Rising to the challenge: Consulting in India
A perspective by N. Venkatram, Managing Partner & CEO, Deloitte India
In conversation with Business India
The evolution of consulting firms reflects the growth and progress of businesses in India. The journey of the profession, as we know it today, progressed from providing basic advisory services in the 1960s and 70s to designing and implementing complex business solutions, thereby truly meeting a business's expectations. It has truly come of age and now competes with the best in the world.
But like most professions in the new world order, consulting had humble beginnings and was originally conceived only as a top-up or additional service to clients. As we flash back to how it kick-started and eventually picked up pace in India, we learn how these consulting firms originally rose to the occasion of their clients' developing and emerging needs - gathering greater momentum after the reforms of 1992.
Before we elaborate further, however, let us talk about the time it all started for the profession in India. A European import, management consultancy was introduced in India much earlier than we may believe. Eastern Bedaux opened its offices in India in 1937. A certain John Moore took the reins of the India operations and renamed it Industrial and Business Consultants (IBCON). In the early days, IBCON's major client was the colonial government and its departments such as the Ishapore Rifle Factory, Pune's military accounts and the Central Railways' Wagons. The primary objective of these services was to advise the government on how to strengthen its war efforts.
IBCON thereafter became International Business Consultants and, like its counterparts elsewhere, focussed mainly on Taylor's Time and Motion Studies. The client portfolio in the postwar and post-independence era included the Bombay Municipal Corporation, The Times of India and the Income Tax Department, besides the Tata group.
The turning point for the profession in India arrived in the late 1960s and early 70s, when businesses in India began to demand specialised services as their scope and portfolios grew at an unprecedented pace. The accounting and auditing firms were the obvious choice for clients to turn to - given their 'trusted advisor' role with them - for guidance and assistance. The initial advisory requests were in areas such as accounting systems, manuals, organisation structures, etc.
Soon after, the accounting and audit firms were expected to match the accelerating evolution of businesses and manage issues arising from the complexities that developed as a consequence. Clients began looking for a more integrated bouquet of services and these accounting and audit firms gained prominence and preference as service providers, given their knowledge and understanding of their clients' business. For example, with the advent of computer systems and businesses gradually shifting their operations to change with the changing times, auditors needed to quickly upskill themselves in order for them hold their ground and, more importantly, retain their clients in the business.
However, what was missing was a service delivery structure. Being more reactive rather than proactive, these firms provided services as demanded, with no focus on specialisation. A few leading accounting firms of the time foresaw this inconsistency and formed specialised management consultancy services as separate divisions within their organisations. These were independent of the traditional audit and tax practices and the teams had their own policies and practices covering hiring, performance assessments, and even compensation structures. The scope of hiring, therefore, inevitably expanded beyond chartered accountants. This renewed focus shifted to acquiring talent from the top institutions with specialised skills in technology, engineering and management. Indians returning after completing their chartered accountancy in the UK also brought in fresh ideas in service delivery, which helped drive the consultancy practices.
Eventually, considering the growing momentum and demand for consultancy services, the ICAI, in the early 1970s, recognised management consultancy to be a natural part of the services that chartered accountants could offer their clients. A later attempt to further organise the profession through the 'Management Consultants Association of India', however, did not find much success.
Traditional audit and accounting firms, thereafter, reset their expectations by aligning to client needs, addressing emerging issues at clients' businesses - all this while strengthening their audit capability by inducting specialised skills. These developments form the foundation of consulting.
The government became a major buyer of consulting services as multilateral institutions stepped up their activities and funding in India. The profession further evolved to meet the demands for capacity building and monitoring the utilisation of funds as well as project monitoring.
Other initial assignments demanded of consultancies included market studies, feasibility studies, project evaluation, and executive recruitment. Besides financial systems, Management Information Systems and design of internal controls continued to gain importance. Further, given the restrictions on access to computer technology solutions from abroad, these organisations developed skills in programming and designing customised packages for India companies.
With the first wave of economic reforms in the 1980s, more consulting firms emerged outside the accounting firms as well. The service portfolio also expanded, requiring deeper skills besides the increasing size of these organisations. The scope of services also developed and they were now being provided for improving efficiencies, restructuring balance sheets, etc.
With the economic liberalisation in 1991, the consulting profession came into the spotlight again, as businesses coped with the rapid changes resulting in significant restructuring of their companies and new business opportunities. The need for advice and consulting services began to grow exponentially. Businesses needed to quickly define their vision and develop strategies that were not just business plans and needed to be re-engineered to compete in the new world. Changing norms of financial disclosure and the need for structured decisionmaking necessitated significant investments in systems and processes including technology. All such changes required external assistance and knowledge, and the consulting profession rose to the occasion to meet these demands. Not only were new skills acquired but extensive training programmes were taken up for their people to enhance their abilities. The increasing breadth of services to be provided also brought in segmentation in the profession with defined specialisation areas.
Organisations that were unable to adapt to these changes withered away, while the market opened up its doors for several new players. India began to see the entry of global consultancy majors such as McKinsey and other strategy players. This period saw a dramatic change in the way consulting services were delivered. Size and scale started to emerge as major factors. Deep specialisation and industry knowledge became critical to address not just the emerging issues faced by businesses but also to look into the future and forecast business plans and models. Speed and response started becoming critical as business needed to move fast to make decisions and implement them. Consulting firms were, therefore, expected to implement their recommendations especially in the IT space rather than simply present documented reports to their clients.
Consistent to the trend, the expanded breadth in the scope of services required even more segmentation. Soon, the profession saw the emergence of specialised areas, such as risk, M&A, human capital, forensic, etc.
As the global players expanded in India, they saw the opportunity in the talent and cost arbitrage that could be leveraged for their worldwide operations - and we witnessed the emergence of global delivery centres. As we know, most consulting majors have sizable delivery centres in India now.
Global consultancy majors also began to see very high-value assignments coming on the market especially in technology implementation, which is where their global delivery centres played a significant role. Owing to its expansive experience, India successfully integrated consulting practices with the globe.
The turn of the century, however, saw concerns developing on the provision of consultancy services and possible conflicts of interest in case of accounting firms. The trusted business advisor roles, where the accounting firms could provide all services, needed new rules of engagement to ensure conflicts did not arise. Globally, most majors divested their consulting practices, and regulations were put in place to restrict the scope of services audit firms could provide to their clients. The accounting firms also adopted self-regulatory codes to ensure conflicts did not arise and public confidence in accounting firms was not hampered. This movement had a similar impact in India as well and once again, consultancy organisations rose to the challenge collectively to ensure continuing confidence of the public in this profession.
Disruptors such as technology, pace of market change, and new regulatory requirements have made the modern business landscape more dynamic as compared to the earlier decades. The business environment continues to change .rapidly and carries new-challenges with every potential disruption. As a consequence of this, consultancies will need to continually adapt themselves. For consultancies in India, this will mean a paradigm shift in their ability to stay adaptive by embracing new ideas and enhancing their skills and capabilities.