Respondents Rank Buyers’ Skills and Understanding of Cloud as Low
NEW YORK/LONDON, July 20 – Demand is increasing for shared services models and internal process improvement as organizations look to enhance business performance, according to the KPMG 2Q11 Sourcing Advisory Pulse Survey of KPMG field advisors and leading global business and IT service providers.
Among the advisors surveyed, 59 percent indicated they anticipate greater demand from clients for shared services delivery models, and 51 percent saw more demand for internal process improvement. Meanwhile, outsourcing demand remained flat including both business process outsourcing (BPO) and IT outsourcing (ITO).
Advisors who primarily support global deals or deals in the Americas were more likely to cite demand growth for shared services (63 percent), while those who support clients in the EMEA region were most likely to cite increased demand for internal process improvement efforts (61 percent).
“The value proposition and success metrics for shared services operations are evolving,” said Stan Lepeak, research director in KPMG’s Shared Services and Outsourcing Advisory group. “Leading organizations today receive measureable business value from shared services – above and beyond driving costs. 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 KPMG Sourcing Advisory Pulse Survey was developed by EquaTerra in 2004. Other key findings from the 2Q11 Pulse Survey:
• Service providers are bullish on new deal pipeline growth – Among providers surveyed, 74 percent expect customer demand for business and IT services to increase over the next one to two quarters. Service providers surveyed cited IT as being the strongest functional area in the pipeline (34 percent), followed by multi-tower deals (21 percent) and F&A (16 percent).
Currently, 55 percent of service providers cited pipeline growth over the past quarter, while the balance indicated no material change in pipeline growth levels (note that the Pulse surveys measure change in pipeline growth levels, not absolute pipeline size or revenue levels).
• Improvement in current shared services and outsourcing governance processes and capabilities – Sixty-six percent of advisors cited this as the most common approach taken to improve service delivery capabilities. This was the top cited approach across all major geographic areas, and among both advisors that primarily support business services (HR, F&A) and those that support IT service and operations. The next most commonly cited approach was the use or expansion of information technology outsourcing/ITO (43 percent).
• Banking, financial services and insurance (BFSI) is the top industry group – Financial services companies show the greatest
demand for shared services/outsourcing services, as noted by 82 percent of service providers. At a distant second the energy, utilities, oil and gas, and manufacturing industries tied for second at 32 percent.
Update on Cloud Deployment
Services providers are more bullish on buyer uptake levels of cloud solutions than are advisors. Forty-two percent of service providers polled indicate that their clients have one or more live cloud services deployments in the field and that this would increase to 66 percent in 12 months. Advisors cite much lower adoption rates of 12 percent today and 30 percent in 12 months. This difference is related to views into different user organizations, differences of opinion into what constitutes a “deployment” and what is truly meant by cloud computing (as opposed to relabeled legacy computing models).
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Service providers and sourcing advisors were also asked to assess the skills of typical end-user organizations around various cloud computing capabilities using a five point scale, where one represents “very unskilled” and five represents “very skilled.”
The highest score given by advisors at 2.39 was for buyers’ “Understanding the technical underpinnings of cloud computing - how it works,” while the highest score given by service providers was 2.81 for “Understanding how cloud computing options can complement or supplant traditional enterprise systems and/or outsourcing investments.” Coming in at the bottom of the rankings according to both advisors and third party providers were skills relating to both sourcing and managing cloud computing initiatives.
How skilled are your clients and prospects
at the following aspects of cloud computing?
(Ratings scale, 1=Very unskilled, 5=Very skilled) Advisors
Average Service Providers Average
Managing and governing cloud initiatives and engagements 1.69 2.19
Sourcing and structuring cloud initiatives and engagements 1.81 2.35
Navigating and assessing the cloud computing vendor and service provider markets and landscapes 2.03 2.45
Understanding how cloud computing options can complement or supplant traditional enterprise systems and/or outsourcing investments 2.03 2.81
Assessing and understanding cloud risks (e.g., data, IP, business, reputational) 2.07 2.74
Assessing the near term maturity of cloud computing and its viability to support enterprise computing needs 2.19 2.68
Understanding the technical underpinnings of cloud computing: how it works 2.39 2.73
Source: KPMG 2Q11 Sourcing Advisory Pulse Survey
“It is not surprising that many buyers possess limited cloud computing skills given the immaturity and fast moving nature of the market,” observed Lepeak. “The situation is not dissimilar to the early days of the Internet, when buyers struggled to define and execute on strategies to exploit its business potential. However, it is critical for buyers to ramp up cloud skills and expertise to realize the larger benefits of cloud as a means to enable new business models and ultimately transform business operations.”
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About the KPMG 2Q11 Sourcing Advisory Pulse Survey
The KPMG Sourcing Advisory Pulse Surveys provide insights into trends and projections in end-user organizations usage of shared services, outsourcing and third-party business and IT services, by polling KPMG’s own field advisors as well as more than 20 leading global business and IT service providers. The Sourcing Advisory Pulse surveys were originally developed by EquaTerra, a leading sourcing advisory firm acquired by KPMG in February 2011.
For a comprehensive discussion of the 2Q11 Pulse Survey, please register for the webcast on Wednesday, July 20 at noon (EDT) by clicking here Presenting on the webcast will be Research Director Stan Lepeak from KPMG U.S., U.S. leader of Shared Services and Outsourcing Advisory Cliff Justice, and KPMG U.K Partner Bill Thomas. To obtain a copy of the KPMG Sourcing Advisory 2Q11 Pulse Survey, as well as past survey reports, please go to www.equaterra.com/pulse, available immediately following the webcast.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative (“KPMG International.”) KPMG International’s member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.
KPMG LLP (U.S.)
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