Indian IT services companies are stepping up their consulting capabilities to build differentiation and address their clients’ dynamic needs that go beyond technology. While traditionally, these companies used consulting only as a means to drive more technology work, today they are trying to sell it as a bundled offering.
“IT services firms want to build strong management consulting capabilities because the one who drives the decision making gets to control the execution agenda and typically has a disproportionate say on who does the execution, and how,” said Abhisek Mukherjee, cofounder and director, Auctus Advisors.
Historically, Indian IT firms used consulting as the “tip of spear” with the objective of creating more pull-through revenue for their core business (technology implementation projects, managed services etc.). “This has led to subpar monetisation of consulting practices since these were included with a broader piece of work and not monetised significantly on their own compared to larger consulting firms who often took a billable headcount approach,” said Nitish Mittal, partner, Europe Technology Practice, Everest Group. “This led to attrition issues as well as creating expensive consulting
practices since the talent for these practices came from other consulting firms and were more expensive compared to IT talent.”
But the environment is changing now as lines are blurring between IT services providers and consulting players, especially the Big 4 (EY, Deloitte, PwC, KPMG). “EY’s split which is currently underway, is a sign of this trend, in addition to investments made by traditional consulting firms to scale tech credentials. IT firms on the other hand are trying to go more upstream to improve their relevance and role in clients’ business strategy enabled by technology and not just be confined to IT or business process functions,” added Mittal.
The modern approach to engagement is moving towards consultative-led approaches and outcome-centric deals. “Differentiation at the technology layer is minimal and the technology landscape is complex. On top of that, demand and expectations from clients are becoming more multifaceted. Many clients don’t know what they don’t know, and this creates room for consulting services to grow,” said DD Mishra, senior director analyst, Gartner. “Most IT services providers are bundling consulting capabilities in their offerings to help clients fill the gap related to insights they are seeking from the provider.”
Bengaluru-based Infosys was one of the firsts to deploy a dedicated management consulting arm among the Indian technology services ecosystem. It made two acquisitions initially to build its consulting practice — Zurich-based Lodestone Management Consultants for $350 million in 2012 and US-based Noah Consulting for $70 million in 2015. Over the years, Infosys continued to make strategic acquisitions to build its consulting practice but experts believe success is still far away.
Wipro recently launched a new financial services advisory capability in India. Capco, a company Wipro acquired for $1.45 billion, is expected to supplement Wipro’s presence in the Indian financial services sector through its business in Mumbai to jointly offer end-to-end transformation services for this sector.
HCLTech also established a distinct digital consulting service line under its overall digital business about four years ago. It has also taken the inorganic route to grow its consulting business by acquiring consulting firms like StrongBridge Envision and Symplicit/DWS.
Earlier this week, Cognizant entered into an agreement to acquire AustinCSI, a consulting firm specialising in enterprise cloud and data analytics advisory services. The acquisition supports Cognizant’s strategic focus on expanding its consulting practice and advisory capabilities to provide clients with end-to-end digital transformation strategy and industry-led solutions.
According to estimates, the IT consulting market will touch $166.80 billion growing at a CAGR of 9.10% between 2022-26. While Indian firms are yet to succeed in their consulting forays, globally, Accenture has successfully built a strong consulting practice mainly by virtue of its legacy existence as Andersen Consulting (the firm changed its name and identity in the early 2000s). Accenture’s consulting revenue stood at $34.1 billion in FY22 which is more than 50% of its total revenues of $61.6 billion. Indian IT firms do not disclose their consulting numbers, but analysts estimate it to be below 10% of their total revenues.
IT services providers can be successful in their consulting practice by taking into consideration three factors, said Mittal of Everest Research. First, consulting should not be offered at throwaway prices or for free. Second, IT services providers should differentiate their talent models from their consulting peers by bringing frontline talent or consultants who can work at the intersection of business strategy, technology, and industry context.
The third strategy to win in the consulting space is to lead with client context.
“IT services providers have a deep understanding of client context as they have been partnering for years and know their technology, operations, and data landscape. They can use this to showcase more practical roadmaps to clients by stitching advice grounds up,” said Mittal.