Plagued by mature customers, intense competition, and focused up-starts, consulting firms are discovering that consulting, like charity, begins at home.

By Seema Shukla

Heard any good consultant jokes lately? Try this: a consultant is a man who knows 99 ways to make love but doesn't know any women. The Net abounds with cjs; just type the term into any search engine and you'll see the extent to which the rest of the world hates consultants. And loves ridiculing them. Here's one more for luck: what's the difference between God and a management consultant? God doesn't think he is a management consultant.

All good, wholesome, humour. Only the dark suits aren't laughing; under their pin-striped shirts, the coolest of them are sweating. Their accelerated perspiration stems from three factors. One, with a dozen or so foreign consulting firms slugging it out in a market whose size is estimated between Rs 500 crore and Rs 700 crore, there simply isn't enough to go around. Two, with every business becoming an e-Business, management consulting firms have had to re-invent themselves to stay relevant. And three, today, Indian companies are far more mature customers of consulting services than they were in the 1990s.

Thus, on a typically muggy Mumbai day in mid-June, the affable managing partner of Booz, Allen & Hamilton's India practice was spotted on a one-way flight out of Mumbai. The reasons cited by the firm for pulling the shutters down on its India operations were ''regional re-alignments''. Bah!

Thus, when Prathap Reddy wishes to develop a template for Apollo Hospital's global healthcare business, he hires not one, but three, consulting firms-Boston Consulting Group (BCG), Arthur Andersen, and Deloitte Consulting-for a significant up-front fee, and the promise of more IF they deliver.

Thus, no consultant has a good word to spare for a peer from another firm. Undercutting is an industry-wide practice. And corporate espionage isn't totally unheard of. Put simply, things are almost as bad as a cola war.

This town ain't big enough for all of us

Booz, Allen & Hamilton may have been the latest corporate GP to shut shop, but it certainly wasn't the first. Arthur D. Little (ADL), Ernst & Young (E&Y), and BCG, are all in their second inning in India. True, some of them entered the country when the concept of consulting was still in its infancy, and lost their patience waiting for the market to mature. Others realised that their wage bills and sundry overheads were far higher than their revenues and beat a hasty retreat. And this trends is likely to continue. Avers Ralph Heuwing, 34, Managing Director, BCG: ''Those (consulting firms) without a critical mass may find it difficult to establish themselves.''

Putting a number to this critical mass isn't as simple as it looks: numbers are taboo in the consulting business and as one over-zealous gatekeeper remarked to this correspondent, ''we talk about other industries; not our own.'' Still BT estimates culled from several sources indicate that even industry heavy-weights such as McKinsey and Andersen Consulting boast revenues in the region of Rs 100 crore. And some list revenues in the tens and twenties (See How The Big Nine Fare).

It isn't as if the market isn't growing: a growth rate of 25 per cent isn't something to thumb your nose at. It may be less than the scorching pace of the industry in other South Asian countries, but it certainly is far from being insignificant. The catch? Established firms account for most of this growth; the rest have to necessarily wait for their turn. And not many can afford the wait. Agrees Ashok Wadhwa, 39, CEO, Ambit Consulting, and former managing partner, Arthur Andersen: ''This market is only for those with a long-term perspective; it isn't for those who are looking for quick returns.''

The customer isn't a moron

Not any more. India Inc's love affair with consulting firms is over. In the early days of the industry, it was fashion as much as need that encouraged companies to call in the dark suits. A few years and a few disappointments later-remember Arvind with its huge denim capacity wasted on a greying export market moving away from the fabric; or IDBI, which ended up with a report it didn't have a clue on how to implement; or SBI, whose consulting firm didn't think it was necessary to speak to the bank's union(s) before charting a course of action for it-everyone's the wiser.

Expectations, too, have climbed down to more realistic levels. Companies have realised that results are far removed from getting a consultant to study the problem and recommend solutions. Agrees Srinath Mukherjee, 38, Associate Director, Arthur D. Little: ''The Indian corporate has become far more sophisticated. There is a recognition that you need more than strategy to succeed.'' Seconds Sanjiv Anand, 40, Head (India and the Middle-East), Renaissance Worldwide Consulting: ''The colour-brochure approach of advertising successful international assignments doesn't work any longer. Today, clients have to be convinced that the solution being offered to them is implementable.''

That probably explains why Reddy has linked the fees he will pay his consultants to the results they catalyse. And it also explains the reason behind Sterlite Industries choosing Arthur Andersen after getting all major consulting firms to make a pitch, and verifying the firm's capabilities with its other clients. Not surprisingly, the fees are linked to results. And, in the case of dot.coms, they take the form of equity. If the company clicks, the consulting firm laughs all the way to the bank; if it doesn't, well, they had a part to play in its failure. Says Narayan K. Seshadri, 43, Head (Business Consulting), Arthur Andersen: ''Consultants are today carrying more risk. In some cases, they are even acting as angel investors.''

Payments that take the form of equity, though, constitute a contentious issue for consulting firms that are part of audit firms: an equity stake decreases the level of requisite independence mandatory for an auditor. That, say observers, is one reason why firms like Arthur Andersen are trying to set up independent consulting businesses. Only, in the case of Arthur Andersen, which is in the throes of a divorce with Andersen Consulting, this could be difficult.

It doesn't matter how you get it

Competition is the mother of desperation. Anxious for revenues, some consulting firms have resorted to price-based competition. Says Sid Khanna, 47, CEO, Andersen Consulting: ''Some will do anything for a bowl of rice. Especially firms that are part of audit set-ups willing to subsidise costs. This is ridiculous.'' Khanna's chagrin is understandable. Price is a card some firms play as part of their entry strategy. Indeed, in some cases, firms offer to take on a few assignments free of cost so as to convince the client of their capabilities. In many cases, these firms have a huge army of consultants who have to be paid anyway; getting them to work on pro bono assignments, then, is a fairly straightforward exercise in market development.

Most consultants single out KPMG and PricewaterhouseCoopers (PWC) as the prime pro bono players. One consultant cites the example of a 5-month-long assignment one of the big five consulting firms completed for a national bank. The number of consultants who worked on the task? 25. The fee? Rs 1 crore. This, says the consultant, would result in a profit less than Rs 1 lakh. Another consultant points to the large number of consultants on PWC's payroll-close to 1,000-and asks how the company can justify the existence of such a corpus of consultants. Both firms deny these allegations. Refutes Sharat Bansal, 47, Executive Director, PWC: ''We are not price players. If we have 950 people today, it is because we have a strong presence in ERP (implementation) and e-Business (facilitation) where you require large numbers.''

The positive fall-out of competition has been partnering. Explains J. Rajagopal, 45, Managing Director, KPMG: ''The customer today does not want a one-off thing. They are looking at partnerships.'' In several instances, two or more firms have banded to work on a single assignment. Explains C. Srinivasan, 45, CEO, at Kearney: ''Many firms prefer a single window behind which there are many specialists. In India, too, we have partnered infotech and non-infotech specialists.''

Every business is an e-business

Meet the vowel that is reconfiguring the boundaries of the management consulting business. e-(Consulting) is the mother lode of the consulting business and everyone-management consulting firms, traditional software companies like Microsoft, infotech service providers like Cambridge Technology Partners, and and focussed e-Biz consultants like Sapient and Razorfish-wants a piece of the action. Says Partha Iyengar, 39, Country Head, Gartner Group: ''Soon management and infotech consulting will merge.''

In a business environment where every company's predominant concern is ensuring the relevance of its business in the surge economy, consultants cannot afford to ignore the e-word. Explains Srinivasan of Kearney: ''The market is reconfiguring itself to emerge as a cross-functional technology-based one. This gives us more opportunities to help businesses in traditional and non-traditional ways.'' Kearney is counting on its parentage-it is the subsidiary of infotech consulting major EDS-to see it through.

The future of the consulting business in India, however, isn't likely to revolve around Indian businesses. India will eventually become a regional hub for several firms. Avers Bansal of PWC: ''There is a recognition that India can be a strong resource-base; 40-50 per cent of the revenue of the industry can come from foreign projects.''

The solution to the ills that plague the consulting business, then, is a piece of wisdom dark suits dish out to companies focussed on the domestic market: there is a world without.

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