Leading Indian software vendors Wipro Ltd and Satyam Computer Services Ltd aim to more than double their consulting business—which accounts for less than a tenth of their revenues currently—in three years, in an ambitious attempt to take on global giants International Business Machines Corp. and Accenture Ltd that have built and sustained long-term relationships with clients with business consulting engagements.
Indian tech firms have traditionally provided technology consulting to clients such as General Electric Co. and Citibank NA extending their application development offerings. In contrast, leading tech powerhouses IBM and Accenture typically begin assignments with clients earlier on in the food chain: solve business problems with the use of technology.
“The true acid test as to whether (a tech firm’s) consulting business can be successful or not is whether a company has set up two separate set of skills to provide both business consulting and technical consulting. Indian tech firms haven’t been able to make that cut,” says Siddharth Pai, partner and managing director at offshore advisory firm TPI Advisory Services India Pvt. Ltd.
An example of a firm trying to make this transition is Hyderabad-based Satyam Computer Services Ltd, India’s fourth-largest software company, which makes under a tenth of its Rs6,485 crore revenues from consulting. Around 70% of the company’s consulting work remains rooted in technology, while 25% is what Satyam calls “functional consulting” in human resources and vendor management; the remaining 5% is pure-play management consulting.
“Up to 50 people today are pure-play management consultants. We will increase both functional and management consulting business substantially in the next several years. Together, they will occupy between 40% and 45% of all the consulting work we will do,” says Shailesh Shah, Satyam’s head of corporate strategy. Satyam has 1,200 consultants on its rolls.
Consulting, Shah says, is an important line of business for Satyam as it will help the firm go beyond dabbling in just pure-play tech services. “We plan to increase revenues from consulting to 20% in the next three-five years,” he adds.
India’s third largest software firm Wipro Ltd says its consulting business accounts for 6.5% of revenues. The company aims to more than double that number to 15% in the next three-four years. The Bangalore-headquartered firm is building its presence and expertise in management consulting and strategy consulting and is hiring consultants from Accenture, IBM Global Services and Deloitte Consulting, company chairman Azim Premji had told Mint in a March interview.
Infosys Technologies Ltd, India’s second largest software company, had launched its consulting arm Infosys Consulting Inc., to be based out of Dallas, Texas, in April 2004 with an initial investment of $20 million. Its bigger rival, Tata Consultancy Services Ltd, earned round $146 million from consulting revenues in the year ended March 2007. This practice, set up in 2004, today has some 500 consultants, 300 of who are based in India.
Most Indian tech vendors see consulting as a means to help them play a larger role in the decision making process of their clients, which will eventually result in them getting large deals in excess of, say, $500 million.
For example, consulting played an important role in helping IBM bag a $1.4 billion information technology infrastructure management contract from drug maker AstraZeneca Plc in July this year.
“We want to get into the early stage of the clients decision life-cycle. Besides, this also helps us get into those large transformational deals. If we provide advice at an early stage, then we are able to influence their decisions on the big deals,” says Sudip Banerjee, president, enterprise solutions division, Wipro.
Analysts, however, warn that Indian tech firms will have to shift focus and ramp up investment to expand their business consulting division in order to become truly global in nature. They say that it is imperative for these firms to understand that the business-consulting buyer will be very different from the purchaser of IT consulting services.
“Indian firms, while having excellent access to IT buyers of Fortune 1000 companies, do not necessarily rub shoulders with business (service) buyers,” says Sabyasachi S. Satyaprasad, research director at offshore advisory firm neoIT. Some Indian companies have tried to “buy” these relationships by recruiting tens of highly placed partners and consultants from well-known consulting companies in the hope that the past relationships of such hires will help land them deals.
The other challenge facing Indian tech firms wishing scale up and build successful consulting practices has to do with their ability to make investments where it is needed. “Indian tech firms have not shown a willingness to invest outside India when it comes to consulting. Consulting cannot be done remotely. This is something that needs a lot more investment by Indian tech vendors,” says TPI’s Pai. The spending by companies such as Infosys—its consulting unit made a loss of Rs110 crore on revenues of Rs213 crore last fiscal year—is not enough, he adds.