OCTOBER 11, 2010. With their fees under pressure and merger and acquisition activity still sluggish, management consulting firms are turning to emerging markets like China and India for growth.

The consultants' emphasis on developing markets is yet another shift for an industry that has had to refocus its work force multiple times over the past decade. During the dot-com boom, clients sought e-commerce advice. After Sept. 11, they looked for help with cost-cutting, and then, a few years later, with M&A. During the recession, clients turned again to cost cuts.

This time, consultancy firms are advising Western companies on how to expand in the emerging markets and also helping overseas concerns boost their infrastructure, management and accounting.

Last week, Deloitte Touche Tohmatsu Ltd. announced it plans to spend $1 billion on new hires, development and other strategic investments over the next five years.

For hiring, "China and India will be at the top of the list," Chief Executive Jim Quigley says. He also plans to bolster operations in Southeast Asia, Brazil, Russia and the Middle East.

Demand for management-consulting services in emerging markets is still relatively small. In 2009, the global market totaled $172 billion, with North America at $79.1 billion, China at $3.1 billion and India at $1.1 billion, according to Tom Rodenhauser, vice president of Kennedy Consulting Research & Advisory.

The fees consultants can charge in emerging markets can be as much as 40% lower than rates in the U.S. But the volume of work is growing, and most international firms are making local hires, which helps to offset the lower fees.

On-the-ground staff also helps the Western firms compete against expanding home-grown consulting firms, which provide expertise on legal and regulatory issues, demographics and local market conditions.

For example, Tata Consultancy Services Ltd., a top consulting firm based in India, plans to hire 40,000 people in the year ending March 31, 2011.

G.V. Gopalakrishnan, chief operating officer of Aditya Birla Financial Services Group, a Mumbai-based division of Aditya Burla Nuvo, says Tata's research is improving the company's understanding of India's rural market.

But overseas clients often look to firms like Deloitte for help in such areas as measuring competitiveness, improving cash flow and recruiting. Recently, the consultant worked with a large Chinese telecom company, helping the mobile operator measure its performance against rivals like Vodafone Group PLC. It also served as the auditor for the Agricultural Bank of China Ltd. when it made its initial public offering, Deloitte says.

The Rio de Janeiro-based energy company Petroleo Brasileiro started working with Deloitte in September 2009, getting help developing and managing a $33 billion, five-year offshore drilling project in Brazil.

Mauro Yuji Hayashi, the project's planning general manager, says the company uses local consulting firms for projects like business-process outsourcing, but for strategy advice, he prefers international firms with strong reputations.

For the year ended May 31, Deloitte posted revenue from member firms of $26.6 billion, up 1.8% in U.S. dollars but essentially flat in local currency.

Asia-Pacific revenue grew the fastest, up 9% in U.S. dollars, including more than 20% growth in Korea and India. Deloitte U.S. grew just 3%.

Daniel Marshak, who heads China operations for PerkinElmer Inc., says he uses a combination of local and international consulting firms for accounting, legal and regulatory advice.

In September 2009, the Waltham, Mass., company used that mix to help with its acquisition of Shanghai-based diagnostics company SYM-BIO Lifescience. The company already had an in-house legal team in Shanghai. But consultants helped it negotiate and construct contracts, he says.

Mr. Marshak adds that PerkinElmer, which sells testing products and services to health-care and industrial companies, uses several consulting firms in China.

For accounting, he says, it tends to look to bigger international firms with a local presence. But for legal and regulatory consulting, it uses a mixture of local consultants and larger, international firms.

Ernst & Young will hire at least 38,000 people globally in the year ending June 30, 2011, up from 32,000 a year earlier, in such areas as advising, taxes and auditing.

The firm, which has 141,000 employees globally, has doubled its head count in China over the past four years to 9,000, and it plans to recruit an additional 2,500 employees there in the year ending June 30, 2011, says Chief Operating Officer John Ferraro.

Ernst & Young also plans to recruit 2,500 employees in India and more than a thousand employees each for emerging markets in Africa, Russia, Brazil and the Middle East.

Source: Wall Street Journal
Read the full article on the blog.

This is absolutely right!

Have a look at this link to see a quick look at the consulting landscape in India

Which are the top consulting firms in India?
http://www.consultingcase101.com/list-of...a-pacific/

while reading lost in it.

Did you know that Theory of Constraints is picking up in India in a big way (perhaps not so much in China though).

By the way, this is mostly in the manufacturing/distribution/retail space at present, though it has been successfully applied in healthcare and some services also.

If anyone is interested in this space please be in touch.

Yes , this is an interesting development . I feel after some more regulatory reforms , this trend will gain momentum in India . Thanks .