Consulting in India.docx

8/13/2019 Consulting in India.docx

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Consulting in India

IntroductionManagement consulting is referred to the practice of helping businesses to improve

their performance, mainly through the analysis of existing organizational challenges

as well as competitive environment. It also involves the development of detailed plan

of action for improvement. Organizations may seek the consulting services for a

number of reasons which includes gaining external advice and access to theconsultants specialised expertise.

The significance of management c onsulting in India cant be undervalued. In India

Management consulting is estimated to be a Rs. 22,000 crore industry (Source:

Assocham) which is growing at a CAGR of 30%.

Consulting firms are also aware about industry Best Practices due to its

relationships with several organizations. They also provide services like change

management assistance, technology implementation, strategy development,

operational improvement services and development of coaching skills.

Consulting in IndiaMcKinsey was the first strategy company to enter the Indian market in the early

90s.In the first 10 years they appointed just 100 odd consultants but now they have

400-500 consultants in India. McKinsey in Gurgaon is the largest hub of knowledge

management professionals within the firm. McKinsey McKC is an analytics group

that works on site and remotely support the McKinsey s consulting teams. Boo z Allen


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Hamilton entered the Indian Market in 1997-98 but exited after 2 years when the

market was tough to crack. They re-entered the market a couple of years ago as Booz

& co with new formed strategy and operations arm that does work outside

government projects.

Types of Consulting FirmsConsulting firms can be broadly classified in two ways as follows

Large Consulting Firms These Medium to Large sized management consultancies

offer their services across functions within a wide range of industries.

Tier 1 They are mainly into Strategy consulting: Market Entry, cost optimization,

Growth strategy, Business Consulting. This includes firms like Mckinsey & Co, Bain &

Co., Booz & Co, BCG, AT Kearney etc.

Tier 2 Tier 2 firms are mainly Industry Focused. Examples include KPMG, Deloitte,

E&Y, PWC, Accenture etc.

Tier 3 Their offerings include Advisory cum outsourcing services. The firms like

Wipro, Infosys, TCS, Capegemini, Cognizant etc. will fall into this category.

Consulting Broad PurposesConsultants are used by clients for the following broad purposes:

To help client add value and achieve Organizational purposes objective &

personal and professional goals.

To help identify ,diagnose and solve management and business related

problems


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To help client in achieve the real potential

To indentify and seize new opportunities as consulting firms are regarded as

source of valuable information and ideas that could be turned into wide range

of initiatives, innovation and improvement including developing new market.

To enhance learning not only for the client but also for the consultants

To implement changes needed to survive and be successful in an environment

where continuous change is needed.

Size of the Consultancy sector in India

The development of consultancy capabilities and business is directly proportional to

growth in Economic and industrial development. Due to the nature of the industry,

getting accurate estimates of its size is difficult. It is estimated that the consultancy

business in India engages about 100,000 persons in about 5000 consulting firms.

According to estimates, the current size of the consulting industry in India is about

Rs.10,000 crores including exports and is expected to grow at a CAGR of approximate

25% in the next few years.

Financial services continue to be big bu siness in Indias consulting world, and whilst

representing just under a third of all consulting revenue, and growing by 8% in 2012,

it was the largest growth sector. The energy and resources market also grew by 5% as

India explores renewable energy alternatives in order to better meet its huge

domestic requirements.

India has been globally recognized for its fast paced development. The service sector

has been growing at a fast pace and now contributes more than 50% to the GDP.


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Thus in the scenario, fuelled by increased demand for consultancy services by

domestic and foreign firms, the sector in India is projected to grow at an compound

annual growth rate (CAGR) of 30 per cent. In 2008, the consulting industry in India

reportedly stands at Rs 13,000 crore. In 2010, it was Rs 17,000 crore industry. As on

2013, it is estimated to be more than Rs 22,000 crore (USD 3.6 billion) industry. Rising

opportunities due to a booming economy and growing demand for consultancy

services are key factor for growth. There would be over 2.2 lakh people working in

this field over the next three years in the 8500-9000 consultancy firms across the

country.

Indian consulting companies have strong capabilities in areas like civil engineering,telecom, power, metallurgy, chemical and computer software. Information

Technology (IT) including e-commerce, telecommunications and soon followed by

Corporate Strategy, Outsourcing Services, Human Resource Management, and

Operations Management have been some of the prominent business divisions in the

consulting market.


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Information technology is one of the fastest growing sectors in India. It has evolved

dramatically over the past decade in terms of scale, key service offering and value

provided to its customers. Having grown at a CAGR of 25 % during FY 2000-13, the

sector has become one of the dominating forces in the global IT - BPM market. As per

NASSCOM (widely acknowledge as the go to Industry body for IT), the industry

touched revenues of US $ 108 million in FY 13 with exports at US $ 76 billion,

accounting for more than 70% of the total revenues.

The Indian IT industry can be segregated into IT Services, Business Process

Management, Engineering and R&D & Software Products and Hardware with eachhaving the following share in the total industry:

India IT industry growth drivers:

IT Services:


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Components: Project based services, IT outsourcing, Support & training Growth

Drivers: Application and services built around social, mobile, cloud & analytics

Business Process Management:

Components: Customer Care, HR, F&A , Procurement Growth Driver: Platform

solution, bundling BPM with analytics, mobile engagement of business processes.

ER&D & Software:

Components: Application development and engineering/design

Growth Driver: Software as a service, technological advances, low cost consumer

preferences

Hardware:Components: Personal computers, Servers, Network equipment, Storage and

security, Printers Growth Driver: New users from rising lower/middle class

Future Opportunities:

Services incorporating Social, Mobility, Analytics and Cloud (SMAC) are reshaping

the traditional way the IT-BPM industry has been providing services till now.

These individual technologies and platforms which have risen during the past few

years have shown immense potential, but are barely understood.

While each of these four components have been evolving individually, companies

are beginning to treat them as an integrated whole.

The convergence on these technologies means dismantling the traditional business

design. This provides an opportunity for India IT players to move into a higher margin

business as compared to the typical IT contracts.


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Consulting Industry Overview Statistic Quantity Unit Year SourceGlobal Consulting Industry Revenues 1 415 Bil. US$ 2013 PREIndia's Outsourcing & Consulting Industry Revenues 2 75.8 Bil. US$ 2013 NASSCOMIndia's Outsourcing & Consulting Industry Forecast 2 225 Bil. US$ 2020 NASSCOMU.S. Management, Scientific & Technical Consulting Industry Revenues 3 171.9 Bil. US$ 2012 CensusU.S. Management, Scientific & Technical Consulting Industry Revenues 156.7 Bil. US$ 2011 Census

Management Consulting Companies Revenues 125.9 Bil. US$ 2011 CensusStrategic Management Consulting 32.8 Bil. US$ 2011 CensusFinancial Management Consulting 7.9 Bil. US$ 2011 CensusMarketing Management Consulting 12.7 Bil. US$ 2011 CensusHuman Resources Management Consulting 11.5 Bil. US$ 2011 CensusOperations and Supply Chain Management Consulting 9.0 Bil. US$ 2011 CensusIT Technical Design, Development and Consulting 8.1 Bil. US$ 2011 Census

U.S. Environmental Consulting Services Revenues 11.6 Bil. US$ 2011 CensusU.S. Accounting Industry Revenues 3 131.6 Bil. US$ 2012 CensusU.S. Accounting Industry Revenues 120.5 Bil. US$ 2011 CensusEmployment in U.S. Accounting & Bookkeeping Services, Seasonally Adjusted 939.1 Thous. Apr-13 BLSEmployment in U.S. Management & Technical Consulting Services, SeasonallyAdjusted

1,175.0 Thous. Apr-13 BLS

1 Includes HR, IT, strategy, operations management & business advisory services.2 2013 figure is for the fiscal year ended March 31. Includes export revenues for IT Services, BPO and software consulting, notincluding domestic consumption.3 Census Bureau figures for 2012 are preliminary.PRE = Plunkett Research Estimate; Census = U.S. Census Bureau; BLS = U.S. Bureau of Labor StatisticsNASSCOM = National Association of Software and Services Companies


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Strengths and Weaknesses of Indian Consulting Industry

The major strengths of Indian consulting organizations include professional

competence, low cost structure, diverse capabilities, high adaptability and

quick learning capability of Indian consultants.

The major weaknesses of Indian consulting organizations, which has hindered

the export growth of consulting sector in the country, are low quality

assurance, low local presence overseas, low equity base, lack of market

intelligence, low level of R&D.

Clients Expectations

Gone are the times when the promoters and CEOs wanted reports or ideas or

portfolio analysis; Clients increasingly want the consulting firm's skin in the game too.

Now they want

On -the ground changes;

Streamlining distribution,

Better go -to-market strategies

Operational excellence and

Efficient supply chain management.

In fact, pure strategy kind of projects would add up to only 10% to 15% of the high-

value consulting market. Clients want consultants to get their hands dirty; not just

give them a study.


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Key Emerging Trends

The following are some of the key emerging trends in Indian management

consulting:

Nature of projects move towards high-end strategy consulting

Management consulting in India has traditionally been about capital funding

(predominantly debt) and market sizing. However, the situation is changing gradually

and there is a steady shift towards high-end strategy consulting. This shift is largely

being driven by the increase in both global and local opportunities for Indian

companies. This necessitates a need for prioritization and evaluation of opportunity

costs. The increasingly competitive market in a new flat world has also significantly

increased the costs of having a flawed strategy. However, a potential drawback to

this shift towards strategy assignments is the ground reality with respect to the

clients lack of ability to implement the strategies that are recommended by

management consultants. Clients have to balance the need for implementation help

with the cost economics of the support. This is another area where management

consulting firms have begun offering their expertise: by aiding the company in the

implementation process.

Public sector consulting projects

Indian central and state governments have increasingly found the need to hire

management consultants for projects in fields such as infrastructure and agriculture.

The government has realised the importance of a data and analytics-driven approach


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to solving problems and framing policies at the macroeconomic level. A good

example is the Gujarat governments awarding of the market demand assessment of

the Rs. 78,000 crore Gujarat International Finance Tec-city (GIFT) to a top-tier

management consulting firm recently. The city is proposed to be a financial centre to

rival the likes of New York, London, etc.

Industry structure move towards greater market segmentation

As India takes on a greater role on the world stage, there is a definite clamour for

managemen t consulting services across all industries and sectors. The countrys

economic and regional diversity has created multiple market segments with differentneeds and share of wallets. As a result, there are multiple layers in the Indian

management consulting industry with each layer catering to a distinct set of needs.

Global management consulting firms have an edge over low cost domestic players

due to their experience and knowledge investments. Their experienced talent and


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deep relationships with clients makes them ideal for high-level strategy projects that

require macroeconomic or global perspectives.

However, a majority of domestic businesses (especially SMEs) cannot afford their

services, leaving ample room for domestic players to bridge the supply gap, with a

much more viable value proposition in terms of service and fees.

With near saturation and declining profit margins at the bottom of the management

consulting pyramid, Indian IT consulting firms are moving up the value chain towards

high-end technology consulting. However, winning credibility as a management

consulting firm is a huge challenge. Indian IT firms realise these limitations and as a

result, are now spending increasingly on innovation and R&D.

Niche management consulting firms are specialists that focus on particular

function(s) or set of industries. At smaller management consulting firms, clients get a

senior professional for the full duration of the project, while a big-brand global firm

typically offers blended packages with senior consultants working part-time on

strategy and junior associates overseeing execution. Rising talent levels, flexiblebusiness models and competitive billing rates have helped these firms to pit

themselves against established players . With their hands-on experience with the

smaller domestic clients, they can spot emerging trends faster making them best-

positioned for projects that involve both strategizing and long-term execution.

Operational consulting firms could be both divisions of global firms or individual

firms tackling operational problems. These firms deal with projects that are more

inward-looking for the clients and include cost structuring, organizational change,

supply-chain innovation, etc.


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Paid management consulting services move towards greater acceptance

Business development in Management Consulting is usually a long-drawn process as

selling an intangible product to savvy entrepreneurs is a tough proposition. Unlike in

the developed economic regions, where the client primarily wants to see a strong

methodology before awarding the assignment, Indian clients expect a glimpse of the

final solution prior to signing any contract.

Cultural perception has also been a hindrance in accepting the concept of

management consulting. In India, knowledge and advice are usually linked with a

persons age. The very idea of a freshly -minted graduate giving management advice

to people with significantly more work experience is not readily accepted.

Business development timelines have reduced due to increased comfort levels in the

concept over time. Although, we still hear anecdotes on how a CEO had given a

dressing down to a newly minted consultant, client management has realized the

unique fresh perspective, energy and innovative thoughts that younger consultants

bring to the table. As the old guard changes at the top echelons of Indian industry,

giving way to a younger management, this change is reflected in the advisory space

too.


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Major Players and their Indian Operations

McKinsey & CompanyQuick Facts:

American global management consulting firm

Founded: 1926

Founder: James O.Mckinsey, Marvin Bower

MD: Dominic Barton

Revenue: $7 billion (2010)

Employees: 17,000 (9,000 consultants)

Organization : Mckinsey operates under a practice of up or out,in which consultants must

either advance in their consulting careers within a pre-defined time-frame, or else be fired.

India Operations and Major Projects:

In September 2007, the firm was hired by IDBI Bank, one o f Indias leading public -sector

banks, to assist in smoothing out legacy issues resulting from the banks 2006 merger with

United Western Bank. McKinseys work will involve restructuring the banks branches,

reengineering processes and implementing business strategy.

In June 2007 McKinsey consultants teamed with the Confederation of Indian Industry to

present an in- depth report on rural growth to Dr. Manmohan Singh, Indias prime minister.

McKinsey and CII worked together to advise the Indian government on Bharat Nirman, an

ambitious initiative launched in 2005 to strengthen the countrys rural infrastructure. One

objective of the project (which has been called Indias New Deal) is to ensure electrification

of all villages by 2009.


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The Boston Consulting Group (BCG)Quick Facts:


Founded: 1963Key People: Rich Lesser (President & CEO)

Revenue: USD 3.7 billion (2012)

Employees: 6,200 (consultants)

Indian Operations and Major Projects:

There are two BCG India offices-in New Delhi and Mumbai-and the firm has come a long way

since the 1990s, when its presence in India consisted of one consultant working from hishotel room. Over 90 percent of the firms consultants in New Delhi are graduates of Indian

business schools, and they work with clients in the pharmaceutical, IT, telecommunications,

financial services and industrial goods sectors.

Since its debut in 2002, the New Delhi facility has worked with Indias central bank, the

Reserve Bank of India, and has helped build economic development plans for government

agencies.

In August 2007, BCG was hired by the three major Indian insurers-New India Assurance,Oriental Insurance and United India Insurance-to help them determine a joint business

strategy.

That same year, BCG assisted the Bank of India with its business process reengineering

strategy, and Tata Capital, subsidiary of the giant Tata Group, tapped the firm to develop a

roadmap for its entry into retail banking and other diversified financial services. BCG Mumbai

was established in 1996, after more than a decade of client assignments in India.

A.T.KearneyQuick Facts:


Founded: 1926


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Key People: Johan Aurik (MD and Chairman)

Revenue: $ 1 billiion (2011)


The company commenced its operations in India by setting up an office inDelhi. Second operations centre came up in Mumbai in 2004 and since then is acting as India

headquarters.

In India, the company works with clients to overcome problems in areas like growth,

operations excellence, merger integration, supply chain management and technology

strategy. Its clients come from diverse industrial sectors such as automotive, engineering and

discrete manufacturing, energy, retail, real estate, private equity, IT and financial services;

these clients range from MNCs, private and public sector companies, government andindustry organizations.

BAIN & CompanyQuick Facts:

American global management consulting

Founded: 1973

Key People: Orit Gadiesh (Co-founder and Chairman)

Employees: 5,5000

India Operations and Major Projects:

In July 2006, Bain established firmer footing in the country when it opened an office in New

Delhi. The New Delhi office now is comprised of over 90 percent Indian nationals.

This wouldnt be earth -shattering news for most consulting firms these days, but it was the

cause of much buzz for Bain, which had yet to set up shop on the subcontinent, aside from a

small in-house capability servicing center, Bain Capability Center, in Gurgaon. Bain has served

clients in the region for over 10 years, historically from its Singapore office.


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Booz & Co.Quick Facts:


Founded: 1914Founder: Edwin Booz

Key People Cesare Mainardi (CEO), Joe Saddi (Chairman)

Revenue: $ 1.3+ billion (2011)


Booz & Company opened offices in Mumbai and New Delhi in 2008. Booz & Company has

provided consulting services for a wide range of Indian clients, and maintained a base of

operations in India in the mid- 1990s as Booz Allen Hamilton. With the launch of Booz & Company in May 2008, the firms leaders

reaffirmed their commitment to India.

Consulting Industry in India - Pyramid

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Consulting in India.docx