In May 2024, a report that the American consultancy group, Boston Consulting Group (BCG), was to be concerned in the revival technique of state-owned Bharat Sanchar Nigam Limited (BSNL) and that BSNL was to pay BCG ₹132 crore for the consultancy drew a lot consideration. BCG has reportedly beneficial decreasing the workforce amongst different main steps. While this turned a much-talked about information merchandise, this isn’t a one-off occasion. In current years, the public sector’s reliance on the providers of exterior consultancy companies has elevated exponentially — and never simply in India but additionally worldwide. While the total spending of the authorities shouldn’t be accessible for India, there may be some information accessible for different international locations. For occasion, France spent over €1 billion on mental providers supplied by consultancies in 2021, whereas the Australian authorities spent A$21 billion on exterior labour rent in 2021-22.
Need for scrutiny
The case of BSNL has as soon as once more drawn consideration to the contentious situation of the rising affect of consultancy companies inside the public sector. It raises necessary questions on the efficacy and the implications of outsourcing strategic decision-making in the public sector. Given the elevated involvement of exterior consultancies, there’s a want that that is scrutinised.
The central critique by most individuals is rooted of their lack of “skin in the game”. Consultancy companies are given tasks and contracts to offer strategic recommendation however bear no duty for the outcomes of their suggestions. Like on this case, for instance, if BSNL’s fortunes fail to enhance regardless of the implementation of BCG’s methods, the consultancy faces no penalties. This lack of accountability creates a troubling misalignment of incentives. The consultants are rewarded handsomely no matter the outcomes, whereas BSNL — and by extension, the Indian taxpayer — will bear the full brunt of any failure.
Moreover, such an association undermines the very function of hiring exterior experience: to ship tangible enhancements and long-term viability. Also, if you’re paying somebody to unravel your issues with none main accountability, there’ll all the time be some issues left to be solved.
In addition, the over-reliance on consultancies erodes the capability of the state to innovate and handle its enterprises successfully. Over time, this dependence on exterior experience creates a vicious cycle. Instead of constructing inside capabilities, they grow to be perpetually reliant on exterior recommendation — and this doesn’t come low cost.
Impact on state capability, battle of curiosity
This form of dependency has a lot broader implications for the state capability. The abilities and the data discovered by the consultancies on these tasks usually are not transferred to the public officers. In impact, this units up a unfavorable suggestions loop, the place public sector workers lose abilities and institutional data, which means, the subsequent venture or piece of labor will nonetheless want exterior inputs.
The proliferation of consultancy contracts displays a deeper disaster of confidence in the public sector’s potential to manipulate itself as nicely, by implicitly undermining their very own legitimacy. This outsourcing of experience not solely weakens public establishments but additionally creates an unaccountable parallel forms of consultants who wield vital affect over public coverage and useful resource allocation with out topic to the similar democratic oversight or accountability as public officers or political leaders.
Consultancy companies typically serve a number of purchasers throughout industries, together with opponents and regulators, which might create conflicts of curiosity. Their recommendation could also be influenced by these overlapping relationships, elevating questions on the impartiality and the integrity of their suggestions. The battle of curiosity has not too long ago been a lot debated in most international locations resulting in main consultancy companies contemplating breaking their numerous features.
An extra downside is that the aims of public sector enterprises are sometimes very totally different from these of the personal sector. Consultancy companies typically method issues from a profit-maximisation perspective, emphasising cost-cutting, effectivity, and market competitiveness. While these methods may yield short-term beneficial properties, they could not align with the broader public service mandate of organisations. For occasion, BSNL, as a public sector enterprise, has traditionally performed a significant function in India’s telecommunications panorama, significantly in bridging the digital divide and bringing telecommunication providers to rural and underserved areas. The aggressive cost-cutting measures may compromise the high quality of service in rural areas, the place BSNL’s presence is essential in offering inexpensive telecommunications entry. Overall, a purely market-driven technique may divert the public enterprise’s focus from its social obligations, which can primarily undermine its function as a public items supplier.
What will work higher
A greater various, as Mariana Mazzucato and Rosie Collington, the authors of the e-book, The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes our Governments and Warps our Economies, counsel can be to spend money on strengthening the inside capabilities of the public sector establishments. This may contain recruiting and coaching prime expertise, fostering a tradition of innovation, and empowering workers to take possession of the firm’s strategic course. They write, “Because knowledge is not cultivated within state workforces and institutions, a dependency on the ‘expertise’ of consultancies spirals.” By constructing inside experience, these organisations may develop methods that aren’t solely efficient but additionally aligned with their long-term targets and public service mandate. This will assist them reclaim their strategic autonomy as nicely — which will get compromised with an excessive amount of reliance on outdoors the system.
The case of BSNL and BCG serves as a microcosm of the broader debate about the function of consultancy companies in public sector governance, state capability and accountability. There is a necessity for governments throughout the world to rethink this mannequin of governance.
Aasheerwad Dwivedi is Assistant Professor (Economics), Faculty of Management Studies, University of Delhi. The views expressed are private
Published – March 19, 2025 12:08 am IST
