New Delhi: Andrew Embury heads Ernst and Young Llp’s (E&Y) advisory practice for Europe, India, West Asia and Africa. On a recent visit to India, Embury, who earlier served in International Business Machines Corp.’s global business services, spoke about changes in the advisory business and among global companies in the wake of the financial crisis. Edited excerpts:
What has been the fallout of the financial crisis on consultancies?
Different organizations have been impacted in different ways. In most of our markets, demand has held up pretty well. The nature of work has changed, but demand has held up pretty well.
Changed in what way?
For instance, as you would expect, in the last 18 months cost reduction has been on the agenda of many enterprises. We have also had a big focus on simplification and rationalization of processes. In the financial sector, risk has been a bigger factor...understanding risk, measuring risk, mitigating risk.
India focus: Andrew Embury says technology, telecom and financial services will dominate E&Y’s advisory work in India. Pradeep Gaur / Mint
One of the patterns we have seen is clients have been much more discriminating about big capital programmes. I think that has driven, to some degree, demand for some of our risk services and some of our performance improvement (services).
Which sectors dominate your advisory work in India?
The top sectors would be technology and telecom, financial services, in particular banking and capital markets. Government and public sector would probably be No. 3.
Would government be one of the fastest growing sectors here?
It is an important one. We feel here, as in a number of other geographies, government has a lot of potential. Globally, in advisory, we have three priority sectors and government and public sector would be one of them.
Indian firms, we have heard, have become wary of leverage. Even money raised through equity sale has often been used to repay debt. Is this the case across the world?
I think clearly financial institutions have been repairing their balance sheets and strengthening their capital position. I guess as a generalization that will continue for some while....
If you take away financial institutions, what are the lessons others may have internalized over the last two years?
If I think of large organizations which are already global or globalizing, there are two or three patterns we see being repeated.
One is that global organizations are trying to simplify costly but complex structures. So, any self-respecting, large organization these days has some kind of matrix. Some of those matrix organizations were becoming quite ambiguous in terms (of) who is accountable for what, and quite heavy. One of the patterns we see is, possibly driven by cost pressures, (organizations are) trying to simplify quite complex structures. So you don’t have role confusion.
Another theme with global organizations, borrowing an example from ERP (enterprise resource planning), with the best of intent, ended up, to some degree, recreating legacy and then having to reimplement. I think you see some of that in ways organizations have globalized. A part of that is coming to a contract with people in the organization who may be in different geographies. The contract is if you want to be a part of a global corporate and access benefits of being a global corporate, you have got to accept that we are going to have one set of IT systems globally, one finance system, one finance performance report. It might not quite fit what you would design here in this country if you were operating on your own, that is one of compromises you need to make...
For the CEO of an Indian firm looking at takeovers abroad, what are the biggest challenges?
I think clearly following the inorganic route, one of the phrases that sticks with me is (that) deal synergies are easy to conceptualize and very difficult to deliver. As we look at prospective deals, cost synergies, revenue synergies and savings are readily identified, but quite complex often to deliver.
Organizations can be quite optimistic in terms of time-frame. I think making sure, if you are acquiring in a market where you don’t have substantial experience, (that) you have the right support in understanding what those synergies are and driving execution of those synergies is important. Clearly, there are some differences in delivering on those synergies in markets you don’t understand as well as a domestic market.