The latest trends and technologies driving GBS maturity

Transcription

1 The latest trends and technologies driving GBS maturity KPMG Global Insights Pulse 1Q 2016 Pulse Survey Results Thursday, 19 May, 2016

2 Webcast participants Stan Lepeak Director Global Research, Management Consulting KPMG LLP (US) David Brown Global Lead Shared Services & Outsourcing Advisory, KPMG LLP (US) Liz Evans Managing Director, Management Consulting KPMG LLP (US) 2

3 Administrative CPE regulations require that online participants take part in online questions Must respond to a minimum of four questions per 50 minutes Polling questions will appear on your media player Post webcast survey must be completed Results will be reviewed in the aggregate; no responses will be tracked back to any individual or organization To ask a question, use the Ask a Question box on your media player Technical issues: use the? button in the upper-right corner of your webcast player to access our new online help portal If this does not resolve your issue, please submit a question through the Ask a Question box, and you will receive a reply from our technical staff shortly in the Answered Questions box. 3

4 KPMG s shared services and outsourcing advisory practice KPMG has the ability to support member firms clients transform enterprise services and help improve value, increase agility and create sustainable business performance. Who we are The Shared Services and Outsourcing Advisory practice brings a specialized team of more than 1,000 professionals within KPMG s global network of independent member firms operating in 155 countries. We help clients design, build, and manage information technology (IT) and business processes across the enterprise. What we do We help clients align their business strategy, organization and execution to enable them to manage the entire IT and business process life cycle improving business performance, and laying the groundwork for genuine business transformation. How we do it We apply focused research, automating tools, proprietary data, clear business acumen, and a forward-thinking mind-set to provide timely, objective, actionable advice and practical approaches for clients. 4

5 Polling Question 1: In which of the following industry groups does your organization operate? (Please select 1) Business or IT service provider KPMG employee Financial services Diversified industrials/manufacturing Energy and natural resources Healthcare and pharmaceuticals Retail consumer goods, Food and beverage Technology Government/Education Other 5

6 KPMG Global Insights Pulse The surveys are a quarterly review of global business services (GBS) market trends and individual observations from the front lines. Input sources: Topics evaluated: Primary functional focus: KPMG sourcing advisors 12 leading global business, IT, and cloud service providers KPMG market research Drivers for GBS usage Demand and buying patterns Deal attributes Thematic topics for each Pulse Survey The role of the GBS executive GBS governance Update on process and cognitive automation Call center/customer care Finance and accounting Human resources Information technology Procurement Real estate and facilities management Vertical industry BPO Emerging BPO/KPO functions Focus on performance, trends, and futures Launched in 2004 by EquaTerra* Part of a growing family of KPMG Pulse market research studies * KPMG LLP (US) KPMG Holdings Limited (UK) and KPMG International acquired the business and subsidiaries of advisory firm EquaTerra, Inc. in February

7 1Q16 Global Insights Pulse Survey results:

8 Summary key findings There are a variety of means organizations can employ to drive increased maturity levels for their global business services operations thereby furthering meaningful and measureable business outcomes. Three key paths to support this approach are promoting and enhancing the role of a single, global, GBS executive leader, improving the capabilities for conducting GBS governance, and adopting and exploiting opportunities with process and cognitive automation to both improve the efficiency but more importantly the effectiveness of GBS operations and capabilities. 1 GBS 2 market trends The role of the GBS executive 3 Governance best practices for GBS 4 Process and cognitive automation adoption trends 8

9 GBS market trends

10 Demand dashboard Service providers: Pipeline growth last quarter 65% 72% 65% 67% 69% 60% 31% 33% 54% Advisors: Demand increase by service delivery model next 1 2 quarters 33% 33% 46% 55% 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 4Q15 1Q16 BPO ITO Shared services Internal process improvement Service providers: Demand next 1 2 quarters 4% 39% 57% Down Flat Up Source: KPMG Global Pulse Survey 4Q15 Advisors: Top functional focus areas for service delivery improvement efforts IT F&A HR Data & analytics Procurement/source to pay Customer care Supply chain All areas, including IT 13% 20% 18% 25% 35% 35% Note: Numbers may not total 100% due to rounding. 51% 49% 10

11 Advisors: Top approaches to improve service delivery capabilities Internal process improvement/re-engineering efforts Improve current SSC/outsourcing governance Use/expansion of SSCs 42% 51% 48% Investments into cloud computing services Investments into/improvements to enterprise software Use/expansion of ITO Use/expansion of BPO Insourcing work previously outsourced Use/expansion of offshore captive SSCs 14% 31% 30% 25% 24% 23% Investments into process & cognitive automation 8% 0% 20% 40% 60% 80% 100% 1Q16 1Q15 1Q14 11

12 Polling Question 2: How has your or your client organization(s) appetite for shared services and outsourcing changed over the past 12 months? (Please select 1) Relative interest in/use of outsourcing has grown/increased compared to shared services Relative interest in/use of shared services has grown/increased compared to outsourcing No change in interest/use of one service delivery model compared to the other N/A, don t know 12

13 Advisors: Demand by industry 46% 30% 25% Banking, Financial Services, Insurance Pharma/Biotech CPG, Food & Beverage, Retail, Wholesale 18% 16% 15% Healthcare Energy/Utilities, Oil & Gas Manufacturing 12% 12% 8% 7% Govt (Fed, State, Local), Education/Non-Profit No one specific sector/vertical industry Telco Transport & Logistics Source: KPMG Global Insights Pulse 1Q16 13

14 Polling Question 3: What is your or your client organization(s) top preferred means to improve global business services delivery capabilities? (Please select 1) Improve governance and management capabilities of existing efforts Internal process improvement/process re-engineering efforts More use of ITO More use of BPO Investments in IT cloud, enterprise systems, data analytics, etc. All of the above Less use of shared services and outsourcing N/A, don t know 14

15 Advisors: Demand growth by service delivery model Advisors: Demand by service delivery model over the past 1-2 quarters BPO 11% 63% 26% ITO 9% 63% 27% Shared services/ssc 6% 55% 39% Internal process improvement 3% 47% 50% 0% 20% 40% 60% 80% 100% Advisors: Demand by service delivery model over the next 1-2 quarters BPO 9% 58% 33% ITO 7% 60% 33% Shared services/ssc 6% 48% 46% Internal process improvement 2% 43% 55% 0% 20% 40% 60% 80% 100% Down Flat Up Source: KPMG Global Insights Pulse 1Q16 15

16 Demand by service delivery model: net change in demand (Next 1-2 quarters) net change in demand (Up-down responses) 70% 60% 50% 40% 30% 20% 10% 0% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 4Q15 1Q16 Source: KPMG Global Insights Pulse 1Q16 Internal process improvement Shared services/ssc ITO BPO 16

17 Service providers: pipeline growth last quarter 38% 31% 33% 55% 76% 61% 68% 61% 78% 60% 76% 65% 72% 65% 67% 69% 60% 54% 52% 62% 50% 45% 32% 32% 42% 36% 36% 29% 32% 24% 21% 35% 33% 31% 19% 24% 3% 3% 3% 10% 17% 4% 8% 6% 8% 4% 8% 4% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 4Q15 1Q16 Down About the same Up Source: KPMG Global Insights Pulse 1Q16 17

18 Service providers: pipeline growth next 1-2 quarters 74% 59% 45% 61% 51% 59% 59% 68% 65% 67% 72% 50% 50% 63% 52% 62% 50% 57% 24% 35% 52% 39% 49% 27% 41% 32% 25% 33% 28% 46% 50% 31% 48% 39% 50% 39% 3% 7% 13% 10% 3% 4% 6% 4% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 4Q15 1Q16 Decrease Remain the same Increase Source: KPMG Global Insights Pulse 1Q16 18

19 Service providers: top functional areas of demand Vertical industry specific services IT 50% 50% Bundled business functions with IT F&A Data & Analytics Bundled multiple business functions 42% 38% 33% 29% HR 17% Procurement/source to pay 8% Other Customer care 4% 4% Source: KPMG Global Insights Pulse 1Q16 1Q16 1Q15 1Q14 19

20 Service providers: demand by industry (Top 10) Banking, Financial Services, Insurance 67% Healthcare 50% Manufacturing Energy/Utilities, Oil & Gas CPG, Food & Bev., Retail, Wholesale 33% 33% 38% High Tech Ent./Media, Hospitality/Travel Bus Svcs/Consulting, Const./Eng. Automotive 13% 13% 13% 13% Transportation & Logistics 8% Source: KPMG Global Insights Pulse 1Q16 1Q16 1Q15 1Q14 20

21 Global quarterly outsourcing deal trending Movements of global IT-BPO deals* Number of deals 1, % Number of deals 1,144-22% Number of deals 891 Total deal value No. of deals 1Q16 83% 1Q15 Deal value Total deal value USD145.5 billion % Total deal value USD120.4 billion USD159.1 billion % Q15 1Q16 19% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Value (USD billion) No. of deals *The term deals is interchangeably used with contracts throughout the analysis unless otherwise specified. Deals analyzed are global sourcing contracts of size USD5.0 million and above only. Source: IDC ( Contract Database, Apr 2016, KPMG member firms research & analysis based on the IDC contract database 1Q16 witnessed a sharp increase in total contract value as compared to 1Q15. There was an increase of 83 per cent in total contract value and 19 per cent increase in the total number of deals in 1Q16 as compared to 1Q15. Though there was an increase in both these parameters, the average contract value also decreased by approximately 30 per cent in 1Q16 as compared to 1Q15 21

22 IT-BPO deals across geographies 649 AMERICAS Quarter-on-quarter comparison of break-up of deals* 398 EMA ASPAC Q Q Q Q Q Q16 Total contract value (USD billion) No. of contracts * Deals originating from the geography Source: IDC ( Contract Database, Apr 2016, KPMG member firms research & analysis based on the IDC contract database Q Q Q16 Americas continues to be the major outsourcing region contributing 73 percent of the total deal value in 1Q16. EMA and ASPAC regions contribute to 25 percent and 2 percent respectively While Americas experienced a multi-fold growth in deal value in 1Q16 as compared to 4Q15, both the ASPAC and EMA regions faced a drop in deal value The outsourcing market in EMA grew by more than 90 percent in number of deals while ASPAC had a dip of 2 percent in 1Q16 as compared to 4Q15 22

23 The role of the GBS executive

24 The role of the GBS executive Creating strong GBS leadership at the executive level as a peer to other CXO roles is critical to enabling the drive to higher levels of GBS maturity and delivering meaningful and measureable business value and outcomes beyond cost savings. Most GBS groups are still organized and managed by function or geography, though this will change over the next three years, moving towards end-to-end process ownership and global management models. Functional or geographic GBS leadership rarely (in <10% of organizations) rolls-up into a single global GBS executive, though awareness of the need for this role and planning for its implementation is growing. GBS executive leadership, in whatever form, faces many challenges to improving GBS capabilities, especially in enabling end-to-end process ownership and gaining executive level support for GBS operations and improvement efforts. Bringing GBS services into one organization that operates under one accountable executive leader is crucial in maximizing efficiency and effectiveness and driving greater business value. David Brown, KPMG s Global Lead, Shared Services and Outsourcing Advisory KPMG in the US 24

25 Advisors: GBS organization and management models today and in three years Today By function 15% 58% 27% By geographic region 22% 63% 15% By end-to-end process 77% 20% 2% Organized and managed globally 71% 26% 3% 0% 20% 40% 60% 80% 100% In three years By function 16% 56% 27% By geographic region 25% 60% 15% By end-to-end process 19% 65% 16% Organized and managed globally 20% 56% 24% Source: KPMG Global Insights Pulse 1Q16 0% 20% 40% 60% 80% 100% Uncommon Common Very common 25

26 Polling Question 4 How important is it to have a single, CXO level, GBS lead? (Please select 1) Not important, other elements of GBS are more critical Important, but not a show stopper if not in place Very important to the long term success of the GBS organization 26

27 Advisors: GBS organization and management models today and in three years 1Q16 21% 32% 28% 7% 9% 4% 3Q14 12% 40% 28% 11% 6% 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% No plans, not on the radar Awareness but no action Developing plans to install role/under discussion Plans being executed, 3+ year timeline Plans being executed, 1-3 year timeline Role already established Source: KPMG Global Insights Pulse 1Q16 27

28 Advisors: biggest challenges facing GBS executives Evolve GBS focus from cost savings to strategic business value 42% 52% Enabling end-to-end process ownership 52% 61% Executive level support to adopt and/or expand GBS 35% 45% Performing governance globally across all GBS processes 44% 43% Enabling an integrated IT model, systems & applications to support GBS 43% 49% Expanding & integrating GBS operations across processes & functions 41% 43% Source: KPMG Global Insights Pulse 1Q16 1Q16 3Q14 28

29 Governance best practices for GBS

30 Governance best practices for GBS Good governance coupled with strong change and program management is critical to the success of an organization s global business services efforts, especially as focus shifts to delivering meaningful and measureable business outcomes above and beyond cost savings. Governance is a perennial challenge to the success of shared services and outsourcing efforts, especially with integrated delivery models comprising global business services. The bar of what constitutes best in class GBS governance is constantly being raised so even as organizations skills improve they are still often not able to keep up with the demands placed upon them by more advanced and aggressive GBS efforts. The biggest challenge to GBS governance efforts is a fundamental lack of governance maturity and capabilities at a level required to support existing GBS efforts. The top governance success factor to ensure expected value is delivered from GBS efforts is measuring business outcomes against original business case expected value. Clearly defined roles and responsibilities for the new governance & operating organization and end-to-end global process ownership are the top two critical considerations for GBS governance. In an integrated environment, the need to have clearly defined roles and responsibilities and hand-offs in your governance environment are extremely significant for success. Liz Evans, Managing Director, Shared Services and Outsourcing Advisory KPMG in the US 30

31 Biggest GBS governance challenges Lack of governance maturity and capability to manage GBS scale and scope Lack of clear ownership for GBS strategy and execution Lack of strategic alignment between business strategy and GBS strategy 61% 50% 41% Advisors 35% 70% 55% Service providers Stakeholder misalignment regarding business scope and expectations 41% 55% Lack of enterprise-wide support for a new GBS operating model 39% 50% Lack of technical automation/integration in support of GBS 32% 10% Inability to execute operationally against GBS operating model 19% 15% 0% 50% 100% 0% 50% 100% Source: KPMG Global Insights Pulse 1Q16 31

32 Top enabling technologies for GBS governance Workflow tools for alerts, approvals, etc. Performance monitoring tools Microsoft products Sophisticated data analytics and reporting tools/dashboards 51% 42% 39% 35% Advisors 32% 47% 21% 47% Service providers Integrated custom developed tools 30% 37% Contract management/procurement tools 23% 26% Risk compliance and management tools 21% 37% Vendor management tools/applications 18% 21% Mobility applications 14% 26% Source: KPMG Global Insights Pulse 1Q16 5% Asset management tools 0% 50% 100% 5% 0% 50% 100% 32

33 Top governance success factors to ensure GBS value Measuring business outcomes against original business case expected value Effective monitoring of key performance indicators and service levels Clearly defined process integration between the GBS org. & bus. units/suppliers Focus on continuous improvement for key business/technical processes 36% 51% 48% 71% Advisors 29% 35% 53% 94% Service providers Monitoring achievement of cost reduction and efficiency objectives 35% 29% Ability to effectively extract and analyze GBS information in support of the business 29% 41% Effective customer surveying and implementation of appropriate action plans 18% 12% 0% 50% 100% 0% 50% 100% Source: KPMG Global Insights Pulse 1Q16 33

34 Top considerations for successful GBS governance organization Clearly defined roles & responsibilities for the new governance & operating org. End-to-end global business process ownership Well-defined integration between the governance org. & the retained org. 57% 54% 53% Advisors 44% 67% 78% Service providers Talent, experience, and skills of GBS governance organization 45% 33% Well-articulated scope and focus of the governance organization 33% 50% Effective structure and focus of joint governance boards 27% 11% GBS governance organization alignment with regional operating structure 25% 17% Source: KPMG Global Insights Pulse 1Q16 0% 50% 100% 0% 50% 100% 34

35 Top relationship management components for GBS governance Service agreements in place between the GBS org. & the bus. units Appropriate stakeholder representation on joint management boards Well-defined service catalog shared with the business Dedicated relationship managers between the bus. units & the governance org. 48% 43% 38% 38% Advisors 6% 44% 50% 78% Service providers Clearly defined decision rights amongst key stakeholders 36% 28% Internal and external service level agreements Well-defined and communicated chargeback and cost allocation methods Clearly identified personnel matchups and working relationships 23% 18% 30% 28% 22% 33% Source: KPMG Global Insights Pulse 1Q16 0% 50% 100% 0% 50% 100% 35

36 Process and cognitive automation

37 The evolution of process automation Enhanced process automation 03 Cognitive automation REASONING 01 Basic process automation RULES 02 LEARNING Processing of unstructured data and base knowledge Large-scale processing Adaptive alteration Machine learning Natural language processing Big data analytics Artificial intelligence Rules engine Screen scraping Work flow Macro-based applets Screen scraping data collection Workflow Visio -type building blocks Process mapping Business process management Built-in knowledge repository Learning capabilities Ability to work with unstructured data Pattern recognition Reading source data manuals Artificial intelligence Natural language recognition and processing Self-optimization/self-learning Digestion of super data sets Predictive analytics/hypothesis generation Evidence-based learning 37

38 Levels of client automation activity by maturity level Advisors Basic process automation 19% 43% 19% 26% Enhanced process automation 41% 40% 19% 4% Cognitive automation 72% 27% 3% 1% 0% 20% 40% 60% 80% 100% Service Providers Basic process automation 14% 24% 67% Enhanced process automation 29% 33% 43% Cognitive automation 15% 40% 30% 15% 0% 20% 40% 60% 80% 100% No activity Self-education and planning Experimenting and running pilots Live implementations Source: KPMG Global Insights Pulse 1Q16 38

39 Levels of automation by process Advisors Service providers Procure to pay 53% 29% 18% IT 5% 37% 58% IT 56% 29% 15% F&A 11% 47% 42% Customer care 63% 26% 12% Record to report 26% 32% 42% Record to report 63% 25% 11% SC/procurement other 28% 33% 39% F&A 67% 23% 10% Procure to pay 21% 42% 37% Quote to cash 76% 15% 8% Quote to cash 42% 26% 32% SC/procurement 79% 13% 8% Customer care 44% 28% 28% HR 81% 11% 8% Source to procure 22% 56% 22% Source to procure 71% 22% 7% HR 33% 50% 17% 0% 50% 100% No current plans Pilot Live implementation 0% 50% 100% No current plans Pilot Live implementation Source: KPMG Global Insights Pulse 1Q16 39

40 Polling Question 5: In which process area is your or your clients organization(s) the most active in terms of implementing process automation solutions?(please select 1) F&A HR Procure to pay Customer care Quote to cash Record to report Source to procure IT N/A, don t know 40

41 Biggest challenges to process automation Determining where to start and deploy RPA technologies Lack of client appetite, budget and skills to make required process standardization Client inability to build compelling and realistic business case 24% 19% 33% Advisors 41% 40% 39% Service providers Immaturity of RPA technologies 10% 32% Inconsistent and non-standard bussiness processes make it impractical Disparate underlying IT systems; lack of integration 38% 48% 29% 25% 0% 50% 100% 0% 50% 100% Source: KPMG Global Insights Pulse 1Q16 41

42 Potential job losses by delivery model - next three years Advisors BPO operations 23% 36% 27% 11% 2% ITO operations 26% 37% 25% 11% 2% Shared services 23% 40% 26% 9% 2% Retained organization 52% 32% 11% 4% 1% 0% 20% 40% 60% 80% 100% Service providers BPO operations 5% 42% 26% 26% 0% ITO operations 17% 44% 22% 17% 0% Shared services 16% 32% 21% 26% 5% Retained organization 26% 42% 21% 5% 5% 0% 20% 40% 60% 80% 100% 0-10% 11-20% 20-30% 30-50% 50%+ Source: KPMG Global Insights Pulse 1Q16 42

43 Potential job losses by delivery model - next five years Advisors BPO operations 13% 28% 33% 19% 7% ITO operations 16% 28% 31% 15% 9% Shared services 17% 26% 32% 20% 5% Retained organization 25% 42% 25% 7% 2% 0% 20% 40% 60% 80% 100% Service providers BPO operations 15% 40% 20% 25% ITO operations 6% 17% 28% 39% 11% Shared services 5% 20% 20% 35% 20% Retained organization 20% 10% 45% 20% 5% 0% 20% 40% 60% 80% 100% 0-10% 11-20% 20-30% 30-50% 50%+ Source: KPMG Global Insights Pulse 1Q16 43

44 Likelihood process maturation will drive use of less outsourcing BPO - SPs 10% 25% 50% 5% 10% BPO - Advisors 12% 26% 40% 15% 7% ITO - SPs 16% 26% 47% 11% ITO - Advisors 16% 25% 44% 9% 6% 0% 20% 40% 60% 80% 100% 1 - Not at all likely Moderately likely Highly likely Source: KPMG Global Insights Pulse 1Q16 44

45 Leveraging trends and technologies to drive GBS maturity There are a variety of levers organizations have at their disposal to drive GBS maturity and deliver meaningful business benefits above and beyond cost savings Move towards global, CXO level leadership on GBS Drive end-to-end process ownership tied to global GBS governance efforts and leverage key technologies such as D&A and automation Prioritize investments related to GBS governance (people, processes, technologies, authority) to get ahead of the curve rather than playing catch up Clearly define GBS roles and responsibilities against retained organization and business units and ensure GBS governance value is measured in terms of business outcomes Drive process automation maturity by defining a roadmap and prioritizing investments in efforts and technologies that bring the greatest business value; you cannot skunk works yourself to greatness Recognize and account for the potential business value different types of automation can bring and the associated costs and complexities to implement Recognize that white collar job loss due to increased automation is inevitable and take proactive steps to address ramifications 45

46 Learn more

47 Learn more KPMG Shared Services and Outsourcing Institute ( Global Insights Pulse Surveys ( KPMG Centers of Excellence Pulse Surveys GBS Maturity Research Program ( KPMG Institutes Home ( Blog: Reality Check ( Podcasts: Advice Worth Keeping ( HfS Research: ( 47

48 The KPMG Shared Services and Outsourcing Institute 48

49 Q & A

50 Appendix

51 Service providers: most common new deal pricing models 49% 31% Fixed price Value-based pricing 29% 10% Source: KPMG Global Insights Pulse 1Q16 Time and materials Cost plus 51

52 Service providers: most common new deal pricing models 1Q16 49% 31% 29% 10% 4Q15 43% 22% 29% 11% 2Q15 47% 23% 34% 8% 1Q15 50% 28% 25% 15% 3Q14 49% 19% 30% 14% Fixed price Time and materials Value-based pricing Cost plus Source: KPMG Global Insights Pulse 1Q16 52

53 Service providers: pricing pressure 3% 4% 6% 64% 63% 52% 46% 61% 67% 63% 60% 67% 56% 68% 64% 44% 50% 38% 39% 33% 48% 36% 37% 45% 54% 39% 33% 37% 36% 33% 44% 32% 36% 50% 50% 63% 62% 67% 52% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 4Q15 1Q16 More competitive/aggressive About the same as last quarter Less competitive/aggressive Source: KPMG Global Insights Pulse 1Q16 53

54 Service providers: contract profitability new contracts 21% 20% 36% 30% 33% 33% 31% 38% 15% 25% 36% 25% 28% 15% 13% 15% 17% 22% 48% 68% 80% 61% 63% 61% 62% 62% 58% 80% 69% 60% 75% 61% 69% 79% 77% 75% 30% 11% 4% 7% 6% 5% 8% 11% 15% 4% 5% 6% 8% 4% 8% 8% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 4Q15 1Q16 Contract profitability is improving on new contracts Contract profitability is about the same Contract profitability is declining on new contracts Source: KPMG Global Insights Pulse 1Q16 54

55 Service providers: contract profitability existing contracts 21% 20% 36% 30% 33% 33% 31% 38% 15% 25% 36% 25% 28% 15% 13% 15% 17% 22% 48% 68% 80% 61% 63% 61% 62% 62% 58% 80% 69% 60% 75% 61% 69% 79% 77% 75% 30% 11% 4% 7% 6% 5% 8% 11% 15% 4% 5% 6% 8% 4% 8% 8% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 4Q15 1Q16 Contract profitability is improving on new contracts Contract profitability is about the same Contract profitability is declining on new contracts Source: KPMG Global Insights Pulse 1Q16 55

56 Service providers: contract scope existing contracts 46% 46% 45% 30% 41% 29% 54% 21% 40% 38% 29% 28% 22% 29% 38% 23% 33% 35% 43% 46% 48% 56% 44% 62% 71% 50% 50% 63% 72% 78% 50% 54% 69% 67% 57% 42% 11% 8% 7% 15% 16% 10% 4% 8% 10% 13% 8% 21% 8% 8% 9% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 1Q15 2Q15 4Q15 1Q16 Contract profitability is improving on existing contracts Contract profitability is about the same Contract profitability is declining on existing contracts Source: KPMG Global Insights Pulse 1Q16 56

57 Speaker bios

58 Stan Lepeak Background Leads market research and thought leadership efforts for KPMG Global Management Consulting, focused on trends, issues and futures in enterprise services transformation and optimization, the threats and opportunities from market and technology disruptions and best practices in responding to and capitalizing on these market trends Stan Lepeak Head, Global Market Research, KPMG Management Consulting KPMG LLP (US) New York, NY Areas of focus expertise The tactical and strategic organizational opportunities, challenges and ramifications from - Technology disrupters and enablers such as cloud, big data and analytics, mobile, Internet of things, social media, consumerization of IT, and robotics process automation - Business disrupters such as globalization, increased regulatory and compliance complexity, talent and skills shortages, shifting global economic and competitive dynamics and geopolitical risks Global business services usage and models including shared services, process outsourcing and automation, and cloud and their leading practices and maturity models across major back (F&A, HR, IT, procurement, supply chain), middle and front office functions Use of data and analytics, process automation and related technologies to create and exploit intelligent business functions to enable organizational innovation and transformation Vertical industry and geographic trends and variations relative disruptive market trends and technologies and their impact on enterprise transformation and innovation efforts Professional experience 25 years experience in the business and IT services markets. Led global research for leading boutique sourcing advisory firm EquaTerra (acquired by KPMG in 2011) for seven years. Previous to that worked for the META Group (acquired by Gartner in 2004) as VP and Research Director. He has had executive roles on the vendor and provider side in software and services industries as well as positions in finance, accounting and operations across several industries. Noted commentator and frequent speaker on global business services and globalization and business and IT enablers and disrupters. 58

59 David J. Brown Background Dave is the global lead for KPMG LLP s (KPMG) Shared Services and Outsourcing Advisory practice. In this role, Dave provides Shared Service and Outsourcing advice to many of our larger, complex deal structures. Dave has more than two decades of experience in IT and business process outsourcing; shared services design/build/implement, sourcing management; contract renegotiations; and finance budgeting, planning, and analysis. Dave also delivers hands-on services as a client executive and has led many multinational deals and provided leadership support on several large and complex deals for both IT and business processes. David J. Brown Global Lead Shared Services and Outsourcing Advisory KPMG LLP (US) Orlando, FL djbrown@kpmg.com Professional and industry experience In addition to advising clients, Dave engages senior members of outsourcing service providers financial and IT delivery teams to establish and implement industry-accepted processes and structures related to outsourcing transactions. Before joining KPMG through the acquisition EquaTerra, where he held various senior leadership positions including the establishment of the Financial Architect & Benchmarking practices and was a client executive leading large multinational, multifunctional shared service and outsourcing engagements, Dave was a senior advisor at TPI. In that role, he assisted clients with the evaluation, negotiation, implementation, and management of IT and business process sourcing initiatives. Earlier in his career, Dave held various financial and IT positions in the telecom industry including Southwestern Bell Information Services, Southwestern Bell Directory Operations, Ameritech Advertising Services, and Bell Canada. Sample client experience Led a large Pharmaceutical company through a Global IT outsourcing transition involving transitions with total contract value in excess of $1 billion Led Eli Lilly s global finance and accounting outsourcing transaction and global shared service design/build and implementation Provided financial and negotiation support for Unilever s finance and accounting outsourcing deal (Europe and North America) Led an assessment of Oil s (Brazilian Telecom) IT operations, outsourcing and joint venture options. Led negotiations with third-party provider Led a large U.S. Oil & Gas company through a Finance and Accounting outsourcing transaction providing overall leadership and financial support. Led a large transportation company through procure-to-pay sourcing opportunity providing leadership and financial support Assisted several clients with leadership and financial support that were pursuing IT and finance and accounting sourcing opportunities through market assessments of their current finance and accounting environment, or financial support during the transaction or negotiation 59

60 Liz Evans Background Liz is a Managing Director with KPMG. Liz has over 18 years experience, focused on working with organizations to support transformational change, often in the form of shared services, outsourcing or other changes to the service delivery environment. Liz is a leader within the Outsourcing and Shared Services area and has led efforts to establish appropriate governance mechanisms for large transformation programs. Much of Liz work is spent advising client on how to successfully establish supplier portfolios and govern them effectively. She is experienced in the set-up, operations and program management within large programs of change. Prior to joining KPMG, Liz led the Governance & Transformation Advisory practice at EquaTerra. While at EquaTerra, Liz was a key contributor to the development of EquaTerra s, governance, transition, Center of Excellence and health check methodologies based on her experience of working with global firms across the business service portfolio. Liz Evans Managing Director, Shared Services and Outsourcing Advisory KPMG LLP (US) Chicago, IL erevans@kpmg.com Professional and industry experience State Governance Agency Currently leading the engagement to provide input and market leading practices to support the development of a robust and scalable governance model for the new Emergency Call Program. The program is highly transformative and involves a large and complex stakeholder group. Global Pharmaceuticals Organization Led the effort to design, build and implement an Outsourcing Center of Excellence. This organization reports directly to the CFO and has purview of all business process outsourcing agreements (traditional BPO and ITO). Led the development of the governance model for the newly define, multi-channel operating model. Currently leading the implementation of a multi-year managed governance service initiative. State Government Authority Currently leading an engagement to review and re-design the IT outsourcing governance model as the client contracts for a multi-provider delivery environment. This multi-provider solution leverages a combination of a third party service integrator and multiple service providers. Global Pharmaceuticals Organization Led the effort to design and implement the governance structure for the Finance & Accounting outsourcing relationship. Currently leading a multi-year managed governance service initiative. Global Beverage Organization Led an engagement to collaboratively review and improve a strategic outsourcing relationship. Led the development and delivery of Service Provider Relationship Outsourcing training for both the client and a key service provider. Additionally, led an effort to determine gaps and remediation strategy for applications outsourcing governance for a multi-vendor environment Large National Health Plan Led the review of the organization s supplier governance across the Enterprise. The work developed an overall governance framework for Suppliers at the Enterprise, Divisional and Operational level. The roll-out incorporated the use of a tool to support the processes and structures established as part of the Enterprise Supplier Governance Office. Currently leading a multi-year managed governance service engagement. 60

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