Stan Lepeak, Global Research Director, KPMG LLP Advisory
KPMG recently released the results of its global 1Q12 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. This quarter’s Pulse analyzed general market GBS market activity and trends, reviewed how current economic conditions are impacting GBS efforts, and looked at the increasingly important role cloud plays in GBS efforts.
Results from this edition of the Pulse find that buyers are continuing to diversify their GBS portfolios with an increased emphasis on the use of domestic and offshore captive shared services.
- Sixty-seven percent of KPMG professionals (see first figure), down 4 percent from last quarter, cited improve current shared services and outsourcing governance processes and capabilities as the most common approach undertaken to improve service delivery capabilities. This has been the top rated response for several quarters, and reflects market awareness of the importance of sourcing governance to GBS success. It highlights a maturing GBS market in which buyers are focused intently on improving operational capabilities for GBS efforts already deployed in the field.
- The second most commonly cited approach was internal process improvement or re-engineering efforts, identified by 47 percent of advisors, down 9 percent quarter over quarter. Ranking a close third and selected by 46 percent of advisors was use/expansion of shared services with use/expansion of ITO slipped to fourth.
KPMG firms’ professionals were also polled on the expected change in buyer organization usage and demand levels over the coming one to two quarters across four different categories of business and IT services delivery models employed in service delivery improvement efforts. These categories are BPO, ITO, shared services, and internal process improvement efforts. Looking forward the greatest expected growth is for shared services efforts (see second figure), identified by 60 percent of advisors, followed by internal process improvement, identified by 54 percent of advisors, up 3 percent from last quarter. Expectations for increased usage of ITO rose from 37 to 40 percent, while BPO demand growth expectations rose from 35 to 37 percent of advisors polled.
Outsourcing remains a core GBS portfolio component but the use of shared services is growing relatively faster than traditional outsourcing. In some cases, buyer organizations are pulling back work previously outsourced and placing it into shared services centers. More often though, expansion of shared services represents an ongoing consolidation of operations previously internally managed and distributed across the organization. Outsourcing usage is increasing, however, in more strategic and niche areas unique to specific industries and sectors. Often these deals are smaller but the strategic value they can bring to a buyer is significant and well beyond just saving money.
For more from KPMG on this topic, visit the KPMG Shared Services and Outsourcing Institute.