executive leadership needed to drive change

GBS mind shift

Centralizing the organization and leadership

3Q14 Global Sourcing Advisory Pulse Survey results

© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

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KPMG’s shared services and outsourcing advisory practice

The Shared Services and Outsourcing Advisory practice brings a specialized global team of more than 800 professionals within KPMG’s global network of independent member firms operating in 155 countries. Our professionals help clients design, build, and manage information technology (IT) and business processes across the enterprise.

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.

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.

Who we are

What we do

How we do it

KPMG has the ability to help member firms’ clients transform enterprise services to help improve value, increase agility and create sustainable business performance.


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KPMG Pulse Surveys

Focus on performance, trends, and futures

Launched in 2004 by EquaTerra* Part of a growing family of KPMG Pulse market research studies

The Global Sourcing Advisory Pulse Surveys

The surveys are a quarterly review of global business services (GBS) market trends and individual observations from the ‘front lines’.

500+ KPMG sourcing advisors 20 leading global business, IT,

and cloud service providers KPMG market research and

outsourcing deal tracker HfS Research

Drivers for GBS usage Demand and buying patterns Deal attributes Thematic topics by quarter

– Role of GBS Executive

– Robotics Process 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

Input sources: Topics evaluated: Primary functional focus:

* KPMG LLP (US) KPMG Holdings Limited (UK) and KPMG International acquired the business and subsidiaries of advisory firm EquaTerra, Inc. in February 2011.


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Global Business Services: Definition and key enablers

GBS

Data and analytics

Strategy

Governance

Services portfolio

Process ownership & optimization

Commercialorientation

Talent management

Enabling technology

GBS represents a journey for organizations in an attempt to transform back-and front-office processes into an enterprise-wide delivery platform that is efficient and drives business value and includes: Multifunctional business processes Common information technology Multichannel service delivery – outsourced,

shared services and centers of excellence Process ownership and management Enterprise-wide governance

All to help enable and deliver measureable business value beyond just cost savings


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Change and program management

Enterprise service governance

Talent management

Data and analytics

Service portfolio

Process excellence

Commercial perspective Enabling technology

Delivery and sourcing strategy

Risk and compliance management

OPERATIONAL

EXCELLENCE

Operational excellence: On-going focus on problem solving, improvement, and GBS transformation outputs toward delivering high quality, seamless and consistent business solutions.

GBS dimensions


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Level 01

FRAGMENTED

Decentralized service delivery model

Duplicative functions, processes, and technology

Little central control and governance over business support services

Level 02

SUB-SCALED

Consolidated delivery model

Leverage economies of scale for highly transactional services

Shared services or outsourcing typically on a single-function, regional basis

Level 03

SCALED

Global business services

Multi-function, silo’d transactional business service model

Variation around the inclusion and level of processes, technology and governance standardization

Level 04

INTEGRATED

Global business services

Enterprise wide multi-functional transactional and specialist business service model

Coordinated processes, technology, governance and multi-channel delivery for scale and adaptability

Level 05

STRATEGIC

Global business solutions

Multi-functional, multi-channel business service model

Provides transactional, expert and analytic services

Managed through integrated, outcome-oriented governance

Synced end-to-end business solutions

KPMG’s GBS maturity model


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19%

12%

11%

51%

32%

42%

30%

56%

47%

Decentralized processes Centralized processes GBS

Likely to be deploying in 2-3 years

Aspiring to deploy in 2-3 years

Today

Six out of 10 organizations with mature operational service frameworks are headed down the GBS path. External expenditure on GBS is growing at 15 percent year-on-year through 2017, with $40 billion this year. Analytics, talent management, governance and wide-ranging process management will provide the value-differentiator

for GBS organizations, but limited experience in these areas slows progress. Labor arbitrage has lost its shine among executives, and back-office centralization is table stakes—GBS is the dessert. Matrixed GBS organizational models fundamentally change the structure of organizations as GBS units evolve from

support to business units. The movement toward business-oriented GBS models must be led by the C-suite. Industry dynamics, varied regional growth patterns, and often weak global economic markets fuel the greatest incentives

to make operating model changes.

Key findings

Source: HfS Research, KPMG, Global Business Services Market Study, October 2013

The (continued) rise of GBS

3Q14 Global Sourcing Advisory Pulse Survey results


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Summary – key findings

234

The foundation of GBS: Leadership

Benefits & key takeaways

1 A strategic initiative without a strategic vision

Creating a customer service culture

With no one at the wheel globally, companies are unlikely to realize anywhere near the full value that Global Business Services transformation can bring.

A strategic initiative without a strategic vision


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Current GBS maturity levels

30% 31% 24% 11% 5%

Fragmented Sub-scaled Scaled Integrated Strategic

Advisors: Typical client organization GBS maturity

Source: KPMG Quarterly Global GBS Pulse Survey 3Q14

The typical GBS organization is still very immature on the KPMG maturity scale.

There are many impediments to driving increased levels of GBS maturity, including:

– Enabling end-to-end process ownership

– Evolving the GBS focus from a concentration on cost savings to providing more strategic business value

– Enabling an integrated IT model, systems & applications to support GBS operations

Fragmented, revolving door and under-powered GBS leadership is a common root cause for GBS problems and difficulties driving maturity. Despite proven results from organizations that have built a strong GBS foundation, many organizations still expect to see results before they are willing to invest in building their own GBS foundation.

Bottom line:

The foundation of GBS:Leadership


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The position and scope of the typical GBS executive

Most GBS organizations are still organized and managed by function or geography.

In very few organizations does this functional or geographic leadership roll-up into a single global GBS executive.

The majority of organizations have no tangible plans to create a CXO-level GBS executive role.

Very few organizations have plans to elevate the GBS executive to a level where the role reports into the CEO; most GBS executives will continue to report into a functional lead or the CFO.

The fragmented nature of GBS operational and executive leadership and its relatively diminished stature compared to CXO level roles will continue to hamper organizations efforts to drive to high levels of GBS maturity, though it will create opportunities for organizations that take a contrarian position in defining a higher level and more influential role for the GBS executive.

“As globally managed GBS organizations grow more common, the fragmented nature of GBS

operational and executive leadership and its relatively diminished stature compared to CXO

level roles will continue to impede efforts to drive to high levels of GBS maturity. GBS leadership is

needed to set the vision for the organization and to get buy-in and alignment across the functions.”

David Brown, KPMG’s Global Lead,

Shared Services and Outsourcing Advisory practice


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GBS organization and management models


15%

13%

61%

54%

25%

33%

14%

75%

65%

23%

21%

3%

28%

22%

50%

59%

22%

19%

25%

78%

56%

21%

19%

1%

Today

In 3 Years

Today

In 3 Years

Today

In 3 Years

Today

In 3 Years

Function Geographic region

End-to-end process Organized and managed globally

Uncommon Common Very Common

Bringing GBS services into one organization, with a single executive-level leader, helps maximize efficiency and effectiveness and drive greater business value. Most global GBS organizations are still organized and managed by function or geography, thus resulting in fragmented approach that impedes achieving desired results. The 3 year trend, however, is a promising sign that change is coming.

Bottom line:


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Where GBS leadership reports

Due to the cross functional nature of GBS, there are inconsistent views in regards to where GBS should report. While there are growing efforts to move away from separate functional reporting, developing an executive position for the GBS lead would solve both the inconsistent reporting and overburdening of the current demanding CXO roles.

Bottom line:


29%

15%

49%

59%

22%

26%

27%

55%

54%

42%

19%

3%

23%

23%

58%

61%

18%

16%

61%

69%

33%

26%

7%

5%

Today

In 3 Years

Today

In 3 Years

Today

In 3 Years

Today

In 3 Years

Functional lead for function CFO

COO/president CIO

Uncommon

Common

Very Common52%

69%

33%

24%

15%

7%Today

In 3 Years

CEO


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Stronger need for mature GBS functions


15% 27% 17% 21% 12% 4% 4%

Percentage of GBS organizations where functional leadership rolls into single global lead

0% 1-5% 6-10% 11-25% 26-50% 51-75% 75%+

% of organizations where GBS leadership rolls up to single global lead

For most organizations the establishment and expansion of GBS operations has been a fragmented and bottom-up process by function and geography. Global leadership has been afterthought or an unachievable goal to achieve for both practical and political reasons. While not all organizations depending on the scope or maturity need a single global lead, organizations that hold to maximize GBS capabilities and maturity need to establish this role .

Bottom line:


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User progress towards installing single GBS executive leadership


80% of organizations currently have no plan for developing a GBS executive leadership plan. This will result in the 20% of organizations that are actively developing a GBS strategy attaining a competitive advantage over the laggards.

Bottom line:

12%40%

28%11%

06%04%

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

GBS – Building a customer service culture


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Removing GBS from the backroom

A successful GBS organization must operate as a business within a business, becoming a provider of choice to the organization and not a provider by default.

For the GBS organization to achieve the maximum results and overcome impediments and challenges in an effective and efficient manner, the function must be run on the same basis as a economically sound and customer focused service business.

To achieve this structure and desired culture, the GBS executive has to be an individual who has experience running a business to understand that success is more than just cutting costs.

GBS organizations’ goals and benefits sought, as well as operating model, must be tied to those of the business as a whole.


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Biggest challenges facing GBS executives


Successfully addressing these challenges will enable a customer service culture within the GBS organization. The top challenges, however, will prove highly difficult to overcome without a central lead who is integrated with the executive level, which is ranked 8th on the key issues, yet non-existent in most organizations. A strong culture requires a strong leader.

Bottom line:

Gaining adequate funding for GBS operations & expansion

Building and maintaining effective internal stakeholder relations

Addressing talent & talent management challenges

Gaining meaningful corporate executive level support to adopt and/or expand GBS efforts

Expanding & integrating GBS operations across geographies

Defining & mapping the GBS strategy to the overall corporate business & operating strategies

Performing governance globally across all process in scope for GBS

Expanding & integrating GBS operations across processes & functions

Enabling an integrated IT model, systems & applications to support GBS operations

Evolving the GBS focus from a focus on cost savings to providing more strategic business value

Enabling end-to-end process ownership

26%

28%

33%

35%

37%

41%

43%

43%

49%

52%

61%

GBS – Benefits and key takeaways


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Benefits – Areas of improvement through GBS


Improve regulatory compliance adherence

Improve supply/service chain

Improve analysis of data

Improve customer experience

improve effectivness of services delivered

Improve efficiency of services delivered

3.42

3.44

3.61

3.79

3.9

4.04

Top areas of improvement for organizations

A lead GBS executive can help drive through a well-managed GBS organization, measurable value above and beyond cost reduction:

A GBS lead with strong ties into the executive committee can drive a centralized approach to achieving these business goals. Where as the current fragmented approach of many organizations requires more effort to attain less results.

Bottom line:


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Driving more value with GBS

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 success such as:

A clear 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.

Changes to procurement strategies to address customs and sales tax implications.

Developed consistent standards across functions and geographies to reduce risk of regulatory compliance failure.

Enhancing the culture of the organization aiding both to requirement and retention of talent.


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Summary

GBS organizations must focus more on driving measurable business value above and beyond cost savings:

– Driving increased business value should be a prime goal of GBS

maturity improvement efforts.

Developing an established and senior/CXO GBS executive role is critical to maximizing the GBS organization’s potential in terms of efficiency, effectiveness and driving measureable business value.

A centralized approach is the only structure for the GBS organization that will enable it to efficiently and effectively overcome the common GBS challenges and impediments.

The market is in the early stages of the development and spread of the GBS executive role creating opportunities for first movers, but key steps need to be taken:

– Need to define the GBS role specifically to your organizations

strategic goals

– Need to socialize the role and receive buy in from the CXO level

and all functions

– Need to structure the GBS executive position so that it is

attractive to a small potential candidate pool.

Provide autonomy to build the function as a business within a business

GBS executive should reside within C-suite.

“Despite these challenges, organizations that move early to define a higher level and more influential role for the GBS executive stand to drive value of

their GBS organization to new heights and win long-term competitive advantage.”

David Brown, KPMG’s Global Lead,

Shared Services and Outsourcing Advisory practicePartner, KPMG LLP

© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firmsof the KPMG network of independent firms are affiliated with KPMG International. KPMGInternational provides no client services.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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Contact Us:

David BrownPartner, KPMG LLPGlobal Head Shared Services & Outsourcing Advisory (SSOA)

T: +1 314 803 5369E: [email protected]

www.kpmg.com/GBSleadership

Visit KPMG.com to find more information on GBS leadership and our Shared Services & Outsourcing Advisory team:

http://www.kpmg.com/GBSleadership

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