Tuesday, March 10, 2009

Consultant, heal thyself

Business Standard carries a front page story on how the top consulting firms are yet to get into the black after years of operating out of here. They really can't say they are in it for the long haul or that they are investing for the long term because they have been around for much too long now. McKinsey had a loss of around Rs 2 crore in2007-08, Accenture netted a minus of Rs 18.6 crore in 2006-07 and Bain showed a loss of Rs 16 crore in 2007-08. BCG is marginally in the black as is Deloitte.

There is little doubt that foreign consulting firms are unable to shed the high cost baggage of all foreign firms. Everything about them is expensive- their staff costs, the places they rent (five star hotel rooms often operating as offices for months on end), their travel, flying in experts from overseas offices at huge cost.... All this is passed on to the clients and yet the firms make no money.

Makes you wonder: how do they justify year-end bonuses? And if consultants can't mind their businesses properly, how can we expect them to advise others to mind theirs?


AmitU said...

Sir don't you think it is a simple ploy to evade indian taxation. I am not certain as to what is the company structure, but the lion's share might be getting diverted to parent companies abroad. It's difficult to fathom that they, while passing on the entire engagement costs to clients, incurr costs which exceed revenues of about 250 cr( 2005/6).

Shradha said...

Like AmitU i too think that the "losses" are a direct result of fancy accounting practices!

There is no way they can pay the kind of bonuses they do, if they were loss making entitites!