How big three are the commodification of the consulting business | Mint – mint | Region & Cash

My hypothesis is that MBB (McKinsey, BCG and Bain) will do to Indian management consultancy what TIW (Tata Consultancy Services, Infosys and Wipro) have done to Indian IT – commercialize the sector, but in a good way.

In the 1990s, as the Indian IT sector began to mature, TIW were prominent recruiters at the Indian Institutes of Technology (IITs). These were coveted positions that offered 25% annual salary increases and the potential for immigration to the West.

TIW acted as a graduating school for Indian engineers, preparing them for the ongoing software boom.

TIW was then able to do this because, to borrow a startup term, they hyperscaled. Offshore US dollar hourly rates were in the late 1900s and early 20’s, which provided enough margin for the attractive additions and swanky campuses.

Things started to change in the mid-2000s. As TIW grew, they became mass recruiters on their traditional campuses. This loss of exclusivity dampened their appeal.

Continued pressure on payroll rates, which have barely exceeded $20 abroad, impacted their ability to pay relatively high salaries. They responded by expanding their recruiting network to the next level colleges and relying on procedures to preserve their margins.

This trend continues. Three decades later, offshore accounting rates remain in the mid to late 1920’s. Starting salaries at these companies have barely doubled in two decades, and their recruiters target a very different profile of colleges.

While this may sound negative, this trend has been a major boon for India, which just surpassed $300 billion in IT services exports. This continued expansion of the recruitment pool has ensured that hundreds of thousands of young engineers have graduated from these world-class software refinement schools. This has made them competitive worldwide.

Today, many have started their own companies or are top executives in established IT companies. The standardization of the global delivery model that enabled this expansion with limited billing increases is an insurmountable competitive advantage for the Indian IT industry.

The Indian management consulting industry is experiencing similar trends.

Up until the mid-2000s, an offer from MBB was the holy grail at top business schools. They recruited in only five to six locations and rarely hired more than 25 consultants altogether. Their salaries used to be the highest, and occasional offers from international offices grabbed the headlines.

Today these companies are mass recruiters in a larger pool of business schools. It is not uncommon for MBB to recruit 30 students from each target campus.

There are also several similar companies such as Kearney, Accenture and Deloitte that are hiring similar numbers. Salaries remain competitive, but tech companies like Google and VC-backed startups routinely offer higher salaries. In fact, product management in startups competes with consulting as the preferred choice of fresh MBAs.

These companies also bleed out talent. Many find the constant intensity (and travel) of counseling unsustainable. There are now multiple opportunities in funds, startups and companies that offer competitive pay.

These alternatives greatly value the MBB training and create a lucrative exit path for consultants. It is common for consultants joining these firms to have a two to three year horizon for an exit. It’s this talent bleed that led to a once-blue-blooded company flooding LinkedIn and soliciting resumes in recent weeks.

As with IT, this is a very positive trend for India. We will soon have the largest pool of management consultants in the world. Their education is highly valued and their talents are in demand. These are the professionals who will drive India’s growth as corporate leaders, startup founders and fund managers. Many of them will use their education and connections to set up their consulting firms, which will create a wave of outsourcing of consulting services to India. The impact of this soft power will be massive, perhaps even greater than the impact of Indian IT globally.

This will also lower rates for consulting services, making them accessible to a wider range of clients, not only in traditional markets but also in emerging markets in Asia and Africa. The resulting virtuous cycle for Indian-born global management consulting firms will help attract both clients and capital.

Like IT, management consulting is also being commercialized in India. This is great for India and the world.

Abhisek Mukherjee is co-founder and director of Auctus Advisors.

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