Several offshore software services vendors are moving into higher end consulting. What are the drivers behind these moves ?

Opportunity to lead the buying cycle: Consulting projects could lead to a downstream offshore engagement. Getting in early in the decision loop means the ability to lead and influence the outsourcing decision instead of waiting for someone to circulate an RFP.

Better CXO level connect:  A pure IT project centric approach typically limits influence to the middle and senior management especially with large clients. CXO level visibility remains a mirage. Developing high end offerings enables greater visibility to top management.

Address offering gaps: To effectively compete against the likes of Accenture and IBM, a single window, full service offering is critical. Larger Indian companies are realizing that are this also explains the interest in large deals (>$ 50 m) despite the lower margins that come with these deals.

Use the offshore model as killer: Typical consulting companies have plenty of fat. I know because I have worked in one. Partners with obscene salaries, entry level MBA's getting flown around the globe for "induction", lavish dinners and endless pampering. The real business value in many of these frills is questionable. Introduce the offshore model into the picture (both culture wise and  business wise) and things can get interesting. Imagine cutting edge research getting fully outsourced. Even if you staff IIM MBA's you'd still save dollars and get better value for your money.

Enhance brand through thought leadership:  Outsourcers are known to be good at following instructions. Thought leadership still lags behind, partly because of the nature of work. Adding high end consulting to the mix gives the opportunity to change the brand perception. 

Improve business value of offshore delivery: Few outsourcers have the ability to understand and quantify the business value that their work adds. Two development projects with exactly the same technology profile might deliver vastly different business value. The bill rate though is likely to be very similar. A move to high end consulting would help outsourcers understand this value gap better and possibly develop strategies for capturing this value. Nice topic for my next post eh ?