A Report

On
The market size of SME consulting in India

Prepared By : Nauhseen Hashmi

 Consulting Industry in India

At the end of the Cold War, American and other Western corporations employed consultants
from Asian nations, including India, before venturing to explore these new markets.

In India, after the liberalisation of the economy, consultants were hired by Indian companies
that wanted to expand their operations abroad. Now, Indian consultants, particularly those in
the IT world, are most sought after, not only in India but also by world powers, for developing
their global businesses.

Today, TCS, Infosys, Wipro have offices all over the world, and they give US and European
consultancies a run for their money. Among other major IT consulting and outsourcing
companies in India are Tech Mahindra, HCL Technologies, Genpact, Mphasis, and Mindtree.

The Indian consulting story began in the 1990s when C. K. Birla requested McKinsey to devise a
turnaround project for Hindustan Motors. Soon, McKinsey opened an office in Delhi, employing
about 100 consultants.

According to an estimate, there are now over 10,000 big and small consulting firms in India,
6,000 of them in the four metros of Delhi, Mumbai, Chennai, and Kolkata.

According to the Associated Chambers of Commerce and Industry, the Indian consulting
industry is expected to record revenues of Rs. 27,000 crore by 2020. One estimate says that
between 500 and 600 high-value consulting contracts, worth $250 million to $300 million, are
awarded every year by Indian companies, including 30 or 40 projects worth over $2 million
each.

As in many other sectors, low cost was the first major initial advantage of Indian consulting
companies and consultants. But their major clients and their partners abroad have found that
Indian consultants have other advantages, such as professionalism, industriousness, willingness
to learn, and adaptability to technology. Their competitors have started to view them as worthy
equals.

However, they suffer from shortcomings, too. Among them are poor brand equity, experience
in foreign markets, ability to maintain quality, and low level of R&D. But they can overcome
these difficulties and emerge more powerful in the global scenario if they adopt the best
practices in the industry and improve their knowledge resources and data warehousing.

Over the Years, the Indian consulting industry has seen a substantial growth, not only in
terms of size, but also in terms of the service offerings. In recent years, the demand of
specialist consulting services is being immensely sought by customers in India, which has
eventually opened the opportunity for a large number of consultants to help businesses with
expert knowledge base and resources. Due to constantly increasing demand, the industry is
estimated to grow at a compounded annual growth rate of 30 percent to become a Rs 27,000
crores industry by 2020, as per the reports of The Associated Chambers of Commerce and
Industry of India (Assocham).

As of now, there are about 6000 consultancy firms in metropolitan cities including Delhi (25.7
percent) followed by, Mumbai (25.5 percent), Chennai (12.1 percent) and Kolkata (9.1
percent). Moreover, service sector contributes more than 50 percent to nation’s GDP.
Besides, there are around 2000 R&D institutions and laboratories supporting several
domestic consultancy organizations directly or indirectly at a reasonable cost.
This fast growth of this sector in India is largely attributable to improved investment activities
because of low-cost structure, entry of many big players into the Indian market, relaxation of
previous FDI restrictions, and strong capabilities in areas like IT, management, civil
engineering, telecommunication, petrochemicals, power and metallurgy. The steady growth
will ultimately lead to expected rise in hiring activities.
The president of Assocham, Venugopal Dhoot, said that the countries worldwide including
the United States of America, the United Kingdom, China, Japan, Saudi Arabia, and Gulf
nations acknowledge the competency of Indian consultancy firms, with their ever growing
demand in the EU as well. He further mentioned the demand growth of Indian consultancy
firms in view of their competitive edge over their counterparts in the ASEAN countries that
include Germany, Italy and France.
The Demand of Consulting Services in India
Due to the involuntary reduction in workforce, many organizations lack the technological,
strategic and project management abilities to handle market and technical changes in the
ever growing market. Therefore, currently, the business world desperately needs consulting
assistance. It is projected that by the next three years, there would be more than 2.2 lakh
people getting employment in almost 10,000 consultancy firms across the nation.
Owing to the shortage of enough qualified people, some consulting firms have already
devised creative solutions by launching their own accredited MBA programs. Many people
are inclined towards this profession because of its heightened demand and visibility, along
with enticing salary packages.
The Major Strengths of the Industry
The major strengths that set Indian consultancy firm above the consultancy organizations of
developed economies are professional competence, low-cost structure, high acceptability,
flexible thinking, high learning agility, strong interpersonal skills, focused approach and
overall business understanding. Moreover, their expertise in diverse areas and familiarity
with the local conditions are a few other reasons that help them to score over the global
players. However, the Indian consulting sector has some shortcomings, which have been
hindering the export growth such as limited local presence in a foreign country due to lack of
intensified market expertise, low quality assurance, low brand equity, lack of strategic tie-
ups, insufficient international experience of Indian Consultants working overseas, and low
level of R&D. Despite these limitations, the consulting sector in India is responding creatively
to the changing needs of the clients and seeking innovations to meet their future needs.
The adoption of best practices data warehousing, knowledge management tools and internet
ensures the faster growth of this industry in near future. Despite the expansion of the
consulting organizations, the size of individual firms is growing in response to another
industry trend. Consulting firms that are unable to compete on size are trying to fulfill the
clients requirements by outsourcing their project to another firm while maintaining
responsibility for the overall project.
Management Consulting Industry– A Major Contributor
Indian management consulting industry is one of the fastest-growing industries, fuelled by
the advancement in technology and rapid adoption of mobile devices. This sector includes
areas like telecommunications, e-commerce, software designs, hardware systems design and
implementation, intranet and internet schemes and functionality, and website development
and operation. The multiple layers of management consulting sector cater to a distinct set of
needs. TCS, Wipro, Infosys, are a few major IT industries in India competing with major
contenders in the global IT sector.
Indian business and management consulting market picks up growth

Business and management consulting in India has breached $11.5 billion, or Rs. 73,800 crores in
revenues this year, and is forecasted to register continuous growth over the next few years as per
new estimates. Business consulting is a broad field, covering a spectrum of consulting activities
including finance, advisory, management, digitalisation, implementation and strategy, among
others.
Having reached the $11.5 billion mark this year, the Indian business consulting market is due to
book further growth over the next year, with Statista analysis now forecasting the market to rise
over the $12 billion threshold by 2018. The growth is consistent with a trend over the last few
years which has seen the Indian management consulting sector having registered an average
growth rate of 6.75% since 2013.

Of the $11.5 billion market, $1.5 billion (approximately 13%, Rs. 9,600 Crore) is contributed by
the management consulting segment, which includes the strategic functions of the market
(‘strategy consulting,’) as well as a number of other organisational advisory functions. The
management segment has also registered consistent growth over the last few years, projected
to reach around the $1.7 billion (Rs. 10,900 Crore) mark by next year. A number of
transformational factors are responsible for this rapid development, which include a general
wave of digitalisation, as well as the widespread opening up of the Indian economy since the
establishment of the Modi administration in early 2014. The Modi regime has been built on
promises of market-liberalisation and pro-business policies.

Among the liberalisation policies pursued by the Modi administration, perhaps the most
influential has been the significant increase in Foreign Direct Investment (FDI) in the country. The
opportunity for Multinational Cooperations (MNCs) to invest in the Indian market simultaneously
opened up opportunities for strategic and financial advisory firms to help them integrate into the
market efficiently, thereby boosting growth in the consulting industry. Both local as well as
international consulting firms have benefitted from the expansion, as local firms provide
assistance to MNCs in India while large international advisories help Indian firms integrate with
the international market.

According to analysis from Source Global Research, meanwhile, the largest consumer of
consulting services is the financial services industry, at 30% of the total amount. technology,
media, and telecoms (TMT) comprise 9% of the sectors seeking consulting services, while
pharmaceuticals and biotech represent 3% of the consumers. On the other hand, the largest
provider of services in the market by a huge margin is the technology consulting sector,
comprising a formidable 45% of the total market size. This can be explained by the fact that
rapid digitalisation is one of the biggest drivers of growth in the Indian market.

International Position
The rapid growth in the Indian consulting market has placed it amongst the biggest markets on
the international stage. This year, the 6% growth registered by India exceeded the growth rate
of several of the biggest members of the global consulting market, including the UK (5%),
Germany (1%) and the Netherlands (0%). However, data reveals that India still has a long way to
catch up with these economies in terms of total market value. The UK consulting market, for
example, is worth more than seven times the Indian market at $81 billion, while the German and
the Dutch markets are also significantly ahead at approximately $31 billion and $17 billion
respectively.
One of the possible reasons for this significant gap between India and the developed consulting
markets is the divide between the low value in technology implementation and the relatively
high value of strategy work. Moreover, there is also considerable stagnation and deficiency in the
consulting fees in India, which significantly dents the potential profits for consulting firms in the
region. Similar issues are typically faced by emerging consulting markets that lie outside of the
matured western consulting economy.

A number of measures are being taken within the Indian market to potentially remedy some of
these issues. An important driver of these remedies is the technological capability within the
Indian market. While there was growth across the board in the consulting market, Indian
technology firms did particularly well, registering growth of 7.1%. According to analysts, these
firms are increasingly offering end-to-end services, and might push up the standard of technology
implementation within the market. With respect to the fee structures, firms are looking to boost
fees by hunting more sophisticated projects, enhancing their reputation in the market, as well as
maintaining flexibility to manage costs and profits. All in all, despite its challenges, the consulting
market in India seems poised and well-equipped for further growth and expansion in years to
come.
Three trends that will redesign India's consulting industry

A number of major trends are set to change the face of India’s management consulting industry,
according to Lalit Khanna, the Managing Director of New Delhi based SL Consultants. In an article
in the Hindustan Times, the executive consultant outlines three trends that are touted to have a
disruptive impact.
The consulting landscape of India is currently worth around $12 billion, with around $1.5 billion
of the industry’s revenues flowing into the pockets of management consulting firms. However,
after recording strong growth for consecutive years, 6% per annum, India’s consulting industry
now finds itself at the onset of major disruption, as highlighted by Lalit Khanna in his review of
the country’s sector trends. His warning comes at a time when the global industry finds itself in
similar water.
Growth is strong, on the back of internationalisation and the rise of new segments (e.g. digital,
cybersecurity, design thinking), yet at the same time competition in the marketplace is heating
to new heights while client demands are changing faster than ever. According to Lalit Khanna,
who founded SL Consultants – a consultancy that provides management consultancy and digital
transformation services to businesses and public institutions – in 2009, this is best exemplified
by three key areas.

Digital
The first, and perhaps most obvious of these, is digital change. Digital transformation consulting
now makes up a $44 billion chunk of the global consulting industry, with further growth expected
as the advancement of new automated technologies and AI show no signs of slowing down. As
the continual development of technology changes what can be done, so the needs of businesses
keep on changing to accommodate it. Be it healthcare or telecommunications, technology is
greatly impacting how organisations work.

According to Lalit Khanna, “Where startups are adopting digital technologies for bringing
innovative services to its clientele, the well-established businesses are switching to AI, robotics,
and machine-Learning technology for transforming their business culture and bring agility into
their organisations. For serving the counselling organisations, the consultancy firms first have to
adopt the disruptive change themselves and train their workforce enabling them to provide
quick, profitable, and smart solutions to the clients. AI and automation significantly boost the
productivity of the consultants and the customer experience.”

An example of the challenges faced by consultancies in this regard is the usage of AI-like
technologies. While these can enhance the firm’s business processes as well as bring innovation
to the services promising them higher growth, budgeting for and implementing such systems is
no mean feat, while they also exacerbate a digital skills gap already present across the business
spectrum, suggesting training issues will also be a great challenge for consultancies here.

Gig economy
Secondly, the gig economy is well publicised as having reshaped the way many businesses now
work, as on-demand talent is cheaper in the long-term due to its lack of commitments to benefits
such as sick-pay or a pensions scheme. At the same time, firms do not need to continue paying
the wages of an expert outside of the period they actually need them if they hire them on a
temporary business. For consulting firms, it is one of the best ways to tap on the right talent
specialised in a particular area bringing to their clients the much-needed skill set and experience,
but it also comes with a host of issues of its own, including the quality of work, availability of
talent, and the efficiency of non-permanent staff.

“The revenue generation for consulting firms depends on the strategies and services developed
by the consultants in close interaction and collaboration with the clients. They might even require
field-tests for which many on-demand or freelance employees are not ready,” Lalit Khanna said
of challenges consultants tapping gig economy talent might face. “Also, the consulting firms have
started going digital with intuitive platforms and software for which they have to pay a hefty
subscription amount. Misuse or exploitation of such paid tools and software and the
manipulation with data meant to be kept confidential is a threat for the consulting firms. Unlike
traditional employees, the consulting firms have to face a tough time while grooming the flexible
workforce and encouraging them to take a proactive approach to project completion.”

Performance based working

Finally, clients are demanding more and more value for their money, with many entities both
public and private coming under scrutiny for their consulting spending. As a result, many
consultancies are now being forced to work for performance based payments. This means that
rather than the amount of hours for which a consultant labours being considered at the time of
billing, what counts is to what extent the work put in has yielded success in terms of the
objectives and targets of the client.

While this is not necessarily a problem for the world’s largest firms, it disproportionately impacts
on smaller-scale consultancies. It especially places them in a difficult position if a difficult client
does not agree to change the tentative amount proposed earlier, after the consultant achieves
success. The effective implementation of the performance-based billing totally depends on the
sophistication of both the consulting firm and the clients entering into the contract, and can land
either in trouble if they fail to appreciate this.

Lalit Khanna concluded, “Moreover, one of the biggest nightmares the consulting firms have is
by the time a consultant prepares a research report or any strategic plan for the client after
collecting data, analysing it, and pilot testing, those trends and issues become outdated and are
replaced with the new emerging disruptive forces. Such vulnerabilities affect the revenues of
small-scale consulting firms which do not have an easy access to Big Data, Data Analytics, Cloud,
and other cognitive technologies. However, the consulting giants who are the early adopters of
dynamic nextgen technology dominate the market leveraging the relevant insights, automation
devices, and scalable data gathering. They are better able to advise clients on the seamless
implementation of disruptive technology as they themselves harness the potential.”

Conclusion
The Consulting Industry in India is growing at fast pace and soaring new heights all across the
world. This time, it is required to make an action plan to exploit the tremendous potential
available for growth of consulting market. Also, there is a need to strengthen the framework of
Indian consulting industry by embracing innovation, nurturing talent, improving the quality of
consulting services, and enhancing consulting skills.

Despite its predicaments, the consulting industry, in 2014, recorded revenues of nearly $415
billion worldwide, from all types of consulting, including management and strategy consulting,
information technology, other technical and scientific fields, and human resources. Of this, the
US accounted for about $191 billion.

Accounting services brought in an additional $152 billion in that country in the same year.
According to Plunkett Research, global revenues from consulting will soon be around $449
billion. India’s consulting and outsourcing industry, put together, had revenues of $89 billion in
2014.

BUSINESS MANAGEMNT CONSULTANCY IN INDIA

The Big Four

The Big Four provide strategy advice too, but they also focus on implementation, particularly in
the case of their IT clients. This group consists of Deloitte Consulting, Ernst and Young, KPMG,
and Pricewaterhouse Coopers, MarketBridge (sales), IBM, Accenture, TCS, Infosys, Wipro, Tech
Mahindra, HCL Technologies, Genpact, Mphasis, and Mindtree.
REFERENCES

https://www.consultancy.in/news/70/indian-business-and-management-consulting-market-picks-up-
growth

https://www.consultancy.in/news/1675/three-trends-that-will-redesign-indias-consulting-industry

https://reader.elsevier.com/reader/sd/pii/S0970389614000883?token=AF3AD53A45137DEBBEB3483F5
443C33D72A6F8C1A7CBB9DAE64901E3A06B8ABDE2B173078DBFEA5EDB1FC4333C62543D

http://www.careerizma.com/industries/consulting/