In December 2005, when Wipro Ltd, India’s third largest software services firm, decided to step up the pace of innovation within the company, it chose a little-known consulting firm in Bangalore, Erehwon Innovation Consulting Pvt. Ltd, to design and help implement the process.
Titled the Quantum Innovation Programme, the project is expected to generate new ideas to drive business growth and also to motivate people within the company that has business interests ranging from software services exports to consumer care products.
In two years, Erehwon Innovation has helped design more than 50 projects, of which four have been initiated, including the Mission 10X programme that aims to train 10,000 faculty members at engineering colleges countrywide by 2010.
Bhupendra Sharma, Erehwon Innovation Consulting
As the economy grows at a steady pace of more than 8% every year and businesses become more global, companies are looking for consulting expertise that helps generate innovative ideas and also implement and sustain them.
“In the past, more of our clients looked at us to guide them through solutions to various business problems and challenges. Today, clients are looking for a mix of both solutions to existing problems and strategies on how to innovate and create for the future,” says Sadeesh Raghavan, managing director, India domestic business, Accenture Ltd, the world’s largest consulting firm, which offers five lines of services in India: strategy, customer relationship management, supply chain management, finance and human performance management.
Such innovative services are increasingly being offered by niche consulting firms with competitive billing rates that are pitting themselves against established players.
The global consulting industry is estimated to cross $350 billion (about Rs13.8 trillion) in revenues by 2010, according to Kennedy Information, an information service that tracks the consulting industry.
The Global Consulting Report for 2007-10 estimates that the Asia-Pacific region, which includes India and China, is growing at a compounded rate of 7.1%, and accounted for more than 13.8% of the worldwide consulting business, valued at $300 billion at the end of 2007.
Harish Bijoor of Harish Bijoor Consults
In India, boutique consulting firms such as Erehwon Innovation, Mumbai-based Avalon Consulting and Harish Bijoor Consults Inc., a firm which has a roster of 79 senior consultants, are competing with big-ticket players for a slice of this growing consulting pie.
Industry analysts define boutique consultancy firms as those companies which have no more than 250 billable consultants on board. Globally, this includes firms such as the Massachusetts-based Saint Consulting Group Inc., the Acquity Group Llc. in Chicago and Sicofin and Asociados headquartered in Mexico City.
Also in the fray are firms such as PRTM Management Consultants (Pittiglio Rabin Todd and McGrath), which opened its India office two years ago and now has a client base spread across the automotive, life sciences, telecommunications and information technology sectors.
PRTM Management, which was founded in 1976, has more than 650 consultants worldwide who are best known as operational strategists developing innovative solutions to operational issues. In many cases, this means defining change that alters not just client firms but also the industries that they operate in.
In India, PRTM Management has worked with a large automotive group in southern India by starting out with a short-term engagement for product innovation. “Implementing innovative ideas requires processes to be put in place—this is fundamental to operational consulting,” says Steve Hussey, managing director, PRTM Management Consultants India, whose team here has helped a large US-based pharmaceutical company set up its India operations to develop novel medicines. “Right now, three-quarters of the projects we do in India are in the product innovation space, with a quarter of the work coming from business and operational strategy,” says Hussey.
Apart from entry strategy for multinational corporations looking to set up base in India, consulting firms are also picking up significant business from Indian corporations that are realigning themselves in a multipolar world. “Increasing competition after the economic reforms has forced companies to seek out newer ideas, leading to an upsurge in the demand for consulting services,” says Raj Nair, chairman, Avalon Consulting.
This?follows?a?global?trend?where in a survey of 585 senior executives and managers, sponsored by PRTM Management in end-2007, 56% respondents said they would make significant changes in operational strategy to achieve performance goals.
Raj Nair, Avalon Consulting
Avalon Consulting, which has a 16-year track record in the consulting business in India, has 91 consultants on board and derives up to 58% of its billing fees from India-based clients in sectors such as the oil and gas industry, automobile components, chemicals and fertilizers, information technology (IT) services and financial services.
Increasingly, the Asia-Pacific region is being seen as one of the fastest growing regions in consulting today, with revenues steadily rising in most markets, according to a report by Kennedy Information.
“For Accenture, the high growth markets are the Bric nations (Brazil, Russia, India, China) as well as Mexico, Korea and the Latin American nations. These are emerging and growing markets, and recording double and triple-digit growth,” says Raghavan. At the end of 2007, Accenture opened its first management consulting centre of excellence in India at the Delhi suburb of Gurgaon, with one each due to come up in Bangalore, Mumbai and Chennai. Accenture, which was the first global consulting firm to set up shop in India way back in 1987 (it was known as Andersen Consulting then), expects to have more than 2,000 consultants in these centres by August.
Nasdaq-listed Diamond Management and Technology Consultants, Inc. too has set up an office in Mumbai. Launched in 1994, the firm has more than 600 consultants worldwide. In India, it focuses on the financial services, telecom, media and manufacturing sectors, and uses small teams of consultants to deliver high-value consulting at high rates as it works typically with very senior management.
Steve Hussey, PRTM Management Consultants India
Everest Consulting Inc. is another niche firm with an India operation and specializes in global sourcing and strategies for captive outsourcing units. The firm has a headcount of about 140 consultants worldwide.
As global firms beef up their India presence, niche firms in the country are also seeing the benefit of building a global brand. Bangalore headquartered Harish Bijoor Consults, a seven-year-old firm, earns 80% of its fees from projects with overseas clients, primarily in the Far East and in Gulf nations. “Building a brand overseas provides leverage that we will use to improve our domestic business,” says Harish Bijoor, founder, who feels niche firms are best positioned to pick up projects that involve both strategizing and long-term implementation. For instance, his firm works on a minimum engagement period of three to five years with a client during which time there is no change in the consultants who are assigned to them.
Consider also the price a niche consulting firm will charge: On an average, billing rates at niche firms are 18-20% lower than at a top-notch firm. For instance, if a boutique firm charges an average rate of Rs25,000 per hour for a senior consultant, the base rate at big-ticket firm will be Rs35,000 per hour. “But it is not price that is driving the market, it is the fact that in a small firm you 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 on strategy and junior associates overseeing implementation,” says Bijoor, who feels more than half the projects handled by firms such as his come from companies that have moved away from big consulting.
The relative experience that consultants at niche firms bring to the table is also a major factor for their growing significance. The partners at Erehwon Innovation, for instance, have more than 20 years of experience. All the consultants on the team at present are senior enough to engage in client facing activity directly.
PRTM Management, too, makes it a practice never to hire fresh talent directly from the campuses of management schools. This is to ensure that all consultants on board PRTM have a minimum of four years of experience.
Clients are increasingly aware of these industry trends. And that is why Wipro plumped for a niche consulting firm such as Erehwon Innovation. “We did not even consider hiring a large global consulting firm for the Quantum Innovation Project although a lot of individual consultants pitched to us,” says Divakaran Mangalath, chief technology officer, Wipro.
The IT company picked Erehwon Innovation based on its track record with innovation practice, and also for its understanding of Indian processes. Erehwon has also worked with big-ticket clients such as Marico Ltd, where it helped design a chain of dermatology clinics, the Kaya Skin Clinics, and also helped create an entry plan for insurance retailer Max New York Life Insurance Co. Ltd when the company set up its India operations.
“Since 2004, we have grown consistently at an average of 40-50% every year,” says Bhupendra Sharma, director and senior strategy consultant, Erehwon Innovation, who describes the work his firm does as pre-strategy consulting, as it involves the generation of innovative ideas that is later followed by strategy creation.
Clients are also looking for a consortium approach to consulting, as in the case of a biotechnology company that engaged PRTM alongside a global consulting firm. “It was the client who put us together on a project that ranged from concept level to implementation,” says Hussey.
Typically, in projects that involve cross-border alliances, consulting firms work in partnership with other niche firms that have specialized legal or government interaction expertise in local markets. But as business becomes increasingly more complex, clients will turn to consulting firms to both protect existing business and expand into new areas.
“Just innovation by itself is not good enough; many companies do alright on that, but the challenge lies in sustaining a flow of creativity,” says Robert Shelton, director and leader of the innovation practice at PRTM Management Consultants.
Clearly, consultants who can do this consistently over a long period are the ones that will win clients.