Why Indian IT Companies Need to Pull up Their Socks to Score BIG in Management Consulting?

Information Technology is one field which made India well known on the global landscape.Being identified as a knowledge powerhouse, India has brought huge manpower to handle the increasing requirements of IT in world dynamics. The majority of global corporations are sourcing IT-ITES from the Indian Information Technology industry, accounting for approximately 55 percent of the global service sourcing market (US$ 200-250 billion) in 2019-20. The IT sector has increased its contribution to India’s GDP from 1.2% in 1998 to almost 10% in 2019.

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But while we applaud all that has been done by Indian IT companies, one area where it hasn’t been able to make any remarkable reform is the Management consulting.

Why is Management consulting necessary for Indian IT firms?

The line differentiation between IT and management is rapidly blurring. In today’s world, businesses are not only looking for solving their technological needs but they are looking for integrated solutions which will help to propel their busineses forward.

No doubt, Indian IT giants have tried to enter the management foray, but they haven’t been able to find the right footing, or work out a viable business model for themselves.

Back when Infosys struck a deal of $350 million dollars with Switzerland-headquartered Lodestone, it finally felt like huge changes would be coming forth. The Lodestone acquisition signified Infosys' global presence, particularly in continental Europe and emerging markets like Latin America and Asia Pacific.
HCL acquired UK-based Axon in 2008 that brought capabilities in SAP consulting.
Wipro too, has focused on business transformation consulting and its head of consulting services Kirk Strawser has said the company intends to become “the largest pure-play business transformation consulting practice in the world” , with 5,000 consultants by 2015. The company now has 1,750 consultants that offer advisory services on designing, adopting and operating new business models to outpace competitors.

IT companies are uniquely placed to offer consulting services, thus they are in the position to pit themselves against the likes of Accenture, IBM, Deloitte PwC etc. Consulting is the practice of helping organizations improve their performance , primarily through the analysis of existing business problems and development of plans for improvement, and is a $366 billion industry globally,

H Sundararaman Viswanathan of globalization advisory firm Zinnov Management Consulting says, “Indian IT companies are increasingly seen as viable options for some of the costlier offerings from global consulting companies.”

For IT companies, consulting brings at least two big benefits.

One is, as Gartner India’s distinguished analyst Partha Iyengar says, “They make for “stickier client relationships” . A lot of consulting happens not with the CIO – the traditional interface for IT – but with other CXOs. This helps get mindshare in company managements and boards, which then translates into deeper and longer-term client relationships.

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“We sell 40% of our consulting services through CXOs such as CEO, CFO, COO, chief medical officer, chief marketing officer, chief risk & compliance officer , and chief merchandising officer,” says Nat Radhakrishnan , VP in Cognizant’s business consulting division.

The second benefit is the dominoes effect. Most consulting assignments will eventually translate into IT orders, because any business change and transformation today involves technology transformation or the use of technology. Iyengar notes that Cognizant has a strong application portfolio management practice. “If a customer hires Cognizant to analyze their application portfolio, and the company spends six months doing it, then the customer will inevitably also give the recommended application work to Cognizant. I believe a lot of their application development and maintenance deals are a result of their strong consulting practice,” he says.

Gartner’s Iyengar, however , warns that IT companies should not overdo themselves. He says consulting’s sweet spot is when a company strategizes around the work (IT services in this case) that it is doing; suggest to clients how to do their IT better, how to optimize. “But if you try to do high end management consulting (organization design/structure, general strategy, etc that the McKinsey's do), it may not work out. Many clients have told us the last thing they want from India is another man ..another management consulting firm. We don’t have the capability and maturity to provide such consulting. And acquisitions will not help either ,” he says.

Consulting in the global scenario

Over the past years, the global consulting market has grown exponentially. With a total value of around $250 billion, it is one of the most crucial markets in the service industry.

It has also been studied that the evolution of consulting reflects directly on the country’s economy. Between the 1970s up till 1990s the global market grew every single year, despite the two recession periods fueled by high demand for strategic services and operational management.

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In 2011 the consulting industry was valued at $205 billion, and since the market has grown with an average Compound Annual Growth Rate (CAGR) of 4.1% to a value of $251 billion in 2016*. The largest segment is Operations Consulting, which accounts for nearly 30% of the market, followed shortly by the Financial Advisory segment. Strategy Consulting – the most prestigious segment in the industry – represents less than 15% of the market, and is, in terms of size, comparable to the HR Consulting domain. Technology Consulting, also referred to as IT Consulting, holds a 20% share of the overall market**.

Across the board, the North American consulting market is regarded as the most mature region globally, however, the EMEA region – Europe, the Middle East and Africa – lead in terms of market size, holding a 41% share of the overall consultancy economy. The US is by a distance the largest national consulting market, with Canada taking just a 7% share of the North American market. Asia and Oceania, with Australia as the most important consulting hub, accounts for around 16% of the industry.

Well, all said and done, the one question which comes to mind is whether the Fortune 500 would come to Indian IT companies for consulting or would the world prefer to go to other global giants. No doubt Indian IT has made a name for itself, but it all boils down to perception. Indian IT giants are seen as applications developers and implementers and thus it is hard to break the stereotypical image unless they adopt an aggressive approach to market themselves in the right direction. Siddharth Pai, partner at TPI says, “Consulting is not essential to the Indian IT companies. For many top-tier companies, they are a way to land more foreign accounts for their IT services.” Let’s hope that we do get ahead in the global market.