The New Threat to Indian IT

By the Big Four, we mean auditing and consulting giants of the world: EY, PwC, Deloitte and KPMG. 

You see, these companies are no longer just interested in auditing and consulting. 

They also want to go ahead and implement the processes about which they are consulting. 

And that means getting into the tech space. Confused? 

The Big Four firms provide consulting services to businesses, telling them how they can grow, expand and improve their businesses. 

Now, in today's world, these objectives are achieved by implementing tech. 

So, that's what the Big Four now want to get into. 

And logically this makes sense. 

You see, the deal size and the margins are higher for tech services than for consulting services. 

For every one dollar of consulting revenue, you can get $8-10 worth of tech revenue. 

So, why send the client somewhere else? 

Why not upsell your tech services to them and make more money? 

This is exactly what the Big Four companies have been planning to do, so they are now hiring tech talent in large numbers. 

And they're turning to Indian IT companies to poach tech talent.

In fact, 15% of the employees added by the Big Four firms in FY22 were from our top five IT companies. 

Result? High attrition rates in IT companies  (too many employees leaving): 

But why are employees ditching IT firms so easily? 

Simple. When they join a Big Four firm, they get:

Associated with a global brand

A 15%-20% salary hike

Plus, now that Indian IT companies have become so strict about moonlighting, it could further convince a lot of professionals to leave in search of a supportive work environment. 

Okay, so employees may prefer Big Four to IT firms but will clients also do so? Will they go to the Big Four for IT or stick to their current consultants? 

Well, the short answer is "probably, yes." 

You see, these consulting firms already have great relationships with companies' C-Suite (the CEO, the CMO, etc). 

Now, most of these heads may not speak the language of tech. So, they would prefer to stick to the consulting firms to get a better idea of things than the IT firms. 

Plus, consulting firms are fast trying to fill in the gaps. They are rapidly hiring coders or acquiring small-scale tech firms to be able to provide tech services to their clients. 

And if they can offer beyond what current IT firms offer, it's game over for the IT companies. 

Just think about it, if one company could solve all your problems, why would you go to a second company? 

Now, IT companies know this. So, they are trying to play a reverse UNO card on consulting firms. How? 

By getting into the consulting business. Yes, two can play this game. 

They want to do exactly what the consulting firms are doing: enter their domain and steal their clients.  

But, this won't be a cakewalk. Since these IT firms are viewed as tech-first, a lot of their clients may go to the Big Four for consultancy first. And if the Big Four offer them IT services, they may never come back. 

Plus, they need to hire more talent and retain them. 

This could mean significant expenses: a bad move amidst an upcoming recession. 

So, it looks like the Big Four have an advantage here. And they might need it. 

You see, regulators around the world want these Big Four to separate their audit and consulting arms. 

EY has already given in to this pressure and the other firms may soon follow. In this scenario, both arms will need another source to boost their revenues. And they're betting on IT services to get additional revenue.

So, will the Big Four manage to overpower Indian IT firms or will they be the ones tasting defeat? 

Only time will tell.