Consulting in India

Introduction
Management 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 the consultants specialised expertise. The significance of management consulting 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 India
McKinsey 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 McKinseys consulting teams. Booz 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 Firms

Consulting 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 Purposes

Consultants 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 business 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 each having 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 Source Global Consulting Industry Revenues1 415 Bil. US$ 2013 PRE 2 India's Outsourcing & Consulting Industry Revenues 75.8 Bil. US$ 2013 NASSCOM India's Outsourcing & Consulting Industry Forecast2 225 Bil. US$ 2020 NASSCOM U.S. Management, Scientific & Technical Consulting Industry Revenues3 171.9 Bil. US$ 2012 Census U.S. Management, Scientific & Technical Consulting Industry Revenues 156.7 Bil. US$ 2011 Census Management Consulting Companies Revenues 125.9 Bil. US$ 2011 Census Strategic Management Consulting 32.8 Bil. US$ 2011 Census Financial Management Consulting 7.9 Bil. US$ 2011 Census Marketing Management Consulting 12.7 Bil. US$ 2011 Census Human Resources Management Consulting 11.5 Bil. US$ 2011 Census Operations and Supply Chain Management Consulting 9.0 Bil. US$ 2011 Census IT Technical Design, Development and Consulting 8.1 Bil. US$ 2011 Census U.S. Environmental Consulting Services Revenues 11.6 Bil. US$ 2011 Census U.S. Accounting Industry Revenues3 131.6 Bil. US$ 2012 Census U.S. Accounting Industry Revenues 120.5 Bil. US$ 2011 Census Employment in U.S. Accounting & Bookkeeping Services, Seasonally Adjusted 939.1 Thous. Apr-13 BLS Employment in U.S. Management & Technical Consulting Services, Seasonally 1,175.0 Thous. Apr-13 BLS Adjusted 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, not including 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 Statistics NASSCOM = 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 highvalue 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 management consulting services across all industries and sectors. The countrys economic and regional diversity has created multiple market segments with different needs 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, flexible business 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 bestpositioned 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 & Company

Quick 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 of 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: American global management consulting firm Founded: 1963 Key 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 his hotel 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.Kearney
Quick Facts: American global management consulting firm Founded: 1926 14 | P a g e

Key People: Johan Aurik (MD and Chairman) Revenue: $ 1 billiion (2011) Indian Operations and Major Projects: The company commenced its operations in India by setting up an office in Delhi. 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 and industry organizations.

BAIN & Company

Quick 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: American global management consulting firm Founded: 1914 Founder: Edwin Booz Key People Cesare Mainardi (CEO), Joe Saddi (Chairman) Revenue: $ 1.3+ billion (2011) Indian Operations and Major Projects: 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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