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The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

July - 2008 - issue > Cover Feature

Indian IT Industry: Will it Rain Consulting?

Jaya Smitha Menon
Wednesday, July 2, 2008
Jaya Smitha Menon
“It’s potentially exciting times”, says Kris Gopalakrishnan, CEO of Infosys. He sounds quite optimistic and confident, though the rupee appreciation and the economic recession are looming large over the IT Industry. According to him the industry is churning the cauldron towards yet another growth curve through consulting. His firm Infosys Consulting is charging ahead with strategies for capturing the consulting business.

The efforts began a few years back. The Indian software companies saw the opportunity to gain credibility with the clients about being business advisers. The tier-one companies were the first to drive this trend by trying to design solutions to solve specific business problems, instead of being just a software vendor or service provider who can translate specifications to quality code. They did not want to miss the train like the management-consulting firms did in the 80’s when they missed the technology wave and created an opening for the accounting firms like Price Water House Coopers (PWc Consulting later got acquired by IBM) and the Arthur Andersen (today known as Accenture) to get into consulting. Hence from simply executing technology, the Indian software giants decided to transition themselves to taking ownership for improving the client’s business, by going into the area of consulting.

Some believe that to venture into consulting is to move up the value chain as the major players were not content to remain doing what many in the service industry put it as non-value add IT functions such as cranking out software code or staffing help desks. But, what puzzles the analysts like Sudin Apte, Senior Research Analyst at Forrester is the balance sheets of the consulting divisions of these companies. He says, “To say that the firms are moving up the value chain through consulting is a big hoax. It is a scalable business and there is an opportunity to grow. But I don’t agree that the companies are moving up the value chain, if so it should be reflected in the profitability. Moreover, consulting is a different ball game altogether. It will not suit the typical Indian sales proposition. A lot of consulting has to happen onshore, which means heavy investments in setting up offices and hiring high-level senior professionals. High cost is a contradictory tone to the typical Indian low cost value proposition.”

Even as the industry is speculating on this move, the SWITCH (Satyam, Wipro, Infosys, TCS, Cognizant, and HCL) companies, as they put it, are gravitating towards the highest end of the services spectrum establishing IT consulting practices, setting up offices in overseas markets and hiring senior people locally. They are also offshoring a significant part of the IT consulting business to India. IDC, the market research firm, estimates that worldwide spend on IT consulting will touch around $201 billion by 2010. “By and large, these companies are far behind the top notch players like IBM and Accenture. Consulting is a niche high touch game, which involves building up a strong relationship with the clients. But, of late, the Indian players are chipping off the market share from these traditional players,” explains Arup Roy, Senior Research Analyst, Gartner. “The process-centricity and process excellence, which the Indian players have evolved over a period of time, gives them a competitive edge over the traditional players,” explains Roy.

With the new entrants, the consulting industry itself is evolving into a new system different from the traditional model. The new generation model capitalizes on the Global Delivery Model with changes in enterprise demand and buying behavior, the number and nature of providers, business process outsourcing (BPO), shared services market development, offshore labor arbitrage, and changes in the ways consulting services are priced, sold, and delivered.


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