Much of the artificial intelligence (AI) story to date has revolved around software platforms and advanced pieces of hardware required to power these applications. Not surprisingly, companies that design and manufacture semiconductors or cloud computing are among the biggest beneficiaries of AI demand.
One area that is overlooked is professional services, also known as consulting. Global professional IT services company Accenture (NYSE:ACN) quietly emerging as a key part of AI roadmaps.
Below I’ll outline how Accenture’s new deal addresses this Nvidia can be a game changer for both parties.
What role do consultancies play in AI?
On the surface, consulting services may not seem like the most attractive opportunity in AI. Let’s look at a simple example.
Law firms pay their lawyers a salary and must cover those costs. When attorneys are with their clients, they typically keep track of the number of hours worked and send a bill based on the time spent on a case. The idea is that the total bill sent to the client covers the lawyer’s salary, and hopefully a little more, so that the law firm actually makes some profit margin on its lawyers.
In contrast, software is generally a source of recurring revenue, while professional services are contracted on an as-needed basis. For this reason, professional services firms have lower margins compared to software-as-a-service (SaaS).
That said, there are some key use cases for consulting in the technology world. After purchasing a software tool, customer employees may not have the expertise to fully implement the new platform company-wide. Software companies understand this dynamic and generally offer one of two solutions.
First, the software company may have its own professional services team in-house, and customers can essentially purchase a package that includes access to these consultants to help implement the new tool as seamlessly as possible. Alternatively, the software company can rely on a separate professional services provider and have its clients work directly with them.
This is where Accenture comes into play. The company’s specialized role covers AI implementation strategies for large organizations. Below I will explain how Accenture is getting involved in the AI landscape and argue why the company should not be overlooked.
Image source: Getty Images.
What benefits has AI had for Accenture so far?
Accenture recently created an internal unit called the Nvidia Business Group. This practice will train 30,000 people on Nvidia’s entire AI stack, including the company’s Foundry, Enterprise and Omniverse products.
A simple way to think about this is that Accenture will help their customers more quickly integrate generative AI tools based on Nvidia protocols. As a result, companies should be able to scale their AI initiatives more quickly, leading to higher productivity and innovation.
While this model may sound opportunistic, AI has been a key growth driver for Accenture lately.
For the fiscal year ended August 31, Accenture generated $3 billion in bookings for generative AI services. Keep in mind that Accenture is a global practice and has achieved approximately $81 billion in total bookings for the entire fiscal year 2024.
Since AI is still in its infancy and the company’s partnership with Nvidia is brand new, I foresee much further AI-driven growth for Accenture in the coming years.
Is this deal a game changer?
I think the deal between Nvidia and Accenture is a game changer for both companies.
From Nvidia’s perspective, Accenture is essentially a source of lead generation. Companies looking to test and demonstrate various AI enterprise platforms can turn to Accenture for consulting advice or implementation of professional services. In turn, Accenture now has an interest in more or less marketing Nvidia’s suite and explaining how and why these tools can meet a potential customer’s needs.
If Accenture can prove that its AI advice actually pays off for Nvidia’s customers, the company could theoretically transfer its relationship with Nvidia to other key players in the market. As such, Accenture has the ability to expand its services depending on a client’s AI use cases. In turn, the company’s generative AI professional services team could grow into a much bigger opportunity.
As I’ve written before, I’m generally a fan of keeping an eye on under-the-radar opportunities that are tied to larger trends. I view professional services as an undervalued and misunderstood part of the broader tech world, and AI is no exception.
For this reason, I think a position in Accenture could pay off in the long term as the company’s AI initiatives take shape.
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Adam Spatacco has positions at Nvidia. The Motley Fool holds positions in and recommends Accenture Plc and Nvidia. The Motley Fool recommends the following options: long January 2025 $290 calls on Accenture Plc and short January 2025 $310 calls on Accenture Plc. The Motley Fool has a disclosure policy.
