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April 23, 2007
The Indians Wrestle with Business Consulting
The earnings reports turned in by the top Indian tech outsourcing companies over the past couple of weeks are mighty impressive. While demand growth is slowing for outsourcing services in general, the top Indian firms are actually accelerating their revenue growth. There are a bunch of reasons for this: they keep broadening their portfolios of services, they get additional jobs with customers they??e already working for, and they keep climbing up the value chain. The Indians have been doing classic systems integration work for years??ostly installing big complex software packages from the likes of Oracle and SAP. But, to gain the kind of sway with customers that the best of the Western tech services outfits enjoy, they have to build up their consulting capabilities and handle more transformational engagements. This has proved to be a serious challenge.
When it comes to business or solutions consulting, Infosys seems to be the farthest along??hough not in the way it originally expected. Three years ago it set up a separate business consulting organization, Infosys Consulting??ormed around a cluster of veteran consultants from Deloitte and other Western outfits. But, building a business consulting capability has come slower than the company?? leaders hoped. When they established their consulting unit in early 2004, they planned on ramping up fast and quickly becoming a full-service outfit like Accenture.
But, demand for that style of service offering was weaker than expected. Revenues remain small and the unit is still operating at a loss. So, instead, the company has settled on a different model??nd that one seems to be working pretty well. Today, while there are fewer than 300 business consultants in the consulting operation, Infosys has built up strong vertical IT practice units addressing different industries??nd it has about 7000 process and technology consultants in these organizations. They work closely with the business consultants on engagements were clients are transforming the way they do business.
Steve Pratt, chief executive of Infosys Consulting, explains that the traditional business consulting approach clashed with Infosys?model and value proposition. “At Deloitte, a good day was to get a client to pay more. We’d high-five each other. But at Infosys a good day is when we can figure out how to charge the client less. And we’d high-five each other for that,” he says. The basic rule at Infosys Consulting became to not have high-priced consultants on-site at customers’ office if that work could be done just as well by business-solutions specialists operating out of India.
This model helps Infosys get contracts that call for a combination of on-site consulting and offshore business-process transformation and IT work. Example: Equifax, the Atlanta-based financial-services company, six months ago hired Infosys to help overhaul its sales organization. This job included installing Siebel Systems customer-relationship management software, retooling the company’s sales processes, and strategic consulting. “They’re racing to the top into the business process and consulting areas,” says Rob Webb, chief technology officer at Equifax. “They have the industry expertise and the software expertise and the scale to do this on a global basis.”
One of the major challenges of Infosys’ new chief executive, Kris Gopalakrishnan (who takes over from Nandan Nilekani in June), will be to infuse the consulting mentality ever deeper into the company. When I visited with him in Bangalore late last year, he told me that Infosys’ big opportunity is to help its clients make the transition to being truly global. “Offshore outsourcing is only one part of the puzzle,” he said. “If you want to take full advantage of outsourcing and take advantage of globalization, you have to help organizations make the transition.” He said Infosys is on the way to being a very different organization, but he has to hire differently and retrain the entire sales force to be more business-solutions orients. He said only about 15% of the company’s work had made the switch-over.
It will be a long time before Infosys completes the transition and becomes a truly consultative organization, but at least it’s on the way.
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Been following your coverage on the Indian Tech sector for quite a bit now. One aspect of the play that's worth a mention is how these outfits utilize their own prescriptions to become more efficient all the time.
Infosys for example has reduced the cost of delivering HR Services by implementing a robust set of process driven metrics and tools to enable routing of most of the "routine" part of HR Transactions to its BPO arm, thereby freeing up its HR team to work on strategic initiatives like talent sourcing & development.
We probably need a new term to describe this phenomenon - Shared Services, Outsourcing and such other terms don't do this justice.
It would be an interesting case study to see how process efficiencies are providing the leverage to stave off the salary increases, rupee appreciation and other such monsters.
Posted by: RN at April 23, 2007 06:10 PM
An interesting blog and analysis. Though I will not comment on the facts and figures you quote, I completely agree with the fact that offshore outsourcing is only one part of the puzzle….just as even IT is just one part of the ‘puzzle’ that businesses work to solve, while working to maximize shareholder wealth, and/or meeting their other goals.
Posted by: Mohan at April 23, 2007 07:08 PM
My sense is that the Accenture's, IBM's, and Capgemini's of the world will master offshore outsourcing long before the Indian outsourcers master business consulting.
Outsourcing is a much easier business to learn than business consulting.
Posted by: Mark at April 29, 2007 12:19 PM
If youmust taste the good tea makers, goto India. The spices etc are great. Here comes the flavours of all types including the IT. In fact the Indians are leaving Silicon Valey to go back to India as there is big scope for them in India. Let me explain. The salary they get in USA is all chopped off in taxes etc leaving them with expensive supermarket shopping. In India the milk, eggs , bread is round the corner and in heaps. So what hey earn is enough to save now. That was the yesteryear that USA paid well they saved. No more.
Posted by: Firozali A.Mulla MBA PhD at May 2, 2007 08:10 AM
What Kris wants and what he will get has a deep valley in between.
Let us see what he must do:
1. Re-train existing workforce to consulting mindset
2. Hire differently
Let us see the pragmatic side to these:
1. Once re-trained, that staff will no longer want to remain in Infosys - incentives are simply not well-aligned in the firm. There are no stock grants or options in the company anymore and the effect of that is seen on the company's attrition rate directly.
Another constraint on re-training is decision on who to re-train. With a low-cost operations mindset, there are org-leaders in such places which completely shunt off the talent and its latent potential.
Jack Welch clearly mentioned that for a company to progress they need to have a different slopes of progress for folks who have different degrees of expertise in their skillsets. Otherwise, it is a communism at workplace and employees barely have incentives to perform better. Indian service providers suffer from this communism as a fixed number of years are required to promote and the promotions are barely based on your skills/abilities.
2. Hiring differently in an employee's market such as the one in India is difficult. Besides, if you go to the top B-schools in India, noone sees Infy jobs in good light as Infy does not open up good positions for these folks. The usual offers are typically a box-package. Creative methods are required for hiring if they want to become a consulting firm.
Until Kris addresses these issues with implementable solutions, I dont see how they will climb up the value-chain which they keep on re-iterating quarter after quarter to the shareholders.
Posted by: Manik Patil at May 25, 2007 03:09 PM