Shared services are a hot ticket: survey

Shared services are a hot ticket: survey

Summary: New KPMG survey finds greater expected demand for business and IT services.

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Shared services -- aka service-oriented or cloud-based services that are accessible via an enterprise or cross-enterprise registry -- are hotter than hot. That's the conclusion of KPMG's latest survey of KPMG field advisors and global business and IT service providers.

Demand is increasing for shared services models and internal process improvement as organizations look to enhance business performance, KPMG says. The consultancy says 59% of the field advisors anticipate greater demand from clients for shared services delivery models, while 51% saw more demand for internal process improvement.

As Stan Lepeak, research director in KPMG’s Shared Services and Outsourcing Advisory group put it:

“Leading organizations today receive measurable 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.”

Other key findings include the following:

  • Service providers are bullish on new deal pipeline growth: Among providers surveyed, 74% expect customer demand for business and IT services to increase over the next one to two quarters.
  • 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%).
  • 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% of service providers. At a distant second the energy, utilities, oil and gas, and manufacturing industries tied for second at 32%.
  • 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% in 12 months.

Organizations seem to understand the technical components of cloud services, as well as how it can help their enterprises. However, there is confusion on where these services should come from. Survey respondents gave high marks to buyers’ “understanding the technical underpinnings of cloud computing - how it works,” as well as “understanding how cloud computing options can complement or supplant traditional enterprise systems and/or outsourcing investments.” Coming in at the bottom of the rankings were skills relating to both sourcing and managing cloud computing initiatives.

Topics: Virtualization, Banking, Cloud, Hardware, Outsourcing, Servers

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3 comments
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  • If they are so hot, how come everything is about expectations?

    I see nothing showing a "hot" product. Only providers claiming a % of EXPECTED growth ... from very low numbers to begin with.

    By the way, how does everybody feel about the claim that banks are the top industry using cloud services?
    wackoae
  • Estimates, Projections & surveys but no evidence

    KPMG have become renowned (notorious) for a peculiar modern management phenomena, the survey.The survey in fact, is often used to stand in place of evidence. The Logic goes, if lots of businesses are doing, it must be a good thing. We know that during the financial crisis, banks and financial institutions were busy handing-out bonuses to bankers beating their targets. The KPMG logic would be that a survey that showed lots of bankers handing out bonuses and doing targets must be good because businesses are doing them.

    Wrong! All of the evidence for shared services arises from within the shared services industry (IT software & hardware companies, Private BPOs, Consultants etc). The evidence? Why it is estimates of savings, projections (to make the savings sound big) and surveys (such as the KPMG one).

    John Seddon, an expert in service organizations says that there are two arguments for sharing services. The '??less of a common resource' argument and the ???efficiency through industrialisation' argument.The former argument is 'obvious': if you have fewer managers, IT systems, buildings etc; if you use less of some resource, it will reduce costs. But the reductions are often minor and one-off.The second argument is '??efficiency through industrialisation'??. This argument assumes that efficiencies follow from specialisation and standardisation resulting in the creation of '??front' and '??back' offices. The typical method is to simplify, standardise and then centralise, using an IT ??'solution' as the means.The problem with the industrial design is simple - it doesn't absorb variety in demand. Because of this, costs soar as the IT system has to be modified and customers ring back again and again because they can't get what they want.

    The evidence of this flawed theory can be found everywhere. In HMRC or South West One shared services which predicted savings of ?176 million over 7 years and actually recorded a pre-tax loss over its three financial years. Duplicate payments sitting at ?772,000 and a struggle to manage ?12.9m in outstanding debts.In the DfT Shared services which bust its estimated budget by almost doubling the cost (from ?500 million to ?750 million).In Australia, the failures in shared services have been spectacular. First Queensland's which cost in the region of $150 million and was projected to save $100 million a year actually only saved $13 million after 5 years. This didn't take into account the set-up costs.Finally West Australia last month ended their shared services after a total cost of $444 million is being decommissioned. It is expected the decommissioning will cost anything up to $2 BILLION dollars.Survey anyone?
    Systems Thinker
    • RE: Shared services are a hot ticket: survey

      @Systems Thinker Thank you for the references. I'd like to explore the HMRC or South West One cases in more detail, as these may demonstrate some of the failings (or at least failed expectations) in the shared service approach. Is there a pointer or source of information you can provide?
      joemckendrick