Scaling the Wall of GBS Maturity: Betting Big on “Big Data”

Stan Lepeak
Global Research Director, KPMG LLP

The pool of organizations participating in this maturity assessment effort includes some of the largest and most mature GBS organizations in the world

KPMG LLP (KPMG) has been conducting an ongoing series of global business services (GBS) assessments in which it works with organizations’ top GBS executives to assess the maturity of their GBS operations across ten dimensions, such as governance, commercial orientation, process ownership, and enabling technology.   Assessed on a five-point scale are both the current state as well as aspiration targeted maturity levels three years out. The pool of organizations participating in this maturity assessment effort includes some of the largest and most mature GBS organizations in the world as well as organizations with smaller or newer (in terms of how long a format GBS strategy and operation has been in place) GBS operations.

The most mature areas of GBS operations across all participant firms, based on average current maturity scores, are services portfolio and strategy. Services portfolio include elements such as functional scale and business unit and geographical scope while strategy includes elements such as integration of GBS in overall business strategy and transformation agenda. These are also the two dimensions with the highest average targeted aspirational scores, though they are starting from the highest current base. The graph below illustrates current and aspirational scores for the largest and most advanced GBS organizations participating in the assessment study, though scores from smaller and newer GBS operations also rank services portfolio and strategy as number one and two.

20150331_MC_blog-graphic

While it is expected that GBS organizations will continue to drive maturity efforts in core areas such as services portfolio and strategy, it is insightful where there are plans to increase investments and accelerate maturity improvement efforts. The average current maturity scores for data and analytics (D&A) are ranked last for all classes of participants in the assessment study. The D&A dimension includes elements such as data and analytics deployment and GBS involvement and capability. The gap between current and aspirational maturity levels is greater for D&A (71 percent expected improvement in maturity level scores in three years) than for any other GBS maturity dimension (average expected improvement is 40 percent).

The scope of D&A usage is primarily inward focused into supporting GBS operations for organizations with lower levels of maturity but more mature firms aspire to, and some today are, providing D&A capabilities back into the organization as whole. The latter may include providing performance metrics and analysis to executive leadership, but increasingly progressive GBS organizations are exploring how, through the application of advanced D&A techniques and services, to support core externally focused activities such as sales and marketing, new market penetration, product and services design, and supplier and supply chain management.

Extending the scope of D&A usage outward from the GBS organization to support the business, especially for external-facing activities, is obviously valuable to the business but also a critical means for the GBS organization to articulate and deliver on a value proposition based on cost reduction and transaction process improvement.   KPMG has seen an increasing number of GBS organizations “hit a wall” at level three maturity, unable to progress beyond delivering (diminishing) cost savings and managing consolidated transactional services. Leveraging D&A capabilities to drive measurable business value is one means to scale this wall.

For more information, please visit our Global Business Services page on the KPMG Institutes site.

In HR, Outsourcing is not Always Transformational
Many companies are on the journey back in house

Robin Rasmussen,
Principal, KPMG Shared Services and Outsourcing Advisory

​Human Resources (HR) is somewhat of a late bloomer when it comes to outsourcing, and for good reason. While ADP has been processing payroll for more than 60 years, outsourcing HR as a whole really did not ramp up until the mid-to-late 1990s.

Like the outsourcing of that period, lower costs and labor arbitrage were seen as the end goals. So not much effort went into creating transformational processes and methodologies—but instead into “your mess for less”—leaving HR outsourced, but not transformed. Unfortunately, in many cases, even the desired goal of reducing costs became just the inverse, with global corporations seeing continuous increases in the cost of HR.

“I told you so”

Recently, we finished a three-year project with a major healthcare firm that wanted to bring HR back in house. Based on that success, many others have followed suit. What we are finding is that when they outsourced HR, they ended up losing just about everybody who knew anything about it. So a number of my clients are reporting they lack controls, processes, and efficiency; they simply do not have the expertise or the readiness to undertake HR insourcing.

Many HR outsourcing contracts are only about seven years on, so it is fresh in the memories of many who worried about losing HR competency internally. Today, they are having to rebuild all that talent by hiring, rehiring, and development. It is a significant change management challenge. So you do hear many folks utter the dreaded, “I told you this would happen.”

Do not repeat the past

We want to make sure it does not happen again, regardless of where the HR function lies. Be it in a Global Business Services environment, several shared service centers, or as a newer, more transformational outsourced arrangement, the key is to develop the right tools, best practices, and methodologies that support a fundamentally modern, self-service, and secure program for HR and payroll.That is exactly what we did for our healthcare client. First, we crafted a sound strategy that supported their business aims and helped them understand where they should go from a service delivery model perspective. Then we helped them design processes and implement SAP accordingly.

To date, it has been deemed by many to be the largest insourcing transformation program. Many others are looking at this example and beginning their own journeys to bring HR back in house. We believe that whatever the delivery model outcome, starting on the journey today is the right way to obtain yesteryear’s HR promises in a very new and very promising way.

 


Robin is an established industry leader with extensive experience in the human capital management, shared services and outsourcing industry. She has over twenty five years’ experience in leadership positions in HR/RPO service providers, HR consulting, and strategic HR roles.

KPMG provides services to help your business embrace change and strengthen performance through proactive approaches to improving the organization and its most valuable asset, its people.

10 Years after the HRO Hype
Where is HR outsourcing today and where should it be tomorrow?

Robin Rasmussen,
Principal, KPMG Shared Services and Outsourcing Advisory

​Human Resources (HR) has not felt this unsettled to me in a very long time—actually since the early days of the big-scale, 10-year, $10 billion outsourcing deals we were doing back in 2000. Today, you have different and more global staffing needs, you have the cloud to provision more quickly, and you have the impact of solutions like Workday. The change has been massive.

Now, all of a sudden, companies that did outsource 10 years ago are waking up, recognizing HR as a priority, and thinking about what to do with HR for the next decade. They know they need to get their strategy right, but when they rub their eyes and look around the HR outsourcing (HRO) landscape, they realize that many of the companies in the HRO business 10 years ago are not there anymore.

HP was a big, early HRO provider, and in reality, it just is not there today. Accenture looks different, IBM looks different, Northgate looks different, Xerox is in the game. Add to that new technology that abounds, and it is a very perplexing time for HR professionals.

Whatever you do, do not mess up payroll

HRO has not been trouble free. Consider payroll. It is one thing when the recruiting system is not exactly what executives are looking for, but miss or mishandle payroll, and it is a crisis. Payroll has historically been an “easy out” to have someone else do. But that was typically on a national scale with someone like ADP. Global payroll is something else entirely. Today, there really is no one provider who can deliver payroll globally. In fact, I was recently in a conversation with a large pharmaceutical company who told me they had nearly 140 different payroll platforms around the globe. Unfortunately, that is not uncommon. We have even heard of an HRO provider who forgot to pay an entire country.

Last in, first out

There are many reasons the big, early HRO models did not come to fruition. HR was the last to the game when it came to outsourcing. IT had been there a long, long time. Finance followed. Even procurement came out before HR. When you think about the touch point a company has with every single employee in the company, it is very concerning to hand it to someone else—even with the idea of savings.

When HRO all of a sudden became very hot, many providers did not have the experience or strength to make it

But when HRO all of a sudden became very hot, many providers did not have the experience or strength to make it. HRO never really adjusted to the one-to-many platform that worked for other outsourced areas. On top of that, the clients wanted to significantly customize, so the providers obliged, breaking the economic model.

So today, we see much thinking going into taking HR back in house. But it is not like it was 10 years ago, either. Companies are seeing a big talent crunch. They are more global than ever. New types of skills and talents are required all over the organization. Truly, it is a different world, and companies must create a different game plan for HR before they take it back in house. There is the old analogy about abandoning ship—everyone gets on the life raft safely, but then what? As many companies’ HR sits on the outsourcer’s life raft, how do they bring it back? That is the question we are answering today.

 


Robin is an established industry leader with extensive experience in the human capital management, shared services and outsourcing industry.  She has over twenty five years’ experience in leadership positions in HR/RPO service providers, HR consulting, and strategic HR roles.

KPMG provides services to help your business embrace change and strengthen performance through proactive approaches to improving the organization and its most valuable asset, its people.

Reorienting HR as a Strategic Partner
Changing the Focus from the Mundane to the Strategic

Bob Cecil,
Principal, KPMG Shared Services and Outsourcing Advisory

​Finding and keeping the right talent is one of today’s biggest business challenges. However, over the past few years, business leaders have relegated many in the HR field to positions of “HR Generalists,” where they handle HR compliance issues along with the office party, expense reports, and other activities—many nonstrategic. While there has been a continual push for HR to be more efficient in the delivery of what they are doing, they have often been viewed as the least valuable of the staff functions.

Your HR doesn’t know…

What is the relationship among
compensation, tenure, and turnover?

How do your pay practices
affect your retention rate?

How do you know if you are
promoting the right people?

What are the characteristics of
the people who are promoted?

How does technology enable the HR
organization to answer these questions?

Analytics and the ability to collate a lot of the information are necessary to create a thriving workforce. What is the relationship among compensation, tenure, and turnover? How do your pay practices affect your retention rate? How do you know if you are promoting the right people? What are the characteristics of the people who are promoted? How does technology enable the HR organization to answer these questions? And has anyone asked?

The Human Capital Agenda

Now that there is more demand on HR to support growth initiatives, we find many are ill prepared. To create a human capital agenda, at a minimum, HR needs to have basic skills around organization design, change management, communications, and basic project management support. But to really get there, companies need to create a target operating model that includes strategic HR for everyone, including HR itself.

The target operating model helps figure out how to best organize the activities within an HR organization so that we can take the HR Generalists and turn them into business partners, while taking the more mundane activities and putting them into shared services or an outsourcing model. With technologies like Fusion, Workday, and other cloud solutions, it is much easier to standardize and streamline across a worldwide system. It also becomes more clear what activities can be consolidated and what should be more near-shore activities in support of the human capital agenda. This consolidates the administrative activities while freeing up the right resources to work on more strategic, more competitive HR issues.

It just gets better

When you transform HR into a business partner, you find yourself obtaining significantly better services and cost efficiencies. Most clients are looking for double-digit hard savings right off the bat. But you also experience more strategic benefits. With the right tools and accelerators, we can get our clients to a target operating model much more quickly than they imagine. No matter the size or specifics of your company, our deep industry knowledge becomes your advantage. We can spot the trends and best practices today to propel you toward a successful tomorrow.

Should Your CFO be Your Firm’s New Knowledge Executive?
The Data Says “Yes” [SlideShare]

Don Mailliard,
Principal, Advisory

In their never-ending quest to improve strategy, operations, IT, supply chain, sales, marketing, and customer satisfaction, pioneering enterprises are discovering a previously unpredicted knowledge champion: their CFO.

For years, CFOs have had access to the data in ERP systems, line-of-business applications, and management reporting tools. Now, with the advent of highly sophisticated business analytics capabilities, CFOs can extend their value across the enterprise by determining linkages and providing data-based insights capable of driving the connection between operational and financial performance.

Consider this: a common manufacturing priority is managing the efficiency of plant utilization, capacity, and backlog. But plant throughput and backlog also have direct ties to revenue forecasts. The CFO can integrate manufacturing analytics to drive the connection.

These types of integrated, analytics-based initiatives can enable significant results. A CFO study conducted by IBM found that those who embraced business analytics over a five-year period showed an average 20-fold increase in EBITDA, a 49 percent increase in revenue, and a 30 percent higher return on investment capital.

Other examples of outcomes achieved by data-driven CFOs include:

  • 30% increase in return on invested capital
  • 20% improvement in working capital
  • 20% reduction in inventory carrying costs
  • 5% increase in return on net assets
  • Nearly 13% reduction in spend

When the right business analytics tools are correctly integrated into purpose-built roadmaps and delivery models, CFOs can be uniquely positioned to identify and institutionalize value-generating opportunities by turning their organizations into data-driven intelligent enterprises.

For more information, please read our white paper entitled, “The Value-Driven CFO,” and visit our website page for CFOs.

Building a Business Case for Global Trade Management

Robert Waldrop
Managing Director – Tax, KPMG LLP

Many companies, large and small, struggle to build a solid business case for implementing a Global Trade Management (GTM) system. Does this sound familiar? Articulating why your organization should allocate precious resources for this type of project is daunting, which is why KPMG LLP would like to invite you to watch a replay of the Webcast we recently presented where we offer insights for building a business case that’s sure to get results.

This one-hour Webcast will highlight the various potential benefits that your organization could gain with the implementation of a GTM system. Learn how to present these benefits to your executive leadership team by categorizing the benefits into several primary categories as well as illustrating how to phase GTM functionality for the purpose of enhancing business value.

Click here to view the Webcast.

Robert is a managing director who leads the sale and delivery of Global Trade Technology within KPMG’s Trade & Customs practice.

It’s Not System Integration, It’s Business Transformation:
Oracle Cloud Takes it to the Next Level

John M. Doel
Partner, KPMG Advisory Services

Oracle has spent the last 8–10 years bringing together the best of market leading applications like PeopleSoft, EBS, Siebel, and Taleo into a single unified Enterprise Application Suite, and with cloud provisioning, they have taken business applications to a completely new level.

Sustainable is so yesterday
From an HR technology standpoint, Oracle Cloud isn’t just sustainable, it’s dynamic. Not only from a technology standpoint, but from a business and employee engagement standpoint. It allows for leveraging mobile to deploy applications to a broader set of employees, and more importantly, unifying their user experience with leading mobile applications across the enterprise as a seamless digital experience. As organizations are competing for top talent in the marketplace, and maximizing their strategic impact on the business, cloud applications are a big part of how organizations support their initiatives to build the workplace of the future.

The reality is that your organization is changing day-by-day, month-by-month, quarter-by-quarter. What you need today may not be what you need next month. So today, it’s not just about the typical cost takeout, reducing total cost of ownership, and other quantitative internal value drivers, but about qualitative, external value drivers such as employee acquisition and engagement—the whole employee life cycle from awareness to retirement.

Systems and business
To avoid system integrator failures of the past, it is important to find a partner focused on business first. A business integrator vs. a systems integrator goes beyond optimizing a particular business function, instead, the business integrator will harness capabilities across the enterprise to ensure business integration equates to optimization, spanning seamlessly across all front- and back-office business functions. Your business integrator will help power your business with optimized technology solutions without adding the complexity and overhead previously necessary with highly customized solutions.

John is a Partner in KPMG’s Advisory Services practice focused on HR and Finance IT Enabled Transformation initiatives, while leading our Oracle Cloud Technology Practice. As a business integrator, KPMG brings HR, finance, sales, and information technology business transformation through our KPMG Powered Enterprise.

 

 

IT Transparency Powers New Business Capabilities in Healthcare

Denis Berry
Principal, CIO Advisory

I spend half of my time meeting with IT leaders and consumers talking about trends and industry practices, trying to understand the challenges and successes around running IT in the healthcare industry. The other half is spent delivering technology and business solutions that help healthcare payors, providers, and life sciences companies improve their IT and business operations.

A common theme I hear from healthcare IT leaders is their desire to be seen as more relevant and strategic. Coincidentally, that’s exactly how the business indicates they want to see IT evolve. Since both constituencies have the same goal, why isn’t that happening? Common symptoms we hear include skill set gaps, credibility, and trust. When we dig deeper into trust, we find IT organizations lack the necessary tools and processes to communicate with their business counterparts about the business of IT. This lack of transparency, or a common language, is really the root cause of the trust issue.

Run IT like a business
Organizations challenge their CIOs every day to create greater value more quickly and show a better return on the investments. Meanwhile, the pace of business and regulatory change in healthcare continues to increase while prospective policy buyers expect new and potentially disruptive technologies to be part of the overall policy package.

These changes put tremendous pressures on CIOs. IT needs to support the business with greater speed, agility, and efficiency, while ensuring quality, compliance, and security. The past few years of reacting to the Affordable Care Act has been a hindrance to advancing the business of IT and, as a result, healthcare IT executives are more likely to perceive themselves as being behind the curve in leading this transformation.

IT organizations must have a team with an integrated set of capabilities that enables leaders to holistically manage the business of IT. These capabilities must then connect practices and information from various areas of IT to effectively enable the business of a technology organization. Running IT like a business creates a transparent environment–both from a delivery and cost perspective–and allows the business and IT to have informed business discussions on technology investments, often leading to better alignment with the business goals and greater return. This transparency, along with accurate IT cost information, is a cornerstone of Technology Business Management (TBM).

TBM is the foundation
TBM is a purpose-built platform for IT that enables a practical, customer-focused approach to IT management with the use of data to analyze the cost of running the business. This sort of transparency provides IT with the insights to have informed discussions about the return and total cost of ownership of potential IT investments and the impact it will have on medical loss ratios.

Healthcare payors have been slow to adopt TBM relative to other industries. Recently, an industry-agnostic TBM Council of more than 600 CIOs and senior IT leaders met to continue the evolution of TBM and TBM standards. Industry specific work groups were commissioned, including one for healthcare that Mike Brady (Kaiser Permanente) and I co-chair.

While other industries have had a head start, healthcare should have little problem advancing in this space, and can reap the benefits by learning from other industries’ transformation journey experiences before they embark on their own.

Denis Berry is KPMG LLP’s U.S. Healthcare & Life Sciences Technology Leader. Learn more about KPMG’s Technology Business Management approach by reading Moving Information Technology from a Cost to an Investment.

Robot Envy, Robot Fear, or Robot Denial?

Stan Lepeak
Global Research Director, KPMG LLP

KPMG recently released the results of its quarterly, global 3Q14 Sourcing Advisory Pulse surveys. These Pulse surveys provide insights into trends and projections in end-user organizations’ usage of global business services (GBS). The learnings are gleaned from KPMG member firms’ advisors, who are working closely with end-user organizations that are actively exploring or undertaking GBS initiatives, as well as from leading global business and information technology (IT) service providers.

One special theme in this edition of the Pulse is the much hyped, feared, and legitimately important topic of robotics process automation (RPA), or the further automation of business services activities traditionally performed by plain old humans.

RPA is a comprehensive term used to define the continuum of technologies that companies may use to automate both business processes and operations. It includes, at one end, the basic automation of parts of a business process (such as auto claim adjudication) and, at the other end, the application of sophisticated technologies involving “cognitive machine processing” and elements of artificial intelligence.

RPA solutions are “software-based” automation toolsets that have also been advancing with various other technology advancements over the past decades, but the key drivers (such as big data analytics, natural language processing, evolution of the “digital corporation,” the rapidly expanding “Internet of things” or IOT,  have dramatically accelerated the advancements. These virtual elements either reside within the IT environment or sit at the “presentation layer”—more often considered the domain of the business user and not the “IT shop.” Examples are IPsoft, Blue Prism, UiPath, InStream, Automation Anywhere, etc.

There is a confluence of technological constructs and technologies that will materially enhance automation over the next 5—10 years and alter world economics.

There have been no material technological developments that have appeared within the last three years that represent a “game-changing event” relative to any RPA platform. However, there is a confluence of technological constructs and technologies that are in front of us today that will materially enhance automation, autonomics, artificial intelligence (“AI”) and machine-cognitive capabilities over the next 5—10 years, which will alter world economics.

Service providers polled in the 3Q14 Pulse survey were generally positive on the impact and importance of RPA (see figure below) and downplayed it as a threat to their firms. This is both optimistic and foolish. Some service providers will co-opt RPA to their financial benefit, for example, in terms of higher margins, and to their clients’ benefit in the form of better and cheaper services. Service providers that are heavily reliant on selling cheap(er) labor with just adequate skills, however, will suffer greatly in the long term as a result of RPA’s expansion. RPA will have a significant long-term impact on the outsourcing market, especially business process services in the customer care, human resources, procurement, and finance and accounting functions. It will further drive the bifurcation of the service provider market between the haves and have nots, though the pace of change will lag market hype. As the outsourcing market evolves labor to skills arbitrage, however, more than a few providers will fall by the wayside.

9272 Fig 1

The (Much Needed and Elevated) Role of the GBS Executive

Stan Lepeak
Global Research Director, KPMG LLP

KPMG recently released the results of its quarterly, global 3Q14 Sourcing Advisory Pulse surveys. These Pulse surveys provide insights into trends and projections in end-user organizations’ usage of global business services (GBS). The learnings are gleaned from KPMG firms’ advisors, who are working closely with end-user organizations that are actively exploring or undertaking GBS initiatives, as well as from leading global business and IT service providers.

The third quarter edition of the Sourcing Advisory Pulse examined how organizations manage their GBS operations from the following three dimensions.

  • Where does GBS leadership typically report into in an organization?
  • How often does a single GBS leader exist and at what level in the organization?
  • Can a single GBS executive leader accelerate driving increased GBS maturity and greater GBS value and if so how and why?

Global business services, or the integrated management and shared services and outsourcing across the organization, has emerged over the past several years a predominate means for organizations to further drive cost out of back- and mid-office operations and increasingly for more progressive and aggressive firms a means to also drive business value above and beyond just cost savings. Yet most organizations that have adopted a GBS model and approach face many challenges in driving increased maturity and benefits beyond picking the initial low-hanging fruit of cost savings. These challenges are derived from fragmentation and duplication of efforts across functions, geographies and business units, weak governance, inadequate supporting technologies, and political and organization pushback against installing end-to-end process ownership.

One enabler to overcoming these challenges is to ensure that GBS organizations have a strategic “seat” at the table. The best means to enable this is to install a single, global GBS leader and elevate this role to a CXO-equivalent position. This GBS executive should focus on driving measurable business value above and beyond cost reduction and be measured against this goal. Organizations that have taken the initiative to develop a centralized GBS organization coupled with a GBS executive who is closely aligned with the rest of the C-suite have achieved marked success in areas such as the following:

  • Developing a clear(er) and holistic vision that is supported by the organization to ensure the initiatives of the GBS organization are aligned with the organization’s overall business goals
  • Spotting opportunities or problems that would have been missed by functions/units operating in isolation
  • Reducing overlaps and inefficiencies throughout the organization
  • Identifying impacts of business decisions of one function on other parts of the organization through centralized data & analytics
  • Changing procurement strategies to address customs and sales tax implications
  • Developing consistent standards across functions and geographies to reduce risk of regulatory compliance failure
  • Enhancing the culture of the organization aiding both requirement and retention of talent.
Very few organizations today, however, have or plan to elevate the GBS executive role to this level (see figure below*).

9271 Fig 1

Enabling this role is easier said than done. Among the many impediments are that there is no precedence for it in most firms, the career path or résumé is not is clear, few in the market have the required skills, and the role will usurp power from many existing executive and operational roles. But just as the role of the CFO, CIO, and CMO have evolved and become mainstream, for organizations embracing GBS and hoping to use it for more than just cutting costs, embarking on the journey to instill a chief GBS officer should start now.

(*Numbers may not total 100 percent due to rounding.)