Neville M. Dumasia, Partner and Deputy Advisory Leader,
EY (Ernst & Young) LLP
Globally, the last year saw three phenomena (strong continuing M&A activity, political tensions over a number of key conflicts and rising growth rates in emerging markets) impact the consulting spend, with potential to do so much more in the near future. From a geographical view point, the North American consulting market continues to be largely regulatory driven whereas the European market is in the process of managing secession pressures faced within the EU. Consulting in Asia Pacific market is focused on helping companies establishes local/global presence and in Latin America, consulting is being seriously hampered by low commodity prices.
In the context of the Indian consulting market, last year saw a 3% growth. Despite modest growth, the economic slowdown has in some ways become an important driver of demand in India’s consulting market as clients seek help from consultants to improve their top line and operational performance. With the seemingly pro-business government today, the Indian consulting market is expected to grow at 5 to 6% in 2015.Consulting market in India is largely driven by financial services industry sector. The financial services sector continues to be the single biggest industry market for consultants with regulatory being the primary driver. The healthcare and pharmaceutical sector also did well last year as Indian customers continue to demand higher standards of health care. From a solutions perspective, technology dominates the India consulting market representing nearly half of its revenues in 2014. Today, Indian clients demand new technologies to improve their customer experience. There’s a universal challenge around combining technology with consulting and offering a single solution as opposed to letting one lead to the other. Clients demand a blended approach and as a result a number of consulting firms today are developing their technology tools/platforms to provide an end-to-end solution. Operational improvement was the next big solution given that a number of companies were looking to enhance their value chain and drive scalable growth. The third big solution was financial management/risk given the regulatory imperative. Over the last few years, regulation in financial services sector has increased whereby these companies are obliged to invest in areas such as financial management and risk.
The Future Trends Impacting Indian Consulting Market
There are three big trends in my view that will impact the consulting market in India over the next few years. The first being Digitization, whereby companies are looking at exploring opportunities to change products, processes and business models by leveraging digital information. It is estimated that Digitization could be a USD 15 billion market globally every year. In India, opportunities exist to help businesses make most of the mobile platforms as more Indians access the internet via mobiles. A greater proportion of investment in digital will be spent by chief marketing officers and business heads, and less by chief information officers. Digitization will drive innovation; help improve service levels as well as outcomes. For e.g. in healthcare, patient information recorded on smart devices and stored on the cloud will help doctors monitor patient’s status remotely and improve effectiveness of critical care. The second being Simplification. Today companies want to improve productivity instead of cutting costs. Most CEOs have a nagging suspicion that their business could be made simpler and as a result there is an inherent demand for consulting firms to drive the simplification agenda showcasing leading practices, demonstrating proprietary data and using innovation methods to simplify client’s business processes. For e.g. a large retailer, a fortune 50 company underwent a business simplification exercise with the objective of eliminating redundancies, making people more effective and enhancing the company’s business performance.
The third being Outcome-based model whereby premium will be paid on outcomes versus ideas and insights. India remains a tough place to do business given that clients are extremely focused on value with “financial return” being the clear expectation. As a result the consulting companies today have had to rethink their own models in order to derive a profit. Results-based pricing and milestone payments will become more common as enablers to make profitable rates more palatable to the clients.
The Challenge of Being Competent and seizing Opportunities
While the above emerging trends pose a significant opportunity, the landscape in India for consulting firms is extremely competitive. India’s consulting market has a good mix of large and boutique firms. While many of the boutique firms are good at strategizing, when it comes to implementation, they may not necessarily possess all the required capabilities. In today’s environment, clients are looking at firms to implement their strategies such as selecting product distribution channels, retraining the sales force and working with a creative agency on advertising. This is where larger firms are able to support clients from strategy to execution with specialization and scale being key imperatives.
In summary, the Indian business community is on a strong growth trajectory finding new avenues for growth and with the nation’s first majority government in a generation, there seems to be a great deal of optimism for consulting firms as they continue their focus on recruitment, training and specialization.