The last couple of years have seen a slowdown in the breakneck growth rates of software exports. There has been tremendous pressure on billing rates in this period and India’s software services giants have begun to take their first steps on the value chain ladder by offering consulting services, observes Prashant L Rao

Pawan Kumar suggests that fixed price projects vs. time and materials-charged deals, is one strategy for India Inc to move up the value chain

There hasn’t been a lot of good news for the software industry of late. Billing rates have been squeezed and customers are cutting back on expenditure, thus forcing upon the industry the need for soul searching and introspection. However, there is a bright spot.

Pawan Kumar, ex-head of IBM global services India and founder of vMoksha says, “Indian IT services companies have moved up from coding, migration and testing to design, analysis and project management.” Kumar suggests that fixed price projects vs. time & materials-charged deals, is one strategy for India Inc to move up the value chain. “However,” he cautions, “if the sizing, estimation, project management and change management is not mature, it could be high risk.” He also stresses on the need to learn value pricing. “If we charge the same price for a designer as that for a programmer where is the value?” he asks.

Towards consulting
Perhaps the single most significant factor driving IT services companies towards consulting has been the phenomenon of billing rates and margins dropping heavily in the last couple of years, as buyers started calling the shots. Across the industry, IT services companies are looking at consulting as a route to increase visibility. Most IT services giants embracing consulting look at it as a way to garner downstream revenues—implementing IT strategy involves a lot of services work.

“Many of us are taking steps in the right direction. In a couple of quarters, hopefully the Western economy will turn and spending will kick off. Big projects will be launched and we will be in a position to compete head-on with the Big Four. We need to use this time to develop a track record,” says Girish Paranjape, president for
finance solutions at Wipro Technologies.

The reverse phenomenon is also visible. The Big Four aren’t sitting still. Accenture is increasing its head count in India. EDS has similar plans. Consulting firms are finding that there’s more money in implementation work. Essentially, these firms are coming down from their consulting perch, while IT services companies are moving up towards consulting.

Consulting rates are higher and projects are priced in terms of time and materials. Consulting work typically brings double the rates in IT services at the minimum. Premium consulting work brings in over $1,000 person/day.

Downstream benefits
“Large companies come to you with a problem; you start a consulting engagement involving business processes, optimising workflow or some new concept. You study their existing operations and give them a roadmap on how to improve operations suggesting rationalisation, tools and technology. This could result in downstream projects for the consulting firm. There are multiple opportunities on a top-down basis,” says N G Subramaniam, vice president of TCS’s Bangalore operations and head of the Banking Industry Practice.

What does it take to succeed?
Companies have to pick out focus areas and decide if they are going to focus on manufacturing or BFSI (banking, financial services and insurance). Practice lines must have frameworks in place that will allow them to scale up and pass work downstream to other parts of the organisation in a consistent manner. “Consulting thrives on people, frameworks and a knowledge base,” says Dr Anurag Srivastava, CTO of Wipro Infotech.

Then there’s domain expertise. “You need domain expertise to understand what’s best-in- class,” says Anjan Mukerji, country leader of IBM’s Business Consulting Services.

Last but not least, don’t count out the professors. “You should have the right collaboration with academics (TCS collaborates with Harvard) and empanelled external advisors,” adds Usha Srikanth, head of TCS’s retail banking.

IBM BCS
IBM Business Consulting Services (IBM BCS) is the newly established consulting arm of IBM Corporation, formed after IBM acquired PwC Consulting. The world’s largest consulting services organisation, IBM BCS is also India’s largest consulting service organisation. Express Computer examines this giant’s strategy and business model with a view to throw some light on what India Inc has to do in order to succeed in the business of consulting.

IBM BCS has an understanding in key solution areas such as CRM, supply chain and financial transaction management from the PwC Consulting acquisition. At the same time, IBM Global Services (IGS) is an old hand at handling mammoth outsourcing projects worth several hundred million dollars.

Business Process Transf-ormation Outsourcing (BTO), optimising processes along with BPO, is a speciality. IBM is a model for wannabe consulting giants with its ability to handle enormous projects.

N G Subramaniam says consulting firms have multiple opportunities on a top-down basis, as consulting could result in downstream projects for the firm

Services offered

• Strategy consulting—leveraging technology to change business models.
• SCM—APO, production planning, sales, product and material management.
• CRM—customer care, billing
• Human capital solutions—aximise productivity of human capital, set up portals for business to employee (B2E), balanced scorecard.
• Financial management solutions.
• E-business integration—for financial services.

Verticals and solutions

• Industrial—Automotive, Oil & Gas—SCM, PLM, R&D.
• Distribution—consumer goods, pharma, retail, life sciences—SCM, CRM.
• Communications—telecom, utilities—CRM, billing, customer care.
• BFSI—optimising processes for public sector banks, BPO and capturing customer data to classify customers by profitability for private banks, BPO and Six Sigma for foreign banks.

TCS
India’s largest software company, TCS, has been planning its consulting strategy for a little over a decade now. In the early nineties, TCS recognised that to move up the value chain it had to create domain capabilities. The company built up industrial practices focusing on BFSI, manufacturing, telecom and healthcare. At the same time, it also built service practices with expertise in architectural consulting, application development and maintenance.
“For any engagement, technology is not sufficient. You need to add domain capability. For every 5-7 people at TCS, one or two are equipped with business or domain knowledge,” says Subramaniam.

TCS’s industrial practices are empowered to create knowledge bases, which will store reusable business components and prototypes in addition to documents, proposals and charts.

Pricing models:

• Value-based pricing—for the right level of expertise, customers are willing to pay.
• ASP-based pricing—pay for use.
• Risk participation—take a part of the fee up front and the rest comes from a percentage of cost savings that the customer derives. Accounting policies are tough to handle in this model.

“Technology is driving business. In any consulting engagement you have to look at technology solutions and enablers that will make a strategy work,” says Subramaniam.

Services offered

• Architect a customer’s IT strategy, both business and technology.
• System selection—entails lots of practical experience.
• Business Process Outsourcing —initial activity, defining BPO, getting the customer ready for process.
• Business Process redesign /reengineering.

Innovative offerings:
Companies often have huge legacy systems that they don’t want to touch as these systems have business processes and rules embedded into their fabric that are crucial to the business. The Business Innovation Lab at TCS has come out with a technique by which legacy systems can be componentised and business processes and rules aren’t lost while making the transition to a new technology.

Verticals:

• BFSI, manufacturing, telecom and healthcare.

Projects:

• Skandia Bank (Switzerland): TCS came up with the overall strategy for the group’s financial services and e-commerce initiatives. It helped identify product direction, conceptualised a solution, worked with local regulators for getting a banking license and defined banking processes.
• LaSalle Bank, Chicago: TCS did a strategy study on rationalising applications to leverage new delivery channels and provide cost benefits.
• General Electric: TCS suggested an approach of total ownership outsourcing for GE’s fleet services operations.
• CUSCAL [Credit Union Services Corporation (Australia)] : TCS came up with a wealth management strategy.

TCS has undertaken consulting assignments for many Indian companies like Tata Chemicals, the Taj Group, Tata Telecom and Tata Teleservices. It has provided the complete technology roadmap and done the software, hardware selection as well as facilities management for Tata Teleservices.

Wipro Infotech
Wipro Infotech’s consulting services notched up nearly 40 customers in its first nine months. The company’s consulting arm is leveraging its expertise in business practices like Six Sigma and PCMM to help its customers deploy best practices along with technology. The basic premise of Wipro Infotech’s consulting strategy is that it has strong business transformation services and technology. “We have positioned ourselves as being able to give realistic and tangible revenue growth using Six Sigma and PCMM and also technology-enable clients,” says Wipro’s CTO Dr Srivastava.

“Earlier you used to see consultants walk away after making a good recommendation. Our approach differs. With Six Sigma we can show tangible improvements. It is only after one or two cycles of such improvements that we walk away,” says Srivastava.

Wipro Infotech undertakes consulting work in the Asia-Pacific, Middle East and India. It plans to expand its services to the US and Europe too.

Dr Anurag Srivastava says consulting thrives on people, frameworks and a knowledge base

Total Outsourcing Services
IT responsibility of the customer organisation over a large contractual period. WI has bagged two such projects with contracts ranging from 5-7 years.

Wipro Infotech has a separate consulting division with 54 core team members. It leverages the rest of the organisation to form a 140-plus strong team.

Horizontally, Wipro Infotech offers technology and business continuity and risk management services. Vertically, it offers business transformation and BPR.

Verticals:
Financial services, manufacturing, IT enabled services, telecom.

Projects:

• Shaw Wallace: Wipro’s job was to increase organisational efficiency, reduce costs and monitor performance on a daily basis for Shaw Wallace, a leading liquor company.
• Retail organisation in Australia: Sales process improvement and technology direction.
• ISPAT—Six Sigma related process improvement.
• HDFC—rolling out Six Sigma-based organisational improvement programme.

Wipro Technologies
While Wipro Infotech has a separate consultancy service, Wipro Technologies has consultancy services attached to each vertical. The Finance Solutions division started its consulting service six months ago when it hired a practice head from McKinsey. Of Wipro Tech’s Finance Solutions division’s 1,800 employees, a dozen comprise the core consulting team that leverages the expertise of the rest of the group when required. Then there’s a domain consulting group that has another 30-40 members who have domain expertise in the banking and insurance verticals.

Wipro is moving toward a model where its customer facing staff is made up of locals. Deals like the one where it paid $26 million for the energy practice of American Management Systems will be the norm and help the company swell its ranks of consultants, say officials. Wipro Technologies projects that strategy consulting will account for 10 percent of its technology revenue. Though that may not sound like much, its consulting assignments with the likes of General Motors will help create long-term relationships and, in turn, outsourcing revenue.

Projects:

• Wipro recently won a high-level contract from Storage Technology Corp to outsource the design and engineering of a line of tape-storage devices.
• The company has taken over an R&D facility for Ericsson.
• The Lattice Group outsourced its optic fibre network systems integration in the United Kingdom, a $70 million contract, to Wipro.

An insurance company in the US gave Wipro the task of helping it understand the real issues behind its lack of success in fulfilling expectations of its partner insurance agents. Wipro Tech’s strategy team did an eight week study and found that many areas were not a technology issue at all but process or policy related.

Infosys
Infy has been developing its consulting arm for 3-4 years. Its strategy is to use the company’s strength in execution to move up the value chain. “We are not like the Big Four, like IBM or EDS, acquiring companies to get there. We are taking Infy’s strength, its existing and new customers and moving up to very focused execution capabilities,” says Jan DeSmet, vice president for Business Consulting Services at Infosys.

Vijay Sharma says consultants need to be trained on the technological strengths of the company to understand what the organisation can do downstream

Supply chain optimisations or assessment have resulted in large downstream projects in the retail and consumer space for the company.

The core-consulting group is 150 strong. 800-900 people at Infosys undertake consulting work. Its consulting group is growing more aggressively than the rest of the organisation.

Verticals:
Industrial products, consumer, retail and financial services.

Projects:
Infy has undertaken consulting engagements with Monsanto, transportation.com and American Century Services.

i-flex
i-flex undertakes value added services around Flexcube and business process reengineering. “In the last two years, our rates for consulting work have gone up. It has also brought downstream revenues on the IT services side,” says Vijay Sharma, head of i-flex Consulting.

Revenue from consulting is not much by itself. However, consulting lets i-flex deliver complete solutions and cross-sell IT services. Large accounts stay with it and business from these accounts grows in a continuous stream.

i-flex has a core team of 35 consultants with an average experience of 12 years in banking and technology. The consulting division leverages people from the rest of the organisation based on project requirements. i-flex has undertaken consulting assignments in 31 countries (18 countries last year). In Q2 it acquired nine new customers in consulting. i-flex Consulting also undertakes quality assessments for IT organisations.

Each year, i-flex Consulting derives its focus areas from the overall organisational strategy. This year it is focusing on:

• Risk management for BFSI.
• Business Process Reengin-eering.
• Process and Quality Consulting.

Solution Architecture
i-flex Consulting also crafts business strategy and how a company should go about implementing a particular solution.

“IT organisations take a technology angle to consulting. People who get in should appreciate technology. Consultants need to be trained in these aspects and understand what the organisation can do downstream,” adds Sharma.

Verticals:
Banking, financial services and insurance.

Projects:

• Process modelling for the International Monetary Fund, covering lending systems and requirements across countries with the aim of improving operational efficiency.
• Implementing Flexcube across Europe for Citibank, here the consulting team is training users in usage before the product implementation.
• Data Warehousing strategy: i-flex Consulting designed and implemented a data warehousing solution for RBI. The implementation is in a soft launch phase. It aggregates data from 19 departments across 300 systems. Most central banks go in for data marts, RBI has gone in for a central data warehouse.
• Kuwait Stock Exchange: i-flex is helping it select a solution for stock exchange operations. As i-flex doesn’t have a product in this space, it can offer package selection.
• Islamic Bank: Telephone banking. Study, strategy for all centres, solution selection, project management for implementing a call centre.
• European banks are required to implement Basel II solutions by 2006. Each bank has a capital adequacy requirement. If risks are covered well, the bank has a lower capital adequacy requirement. i-flex Consulting did the requirements work for a German Bank. As a result, i-flex is developing a solution for the bank. This is a case of downstream revenue accruing as a result of domain expertise.
• The African Banking Corporation (ABC) of Zimbabwe had acquired banks in different countries with varying technology platforms and processes in place. i-flex did Business Process Architecture work to define a framework across the five countries ABC operated in, bringing down cost and improving customer service in the process. The framework will handle future acquisitions as well. Right now i-flex is implementing change management.
• CMM assessments: Cosdac the Korean Stock Exchange, Powerice in China, Amsoft and BlueStar (CMMi) in India. In places like Brazil or China, i-flex Consulting works through interpreters. This kind of project helps understand non-English speaking markets from an organisational perspective.
• Bank Verlag (BVK): This entity offers its member banks shared services. i-flex Consulting is helping devise an internal rating system for corporate and retail lending. The framework will let banks use a common system.

Cognizant
Cognizant has extended enterprise consulting and transformational outsourcing services to existing customers and used it as a point of entry to win new customers. Cognizant’s entire executive management is based in the US and Europe, which helps it build CXO-level relationships. The company recruits senior level consulting folk with over 15 years of experience from the Big Four consulting companies and end-user organisations. Its leads in CRM and e-business, Peter Grambs and Sean Narayanan, are from Booz Allen and Hamilton; Cognizant’s CTO and chief architect are from Farmers Insurance; and the CIO is from First Data Corporation.

According to Jan DeSmet, Infosys' strategy is to use the company's strength in execution to move up the value chain

Enterprise Consulting is an integral part of Cognizant’s business. Its solutions start from consulting and extend to application development, application maintenance and BPO. Cognizant believes that any assignment starting from consulting will have a downstream effect and will lead to providing application development and maintenance services and vice-versa.

Transformational outsourcing services includes application portfolio analysis and rationalisation, performance rescue and save our systems (SOS), and digital security and forensics. Its Enterprise Consulting practice includes program management, CRM, ERP, business intelligence and e-business solutions.

“Our portfolio analysis and Rationalisation service helps organisations maximise savings by quickly identifying all systems suited to offshore outsourcing and then further reducing costs and processes by eliminating redundant systems,” says Deb Mukherjee, CTO for Cognizant.

Projects:

• Metlife: Transformational outsourcing and enterprise consulting solutions.
• Sallie Mae: Portfolio analysis and rationalisation services.

Cognizant helped the company inventory its capabilities and identify opportunities for cost efficiencies and performance improvements. Cognizant also helped Sallie Mae archive a large knowledge base that is frequently tapped in the decision-making processes.