2Q11 KPMG Sourcing Advisory Global Pulse Survey
Global Demand Seen Rising for Shared Services and Internal Process Improvement
Survey Respondents Rank Buyers' Skills and Understanding of Cloud as Low |
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Introduction
KPMG is pleased to release the findings from its KPMG 2Q11 Sourcing Advisory Pulse surveys. These Pulse surveys provide insights into trends and projections in end-user organizations’ usage of shared services, outsourcing, and third-party business and IT services. The learnings are gleaned from KPMG firms’ advisors, who are working closely with end-user organizations that are actively exploring or undertaking shared services, outsourcing, offshore, and other service delivery initiatives, as well as from leading global business and IT service providers.
The advisor and servicer provider Pulse surveys were originally developed by EquaTerra, a leading sourcing advisory consultancy that KPMG* acquired in February of 2011. They are now part of a broader family of KPMG Pulse surveys that include similar surveys focused on specific geographies such as China, functional areas such as real estate and facilities management, related key topics such as cloud computing and HR transformation, and broader business market trending.
Since their inception in 2004, the advisor and service provider Pulse surveys have yielded insightful analyses of current and ongoing market trends in the use, deployment, and delivery of business and IT services. They capture changes in demand, usage levels, future adoption plans, and related key market indicators. They highlight the changes, and the direction of change, in the business and IT service markets as a whole. The surveys focus on where the market is going and how that direction is changing—or not—compared to prior quarters and years.
This edition of the advisor and service provider Pulse surveys reflects business and IT service market activity during 2Q11 as well as projections for the balance of 2011.
Topics explored include:
- Demand and adoption trends for shared services and third-party business and IT services
- Drivers for service delivery improvement efforts
- Challenges to successful service delivery improvement efforts
- Trends in global sourcing
- Trends in cloud computing services
- Outsourcing deal pricing, service provider profitability, and scope
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The following leading global business and IT service providers participated in the quarter’s survey:
- Accenture
- ACS, a Xerox company
- ADP
- Aon Hewitt
- Atos Origin
- Caliber Point
- Capgemini
- Ceridian
- Cognizant
- CSC
- Genpact
- HCL Technologies
- HP
- IBM
- Infosys
- Logica
- Mercer
- Northgate Arinso
- Steria
- Syntel
- TCS
- Unisys
- Wipro
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The Pulse surveys focus on end-user organizations’ global use of shared services, outsourcing, and other third-party services across the following functional areas: customer care/call center, finance & accounting (F&A), human resources (HR), information technology (IT), knowledge process outsourcing (KPO), procurement/ source-to-pay, real estate and facilities management (REFM), and vertical industry business services.
Management Summary
The means through which organizations deliver and manage their core operating services (e.g., IT, F&A, HR, customer care) have changed significantly over the past 25 years. Leading organizations today employ a broad range of service delivery models and techniques, including alternative delivery models such as shared services centers (SSCs), offshore captive operations, and IT and business process outsourcing (ITO/BPO). KPMG firms have developed a model labeled the extended global enterprise (EGE) that provides a framework to design, build, deploy, and manage service delivery globally.
End-user organizations are changing their approach to optimizing their internal operations, and are changing their delivery of internal support using a combination of external providers and internal staff. Fierce global competition and difficult economic times require radical improvements with new constraints that do not allow significant investments and elongated time frames (e.g., massive enterprise resource planning software implementation or 10-year outsourcing deals). There is a renewed focus on optimizing services and driving process improvement across the entire organization using domestic and offshore captive SSCs augmented, extended, and often improved by external service providers. It is no longer an either/or approach.
The value proposition and success metrics for shared services operations are evolving. Leading organizations today receive measureable business value from shared services—above and beyond driving costs down via consolidation, automation, and labor arbitrage—in areas such as IT, F&A, HR, and procurement. These organizations are assuming a more commercial orientation to the business. This involves driving and improving overall business performance as well as competing for internal business on level ground with external service providers.
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The outsourcing market has also materially evolved and matured. A growing number of service providers are demonstrating advanced capabilities enabling them to move up the value chain in terms of services offered. They are better able to integrate into existing business operations to provide more high-value and strategic services. As a result, outsourcing today is moving beyond just an alternative service delivery strategy to become an enabling lever of an overall transformation agenda, and one that is closely aligned with internal shared services delivery capabilities. Commonly, this transformation agenda is targeted at improving global competitiveness by better leveraging global resources, talent, and markets via a global business services model.
What constitutes outsourcing is also evolving. Multi-point global sourcing has become the norm, combining shared services, offshore captive, and ITO/BPO efforts. While the scale and scope of global sourcing continues to expand, many buyers struggle to keep up relative to the skills and capabilities needed to manage global sourcing efforts. Cloud computing is beginning to heavily impact all aspects of outsourcing and the way IT and business services are designed, purchased, and consumed. Cloud computing has the potential to help buyers and providers standardize services while simultaneously improving price performance, long a desired but elusive outsourcing goal.
In light of these continually evolving global business and IT services market conditions, KPMG is introducing an enhanced version of the seven-year-old EquaTerra global advisor and service provider Pulse surveys. These Pulse surveys will track, assess, and interpret market trends and futures relative to organizations’ efforts to define, implement, and manage an EGE agenda.
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Questions or comments regarding the advisor Pulse surveys should be directed to Stan Lepeak, Director of KPMG Sourcing Advisory Global Research, at slepeak@kpmg.com or +1 203-458-0677.
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