Imagine Broadband, Indeliq and Navitaire are consolidated in our financial statements and headcount. Individually none of our affiliates is material to our business.
Research and Innovation
We are committed to developing leading-edge ideas. We believe that research and innovation have been major factors in our success and will help us continue to grow in the future. We use our investment in research to help create,
commercialize and disseminate innovative business strategies and technology. Our research and innovation program is designed to generate early insights into how knowledge can be harnessed to create innovative business solutions for our clients and
to develop business strategies with significant value. We spent $252 million, $271 million and $235 million on research and development in fiscal years 2000, 2001 and 2002, respectively, primarily through our operating groups and our capability
groups to develop market-ready solutions for our clients. We also promote the creation of knowledge capital and thought leadership through the Accenture Technology Labs and the Accenture Institute for Strategic Change.
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Accenture Organizational Structure
Accenture SCA, a Luxembourg partnership limited by shares, is a subsidiary of Accenture Ltd. Accenture Ltd is a Bermuda holding company with no material assets other than
Class I and Class II common shares in Accenture SCA. Accenture Ltd’s only business is to hold these shares and to act as the sole general partner of Accenture SCA. Accenture Ltd owns a majority voting interest in Accenture SCA. As the general
partner of Accenture SCA and as a result of Accenture Ltd’s majority voting interest in Accenture SCA, Accenture Ltd controls Accenture SCA’s management and operations and consolidates Accenture SCA’s results in its financial
statements. Accenture operates its business through subsidiaries of Accenture SCA. Accenture SCA reimburses Accenture Ltd for its expenses but does not pay Accenture Ltd any fees.
Prior to our transition to a corporate structure in fiscal 2001, we operated as a series of related partnerships and corporations under the control of our partners. In
connection with our transition to a corporate structure, our partners generally exchanged all of their interests in these partnerships and corporations for Accenture Ltd Class A common shares or, in the case of partners in certain countries,
Accenture SCA Class I common shares or exchangeable shares issued by Accenture Canada Holdings Inc., an indirect subsidiary of Accenture SCA. Generally, partners who received Accenture SCA Class I common shares or Accenture Canada Holdings
exchangeable shares also received a corresponding number of Accenture Ltd Class X common shares which entitle their holders to vote at Accenture Ltd shareholders’ meetings but do not carry any economic rights.
Each Class A common share and each Class X common share of Accenture Ltd entitles its holder to one vote on all matters submitted to a
vote of shareholders of Accenture Ltd. The holder of a Class X common share is not, however, entitled to receive dividends or to receive payments upon a liquidation of Accenture Ltd.
Each Class I common share and each Class II common share of Accenture SCA entitles its holder to one vote on all matters submitted to a vote of shareholders of Accenture
SCA. Each Accenture SCA Class II common share entitles Accenture Ltd to receive a dividend or liquidation payment equal to 10% of any dividend or liquidation payment to which an Accenture SCA Class I common share entitles its holder. Accenture Ltd
holds all of the Class II common shares of Accenture SCA.
Subject to contractual transfer restrictions, Accenture
SCA is obligated, at the option of the holder, to redeem any outstanding Accenture SCA Class I common share at any time at a redemption price per share generally equal to the market price of an Accenture Ltd Class A common share at the time of the
redemption. Accenture SCA may, at its option, pay this redemption price with cash or by delivering Accenture Ltd Class A common shares on a one-for-one basis. In addition, each of our partners in the United States, Australia and Norway has agreed
that we may cause that partner to exchange that partner’s Accenture SCA Class I common shares for Accenture Ltd Class A common shares on a one-for-one basis if Accenture Ltd holds more than 40% of the issued share capital of Accenture SCA and
we receive a satisfactory opinion from counsel or a professional tax advisor that such exchange should be without tax cost to that partner. This one-for-one redemption price and exchange ratio will be adjusted if Accenture Ltd holds more than a de
minimis amount of assets (other than its interest in Accenture SCA and assets it holds only transiently prior to contributing them to Accenture SCA) or incurs more than a de minimis amount of liabilities (other than liabilities for which Accenture
SCA has a corresponding liability to Accenture Ltd). We have been advised by our legal advisors in Luxembourg that there is no relevant legal precedent in Luxembourg quantifying or defining the term “de minimis.” In the event that a
question arises in this regard, we expect that management will interpret “de minimis” in light of the facts and circumstances existing at the time in question. Accenture Ltd does not intend to hold any material assets
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other than its interest in Accenture SCA or to incur any material liabilities such that this one-for-one redemption price and exchange ratio would require adjustment and will disclose any change
in its intentions that could affect this ratio. In order to maintain Accenture Ltd’s economic interest in Accenture SCA, Accenture Ltd will acquire additional Accenture SCA common shares each time it issues additional Accenture Ltd Class A
common shares.
Holders of Accenture Canada Holdings exchangeable shares may exchange their shares for Accenture
Ltd Class A common shares at any time on a one-for-one basis. Accenture may, at its option, satisfy this exchange with cash at a price per share generally equal to the market price of an Accenture Ltd Class A common share at the time of the
exchange. Each exchangeable share of Accenture Canada Holdings entitles its holder to receive distributions equal to any distributions to which an Accenture Ltd Class A common share entitles its holder.
Accenture Ltd may, at its option, redeem any Class X common share for a redemption price equal to the par value of the Class X common
share, or $0.0000225 per share. Accenture Ltd may not, however, redeem any Class X common share of a holder if such redemption would reduce the number of Class X common shares held by that holder to a number that is less than the number of Accenture
SCA Class I common shares or Accenture Canada Holdings exchangeable shares held by that holder, as the case may be. Accenture Ltd will redeem Accenture Ltd Class X common shares upon redemption or exchange of Accenture SCA Class I common shares and
Accenture Canada Holdings exchangeable shares so that the aggregate number of Class X common shares outstanding at any time does not exceed the aggregate number of Accenture SCA Class I common shares and Accenture Canada Holdings exchangeable shares
outstanding.
We use the term “partner” to refer to the executive employees of Accenture with the
“partner” title.
Employees
Our most important asset is our people. We are deeply committed to the long-term development of our employees. Each professional receives extensive and focused technical and managerial skills
development training throughout his or her career with us. We seek to reinforce our employees’ commitment to our clients, culture and values through a comprehensive performance review system and a competitive compensation philosophy that reward
individual performance and teamwork. We strive to maintain a work environment that reinforces our partnership culture and the collaboration, motivation, alignment of interests and sense of ownership and reward that this partnership culture has
fostered.
As of August 31, 2002, we had more than 75,000 employees worldwide, including employees of our
consolidated affiliates. Approximately 2,600 of our more than 75,000 employees are partners.
Competition
We operate in a highly competitive and rapidly changing global market and compete with a variety of organizations that offer services
similar to those that we offer. Our clients typically retain us on a non-exclusive basis. In addition, a client may choose to use its own resources rather than engage an outside firm for the types of services we provide. Our competitors include
consulting and other professional services firms; information technology services providers, including providers of outsourcing services; application service providers; and professional services groups of packaged software vendors, resellers and
computer equipment companies.
Our revenues are derived primarily from Fortune Global 500 and
Fortune 1000 companies, medium-sized companies, governmental organizations and other large enterprises. There is an increasing number
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of professional services firms seeking consulting engagements with these organizations. We believe that the principal competitive factors in the consulting industry in which we operate include:
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skills and capabilities of people; |
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reputation and client references; |
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service delivery approach; |
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technical and industry expertise; |
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perceived ability to add value; |
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quality of services and solutions; |
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focus on achieving results on a timely basis; |
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availability of appropriate resources; and |
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global reach and scale. |
Intellectual Property
Our success has resulted in part from our proprietary methodologies,
software, reusable knowledge capital and other intellectual property rights. We rely upon a combination of nondisclosure and other contractual arrangements as well as upon trade secret, copyright, patent and trademark laws to protect our
intellectual property rights and rights of third parties from whom we license intellectual property. We have promulgated policies related to confidentiality and ownership and to the use and protection of Accenture’s and third parties’
intellectual property, and we also enter into agreements with our employees as appropriate.
We recognize the
value of intellectual property in the new marketplace and vigorously create, harvest and protect our intellectual property. We have approximately 1,000 patent applications currently pending in the United States and other jurisdictions and have been
issued 68 U.S. patents and 21 non-U.S. patents in, among others, the following areas: goal-based educational simulation, virtual call centers, hybrid telecommunications networks, development architecture frameworks, emotion-based voice processing,
mobile communications networks, location-based information filtering, and computerized multimedia asset systems. We will continue to vigorously identify, create, harvest and protect our intellectual property.
Disclosure Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains or incorporates by reference forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act relating to
our operations that are based on our current expectations, estimates and projections. Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates” and similar
expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon
assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. The reasons for this include changes in general economic and
political conditions, including fluctuations in exchange rates, and the factors discussed below under the section entitled “Risk Factors.”
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Risk Factors
Risks That Relate to Our Business
Should the
current significant economic downturn continue to affect our clients, it could have a material adverse effect on our results of operations.
Our results of operations are affected by the level of business activity of our clients, which in turn is affected by the levels of economic activity in the industries and markets that they serve. In
addition, our business tends to lag behind economic cycles in an industry. As a result of the continuing difficult economic environment, some clients have reduced or deferred expenditures for consulting services and we have also experienced
increasing pricing pressure over the last year, which has eroded our revenues. Should the significant economic downturn continue to affect the levels of business activity of our clients, it could continue to adversely affect our revenues. Further
deterioration of global economic or political conditions could increase these effects.
Our business will be
negatively affected if we are not able to anticipate and keep pace with rapid changes in technology or if growth in the use of technology in business is not as rapid as in the past.
Our success depends, in part, on our ability to develop and implement management and technology services and solutions that anticipate and keep pace with rapid and
continuing changes in technology, industry standards and client preferences. We may not be successful in anticipating or responding to these developments on a timely basis, and our offerings may not be successful in the marketplace. Also, services,
solutions and technologies developed by our competitors may make our service or solution offerings uncompetitive or obsolete. Any one of these circumstances could have a material adverse effect on our ability to obtain and successfully complete
client engagements.
Our business is also dependent, in part, upon continued growth in the use of technology in
business by our clients and prospective clients and their customers and suppliers. The growth in the use of technology slows down in a challenging economic environment, such as the one we are experiencing now. There is currently no new technology
wave to stimulate spending. Use of new technology for commerce generally requires the understanding and acceptance of a new way of conducting business and exchanging information. Companies that have already invested substantial resources in
traditional means of conducting commerce and exchanging information may be particularly reluctant or slow to adopt a new approach that may make some of their existing personnel, processes and infrastructure obsolete.
We may face damage to our professional reputation or legal liability if our clients are not satisfied with our services.
As a professional services firm, we depend to a large extent on our relationships with our clients and
our reputation for high-caliber professional services and integrity to attract and retain clients. As a result, if a client is not satisfied with our services or solutions, including those of subcontractors we employ, it may be more damaging in our
business than in other businesses. Moreover, if we fail to meet our contractual obligations or fail to disclose our financial or other arrangements with our alliance partners, we could be subject to legal liability or loss of client relationships.
Our exposure to legal liability may be increased in the case of business transformation outsourcing contracts in which we become more involved in our clients’ operations. Our contracts typically include provisions to limit our exposure to legal
claims relating to our services and the solutions we develop, but these provisions may not protect us or may not be enforceable in all cases.
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Our services or solutions may infringe upon the intellectual property
rights of others.
We cannot be sure that our services and solutions, or the solutions of others that we
offer to our clients, do not infringe on the intellectual property rights of third parties, and we may have infringement claims asserted against us or against our clients. These claims may harm our reputation, cost us money and prevent us from
offering some services or solutions. Historically in our contracts, we have generally agreed to indemnify our clients for any expenses or liabilities resulting from claimed infringements of the intellectual property rights of third parties. In some
instances, the amount of these indemnities may be greater than the revenues we receive from the client. Any claims or litigation in this area, whether we ultimately win or lose, could be time-consuming and costly, injure our reputation or require us
to enter into royalty or licensing arrangements. We may not be able to enter into these royalty or licensing arrangements on acceptable terms. Depending on the circumstances, we may be required to grant a specific client greater rights in
intellectual property developed in connection with an engagement than we otherwise do, in which case we seek to cross license the use of the intellectual property. However, in very limited situations, we forego rights to the use of intellectual
property we help create and in these cases, this limits our ability to reuse that intellectual property for other clients. Any limitation on our ability to provide a service or solution could cause us to lose revenue-generating opportunities and
require us to incur additional expenses to develop new or modified solutions for future projects.
Our
engagements with clients may not be profitable.
Unexpected costs or delays could make our contracts
unprofitable. While we have many types of contracts, including time-and-materials contracts, fixed-price contracts and contracts with features of both of these contract types, the risks associated with all of these types
of contracts are often similar. When making proposals for engagements, we estimate the costs and timing for completing the projects. These estimates reflect our best judgment regarding the efficiencies of our methodologies and professionals as we
plan to deploy them on projects. Any increased or unexpected costs or unanticipated delays in connection with the performance of these engagements, including delays caused by factors outside our control, could make these contracts less profitable or
unprofitable, which would have an adverse effect on our profit margin.
Under many of our contracts the payment
of some or all of our fees is conditioned upon our performance. We have been moving away from contracts that are priced solely on a time-and-materials basis toward contracts that also include incentives related to factors
such as costs incurred, benefits produced, goals attained and adherence to schedule. For example, we are entering into an increasing number of business transformation outsourcing contracts under which payment of all or a portion of our fees is
contingent upon our clients meeting cost-saving or other contractually defined goals. We estimate that a majority of our contracts have some fixed-price, incentive-based or other pricing terms that condition some or all of our fees on our ability to
deliver defined goals. Our failure to meet contractually defined goals or a client’s expectations in any type of contract may result in an unprofitable engagement.
Our contracts can be terminated by our clients with short notice. Our clients typically retain us on a non-exclusive, engagement-by-engagement
basis, rather than under exclusive long-term contracts. A majority of our consulting engagements are less than twelve months in duration. While our accounting systems identify the duration of our engagements, these systems do not track whether
contracts can be terminated upon short notice and without penalty. However, we estimate that the majority of our contracts can be terminated by our clients with short notice and without significant penalty. The advance notice of termination required
for contracts of shorter duration and lower revenue is typically 30 days. Longer-term, larger and more complex contracts generally require a longer notice period for termination and may include an early termination charge to be paid to us.
Additionally, large client projects involve multiple engagements or stages, and there is a risk that a client may choose not to retain us for additional stages of
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a project or that a client will cancel or delay additional planned engagements. These terminations, cancellations or delays could result from factors unrelated to our work product or the progress
of the project, but could be related to business or financial conditions of the client or the economy generally. When contracts are terminated, we lose the associated revenues and we may not be able to eliminate associated costs in a timely manner.
We may fail to collect amounts extended to clients. In limited circumstances we
extend financing to our clients, which we may fail to collect. A client must meet established criteria to receive financing, and any significant extension of credit requires approval by senior levels of our management. We had extended $265 million
of financing as of August 31, 2002.
If our affiliates or alliances do not succeed, we may not be successful
in implementing our growth strategy.
We have committed a substantial amount of time and financial
resources to our affiliates and our relationships with our alliance partners, and we plan to commit substantial additional financial resources in the future. The benefits we anticipate from these relationships are an important component of our
growth strategy. If these relationships do not succeed, we may fail to obtain the benefits we hope to derive or lose the financial resources we have committed. Similarly, we may be adversely affected by the failure of one or more of our affiliates
or alliances, which could lead to reduced marketing exposure, diminished sales and a decreased ability to develop and gain access to solutions. Moreover, because most of our alliance relationships are non-exclusive, our alliance partners are able to
form closer or preferred arrangements with our competitors. Poor performance or failures of our affiliates or alliances could have a material and adverse impact on our growth strategy, which, in turn, could adversely affect our financial condition
and results of operations.
Our global operations pose complex management, foreign currency, legal, tax and
economic risks, which we may not adequately address.
We have offices in 47 countries around the world. In
fiscal 2002, approximately 50% of our revenues before reimbursements were attributable to our activities in the Americas, 43% were attributable to our activities in Europe, the Middle East and Africa, and 7% were attributable to our activities in
the Asia/Pacific region. As a result, we are subject to a number of risks, including:
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the absence in some jurisdictions of effective laws to protect our intellectual property rights; |
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multiple and possibly overlapping and conflicting tax laws; |
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restrictions on the movement of cash; |
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the burdens of complying with a wide variety of national and local laws; |
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restrictions on the import and export of certain technologies; |
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price controls or restrictions on exchange of foreign currencies; and |
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The consulting, technology and outsourcing markets are highly competitive,
and we may not be able to compete effectively.
The consulting, technology and outsourcing markets in
which we operate include a large number of participants and are highly competitive. Our primary competitors include:
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consulting and other professional services firms; |
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information technology services providers, including providers of outsourcing services; |