Tatas consulting arm ups global footprint, seeks more non-group business

Written by MG Arun | Mumbai | Updated: Oct 1 2011, 09:20am hrs
Tata Strategic Management Group or TSMG, the management consulting arm of the salt to software $71-billion Tata Group, will step up its overseas presence to break away from being perceived as a Tata group advisor, a move its peers say would be challenging.

TSMG, established in 1991 as a brainchild of Tata Group chairman Ratan Tata, will expand into new sectors, geographies and recruit more employees, but will position itself as an India-focused firm with expertise in advising foreign companies for their entry into India.

Our model is Indian, says TSMG chief executive Raju Bhinge, in an interview from his new 10,000 square feet swanky office in Mumbai. Our intention is to focus on India, since India is where the action is.

The firm, which started with advising Tata companies, will now set up offices in the US, Europe, Southeast Asia and West Asia. TSMG gave strategic inputs for Tata Groups entry into retail, direct-to-home broadcast, supercomputers, real estate development and most recently logistics. TSMG has 70 consultants and plans to add more as the office can accommodate 100 people.

The Indian model will differentiate the firm from other large consulting companies like McKinsey, Boston Consulting Group, KPMG, Ernst & Young and PricewaterhouseCoopers, says Bhinge, who joined the Tata Group in 1975 at the age of 23.

TSMG is a good example of in-house consulting, says Ashwin Parekh, partner and global financial leader, Ernst &Young, which has an office a few metres from TSMG. The organised sector comprises 40% of the $1-billion opportunity in business advisory in India. The other forms of the consulting profession are, at one end, the multi-disciplinary category where McKinsey and E&Y belongs to, and on the other, relationship consultancy run by experienced individuals, he added.

India is expected to become the seventh-largest economy by 2015 and fourth-largest by 2020, overtaking Germany and the UK, said a Citigroup report this year.

However, the country's growth has moderated in the last few quarters as the Reserve Bank of India successively hiked interest rates to curb inflation. India's Gross Domestic Product or GDP growth moderated to 7.7% in the second quarter of 2011 from 7.8% in the previous quarter.

The moderation in growth is in itself an opportunity, says Bhinge. Businesses today are looking at many avenues for growth in the face of a slowdown. First is, to improve their top line without spending too much on new assets, he added. He cites the example of parts makers who are already supplying forgings or castings, looking to service clients in energy and defence. Second, companies that want to know how to get into new lines of businesses that can make use of the knowledge they already possess. The third is to advice on the cost and capex side. Fourth, companies want to know how they can cut down wastage and become competitive, adds Bhinge.

TSMG earns half of its total revenues by advising its parent group companies. Bhinge said the firm has been consistently profitable since its inception, barring one or two downturn years. The future growth has to come from beyond the Tata Group, admits Bhinge, who plans to garner as much as 75% of the firm's business from outside the Tatas over the next five years. TSMG has worked for external clients like Siemens, DuPont, ACC, Lafarge, Philips, Dubai World and Merck.

The task will not be easy, says Mumbai-based Candle Partners MD Navroz Mahudawala, who left a senior position at Ernst & Young last year to float his new firm, as he found big opportunities in boutique advisory offerings. TSMG is still considered as a firm primarily working for Tata Group companies. That will make it more difficult for them to attract talent, something that is crucial for the business, he added.

People management is not easy, says Bhinge, who recruited 10 senior professionals both from India and abroad in the past few months. This is a highly qualified, knowledge-based profession.

Contracts in the consulting business are done on trust and connections, not just driven by strategies, Frost & Sullivan chairman David Frigstad said in an interaction with FE. It's a battle and you ought to be clever. The business has got a lot more different, he added. According to him, there is much more pressure on delivery and focus. Frigstad's comments weren't specific to TSMG.

However, a continuing business opportunity for TSMG is from foreign companies looking to enter India. Companies abroad are now convinced that growth has to be in emerging countries, says Bhinge. Foreign companies, who have set up a presence in China, now want to get into India for the next phase of their growth, either on their own or through partnerships.

If the momentum continues, Bhinge will have to look beyond him firm's new office. We already have a presence in Delhi. Expanding that will be the natural choice, he said, adding that the third office could be in the south. Beyond that, we will think of another city in India.

Can an Indian consulting brand make an impact globally Frost's Frigstad believes it can. In the global space, a brand like McKinsey will be tough for Tata to beat, Frigstad said. But he's beatable. You can beat him on quality, price and positioning, he added.