Biggies play catch-up as IT boils down to consulting

The consulting bug appears to have bitten IT firms hard. The objective is clear: offer more value-added services to bring in more clients.

MNCs like IBM, Capgemini have traditionally viewed consulting as an effective door opener and hence, do not necessarily tie outsourcing to it.

Lately, their counterparts in India have started toeing the same line, with many heritage players setting up standalone consulting arms to create a mindshare.

Experts, however, see much ground to be covered yet.
“Indian companies are now building their consulting strength around IT services in view of growing global competition. They have realised that consulting is the way to get familiarised with potential clients and gain business,” said Karthik Ananth, director, Zinnov Consulting, a leading management consulting firm.

Consulting has many facets. There can be pure-play management consulting which is mainly strategy-oriented.
But technology firms are more interested in IT components of consulting, which mainly feature a change in either the process or the technology.

 According to an analyst at a Mumbai brokerage firm, the biggest challenge for Indian players is from global consulting companies like IBM, HP and Accenture as these have been able to replicate their delivery models. “This has led to business becoming commoditised. They have set up offshore centres in India. So, Indian players have little choice but to focus on consulting and move up the value chain in order to improve margins.”

 Hence, tier-I firms like Infosys, HCL, Wipro, TCS and Cognizant are aggressively increasing their consulting capabilities to become a preferred partner for their clients. For instance, Infosys in its new strategy targets to achieve equal revenue from three streams — consulting & system integration, platforms & solutions and business IT services. It had started its consulting business by forming a separate arm in 2004.

Recently, it decided to fold its consulting subsidiary into a larger unit, thus helping customers identify, deploy and manage software applications to compete better with multinational rivals like Accenture, IBM and Cognizant.
Similarly, HCL in 2008 acquired Axon, a SAP consulting company. Even Wipro started its consulting practice almost three years ago under the leadership of T K Kurien.

Since then, the share of consulting in their overall offering has been on an upward curve.

Cognizant is stepping up, too, and has been steadily raising its consulting strength from 1,600 in 2009 to 2,800 in 2011.

This contributes over 5% to Cognizant’s revenue. Infosys has also increased staff strength in its consulting unit, though at a more measured manner, from 567 in 2009 to 733 in 2011. 

According to recent report put out by JP Morgan, IT consulting has a promising future provided firms are ready to rewrite their script.

For instance, Infosys is trying to reposition itself by linking consulting with outsourcing. However, TCS has been consistent in its view as to how consulting serves its integrated, outsourcing-oriented business model.

Sid Pai, partner, TPI, a global advisory firm, thinks consulting business can be a money spinner, going ahead. “The reason you set up consulting business is to bring in more professional service business for yourself. You do not mind losing some money on consulting, hoping that you will gain some money in the back end,” he said. To back up, he added IBM started out its consulting arm in a similar manner.

IBM had set up its consulting arm in 1992-93 before it became a stand-alone business of its own when it acquired

PricewaterhouseCoopers’ consulting arm for an estimated $3.5 billion in 2002. “The Indian heritage providers have been aiming to replicate this. However, it has not reached the level of maturity required to become a stand-alone business,” said Pai.