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Bengaluru: Infosys Ltd and Wipro Ltd, having struggled to leverage their consulting units to win bigger orders, are reorganizing their consulting arms as more clients are seeking their help to improve business operations.

Experts say outsourcing firms that have strong consulting arms will emerge as winners as information technology (IT) vendors battle it out to cross-sell solutions to clients that give more than $100 million in annual revenues.

Nasdaq-listed Cognizant Technology Solutions Corp., which first introduced the so-called three-in-a-box concept a few years ago and claims to have the second largest consulting practice among IT vendors behind Accenture Plc, says it has perfected the operational model, helping the firm grow faster than its Indian rivals over the past five years.

“We have created a unique and highly operating successful model that you could say is the magic sauce behind Cognizant recording massive numbers for the last five years," said Mark Livingston, executive vice-president of the consulting arm at Cognizant. Livingston, who was hired by Cognizant boss Francisco D’Souza in 2008, has scaled up the firm’s consulting arm from a little less than 1,000 consultants to a 5,400-member strong practice. Nearly half of these consultants have been hired from top consulting firms such as EY and Deloitte.

Cognizant’s three-in-a-box approach means the company has at least one consultant, along with a client partner and a delivery director, who is based out of India, for each of its large clients. The client partner manages the operations part while the consultant advises a client on how to improve its current business operations.

“They are tied to the hip," said Sandy Gopalan, vice-president of consulting at Teaneck, New Jersey-based Cognizant.

“Our consulting practice is not standalone. In our model, consultants are more like software delivery sales guys. It’s a matrix model where the consultancy organization reports to the vertical in the business and report to me. So it’s aligned with delivery and we go jointly to market," said Livingston.

Over the last decade, homegrown IT vendors, led by Infosys, Tata Consultancy Services Ltd and Wipro, started to build a consulting practice as they believed it offered an opportunity when large enterprises over the world looked to simplify their existing technology and business operations. Indian software exporters believed that as they would be able outsource most work back home, they would be able to bill their clients lower than the likes of Deloitte and EY.

To be sure, Indian IT firms and large pure-play consulting firms rarely bid against each other as top end consultants are less dependent on back-office business process outsourcing (BPO) revenue and also unlike Indian IT firms, the pure-play consulting firms took small-sized projects. However, software exporters were perennially plagued with the problem of making software code writers and consultants work together as a team.

Cognizant, and Indian firms, including Infosys and Wipro, do not get any significant business in fees from offering thought leadership though these firms club revenue from software application development and implementation when reporting business from consulting practice. So Infosys claims to generate nearly one-third of its $8.7 billion in revenue from what it calls “consulting and package implementation".

But as socially-enabled business process, mobility, data analytics and cloud computing are reshaping the way companies globally have relied on technology for doing business, IT firms say consultants will play a central role to help them grow at a faster clip.

“Strategy without technology is no strategy at all. Now as digital becomes default, clients are simply not buying strategy alone from top-tier consultancies. Every great idea has to have technology as a backbone. This explains how we win in more than 70% of times competing against the top consulting firms. So we are using consulting to help accelerate growth of delivery (of our technology offerings) because we can implement the idea, we can quickly develop a prototype, using design thinking and other things and that is what has helped us," said Livingston.

Recognizing this change, Infosys chief executive Vishal Sikka in March absorbed the company’s Swiss consulting unit Lodestone and merged it with its own small consulting business. Taking a leaf out of Cognizant’s success, Sikka also tasked 100 of the firm’s nearly 3,000 consultants with added responsibility to manage 200 of its largest clients.

Sikka believes consultants will be the spearheads to help make Infosys a next-generation services firm and become a $20 billion giant by 2020.

In an interview after the company reported strong first quarter earnings, Sikka said this strategy was one of the reasons Infosys managed to increase business from its top 10 clients in April-June by 5.7% from the January-March period. In the January-March fourth quarter, contribution from Infosys’s top 10 clients dropped by 1.2%.

Rival Wipro, too, is redrawing its consulting practice although the firm for now does not want to task its consultants with added responsibility of managing key accounts.

“We had a look and have decided that consulting at Wipro will look at three key areas. Business operations consulting, where we can help customers with improving the way they run their business is one. Second is within the IT strategy and operations. And third is organizational change management, which includes setting up shared services and bringing in change at clients’ end," Wipro chief operating officer Abid Ali Neemuchwala said in an interview last month.

This model is similar to the way India’s largest software firm, Tata Consultancy Services Ltd, positions its consulting practice.

“A business consulting layer is key for every IT services vendor’s growth strategy. Separate silos of BPO, testing and infrastructure are not enough. The current battle moves beyond breadth (e.g. $100 million accounts). The new battle is about effective cross-selling of services. This consolidation of services at the account level is accelerating in the market," said Ray Wang, founder of Constellation Research, a technology research and advisory firm. “However, as IT service firms mature, they realize that this is a key driver for future deals. The firm which can service a client with more of their offerings will win in the next three to five years," said Wang.

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