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An overview of IT Consulting (Part III)

Sep 13, 2007

In our previous two articles, we focussed on the consulting division of Infosys and Satyam. In this last part of the series, we take a look at Wipro and TCS. Wipro Consulting
Wipro, like its peers was also focused on providing application solutions to its client. Its first strategic move towards consulting came in FY03 (May 2003) when it acquired Nervewire Inc for Rs 836 m (US$ 17.7 m) to focus on IT consulting in financial services sector. This was later merged with Wipro’s wholly owned subsidiary Wipro Inc in US. In FY04, Wipro saw its consulting revenues rise from nil in FY03 to 4% of revenues from Global IT services in FY04 and to 5% in FY05. This was mainly bolstered by acquisition of Nervewire.

However, in FY06, the consulting revenues dropped from 5% to 1% as Wipro diverted its focus to Technology Infrastructure Services (TIS) and Testing services. This was also partially due to reclassification of services under consulting and increases in share of R&D and TIS. In May 06, Wipro acquired European retail solution provider ‘Enabler’ for 41 m Euros (US$ 53 m) to focus on IT consulting and implementation services in the booming retail sector. However, the revenues from consulting still remained at 1% of global IT services revenues.

TCS Consulting
TCS traditionally had focussed on ADM and Enterprise solutions and generates almost 65% of its revenues from these two services. Consulting has never been the core area of operations for Indian IT companies and TCS is not an exception to it. TCS in the past used to club its consulting revenues with other services and its only from FY07 onwards it has started disclosing consulting revenues separately.

TCS derives almost 3.5% of its consolidated revenues from global consulting services. To ensure proper delivery, TCS has developed the TCS Way of Consulting methodology and have identified two key drivers for the consulting segment. Firstly, the company plans to leverage on ongoing demand for enterprise transformation and secondly, it plans to ensure that clients cost inefficiencies are met and the compliance needs of enterprise is taken care of.

Looking ahead
As regards Wipro, it has made 9 acquisitions in the past 24 months in different service offerings and verticals. The management wants to make most of the opportunities available in the TIS space and its recent acquisition of Infocrossing validates this thought. Thus, we believe that the consulting revenues will continues to grow but it may not outpace the growth in R&D services and TIS.

Regarding TCS, its biggest win in the consulting arena came in August 2005 when it bagged a project on performance excellence from Bank Negara Indonesia (BNI). The company in currently negotiating a US$ 1.5 bn outsourcing contract from UK based Prudential Plc. With regards to consulting, it remains to be seen how effectively the company converts its identified growth drivers into actual performance.

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