Indian IT services firms’ consulting business is expected to face challenges in certain sectors that are seeing a slowdown in the macro-economic environment.
IT firms have been making inroads in building consulting capabilities. Some of the top firms have made investments in acquisitions to build capabilities, which may now become challenging.
Phil Fersht, CEO and Chief Analyst at HFS Research, told businessline: “Indian IT services firms are likely to struggle in industries suffering in the current climate. For example, Wipro made a major investment in Capco and Infosys in ABN Amro, both of which could prove challenging with the slowdown in the mortgage sector.”
Wipro acquired Capco, a London-based global management and tech consultancy for $1.5 billion — its largest acquisition ever to up its presence in the BFSI sector. Brokerage firms had earlier indicated that weakness in Wipro’s consulting business is also to blame for its sluggish growth.
Infosys had acquired a 75 per cent stake in ABN Amro for 127.5 million euros. Earlier, too, it had made acquisitions of Noah Consulting and Lodestone Management Consultants to build its consulting capabilities. HCL, too, has a digital consulting service line, and had acquired consulting firms StrongBridge Envision and DWS.
Global tech major Accenture, for whom consulting business is a major revenue contributor, in its last quarterly earnings indicated that there is pressure on consulting business as clients have turned cautious.
To be sure, the consulting business is not a significant revenue contributor to Indian IT firms and wouldn’t have much impact on the direct growth momentum. Omkar Tanksale, Research Analyst, Axis Securities told businessline, “Consulting business is not a significant revenue contributor yet. It would take two to three years for the vertical to have a contribution.”
Fersht opines, “Consulting has not been as significant as it should be, but it is on the increase and clients need immediate help in areas like cybersecurity and cloud migration.” However, at large, he says consulting should be strong for Q1 and Q2 next year due to the complexity in the markets, and huge pressures to cut costs in the current inflationary and recessionary economy.
