Target $15 billion, EY advisory business looks to disrupt self

MUMBAI: EY is looking to companies like Amazon for ideas on how to disrupt its consulting model before disruption is forced upon it, as the firm moves toward its goal of developing a $15-billion advisory business by 2020.

The consulting firm, as a whole, reported revenue of $27.4 billion for FY14 with a headcount of about 1,90,000.

The advisory business is currently close to $7 billion in revenue and 35,000 employees, said Norman Lonergan, global vice chair for advisory at EY.

But the consulting firm's business model -of rate-times-hourstimes-people -is in danger of becoming obsolete.

Lonergan said the company couldn't rest on its laurels and expects advisory to grow in a linear fashion to 1,00,000 employees whether organically or inorganically.

“I think of it as how would we do it, if we were disrupting our own business. If you look at what Amazon did, it was growing exponentially, it put Barnes and Noble pretty much out of business and then they disrupted their own business by bringing in the Kindle,“ Lonergan told ET.

“So what is our Kindle moment?
That is what I spend a lot of time thinking about because the current consulting model has a pretty poor shelf life,“ The advisory unit will think of a business that is much more asset based, much more reliant on its own intellectual property and would have to potentially sell more subscription-type services and would even look at whether it wants to employ 1,00,000 people, Lonergan said.

Helping the advisory business more than double revenue in the next five years will be countries like India. When the advisory practice began in 2006, it focused on the developed economies to build cred ibility but now, as those markets mature, focus is moving to countries like India and so is investment.

“We are investing heavily in building out our risk practice and our management consulting prac tice. Going forward, it's pretty clear to anybody who hasn't been living in a cave for the last 10 years, that India is going to be vitally important,“ Lonergan said.

In July, EY opened its cyber forensics and eDiscovery Centre in Hyderabad and has been bulking up teams and expects to see strong headcount growth going forward.EY expects its headcount to increase by 22,000 to 25,000 in the next four years, taking its total employee base to 40,000 plus in 2018, ET had reported in January. This includes staff at outsourcing centres in Gurgaon, Bengaluru, Thiruvananthapuram, Chennai and Kochi where more than 9,000 people are currently employed.

India is not just a low-cost delivery centre. “We are looking at India not just as an outsourcing shared services centre. I am talking about the consulting business we are going to build here with clients that are going to be dominant global players in the years to come. It's a vital part of our strategy,“ Lonergan said.

EY expects 30% of its revenue will come from emerging markets by 2020, and the firm has earmarked $1.5 billion in investment to support that growth across all its different businesses.