- Banking and healthcare top the list of sectors outsourcing key services
- IT, finance & accounting and HR functions dominate outsourcing agenda
- Pipeline for growth of outsourcing looks strong, in spite of economy
Organisations are continuing to expand the services they outsource, according to KPMG’s latest global survey. Based on the views of respondents across North America, the UK, Asia and Europe, the quarterly study indicates that the growth in businesses using ‘shared service centres’ continues to outpace the number of organisations who favour traditional outsourcing.
Shared services, which refers to centralising admin functions once performed in separate divisions of a business, was cited as the strongest area of growth by over half (52 percent) of the respondents polled in the first quarter 2012 survey. In comparison, just 37 percent said they have seen growth in demand for traditional information technology outsourcing and just 27 percent for traditional business process outsourcing.
More than two-third (68 percent) of the service providers polled were also cautiously optimistic about pipeline growth for the next quarter – a figure that has risen by 7 percent since January. Asked to identify the key areas of interest, 50 percent suggested that they expect customer demand for IT services to increase between now and the end of Q2. Some also suggested growth would come from bundled business and IT outsourcing (21 percent), finance & accounting (11 percent) and HR (11 percent).
The survey goes on to suggest that while traditional outsourcing remains a valuable component of business’ efforts to reduce overheads, relative growth of its use has slowed. This is especially the case with business process outsourcing (BPO), which only 27 percent of the advisers polled cited as the strongest growth area.
“It appears that the trend towards focusing on more specialised outsourcing is a consequence of the expanding number of quality global sourcing locations with highly skilled resources, the ability of Indian services providers to diversify delivery capabilities beyond their home markets, and the growing sophistication of skill sets becoming available,” said Shamus Rae, partner in KPMG’s Shared Services and Outsourcing Advisory team.
“Clearly, the relatively weak BPO growth expectations are a reflection of diminished demand for more traditional, generic, transaction-oriented outsourcing arrangements, such as in finance and accounting, in contrast to the greater demand for more specialised BPO,” he added.
The findings also highlight that while many businesses are re-examining their use of domestic outsourcing, the use of near and offshore shared services and outsourcing continues to grow – especially buyer interest in offshore services delivered from locations other than India. For example, asked whether they agreed that buyers are looking beyond India for outsourced services, respondents scored 3.53 on a 5-point scale.
The survey found that respondents are seeing an increase in usage of Cloud services to complement, extend and in some cases replace traditional approaches to outsourcing, with 50 percent of service providers indicating that clients have one or more “live” cloud services deployments at the business unit level. They anticipate that this percentage will rise to 92 percent in 12 months.
“These findings highlight the fact that businesses need to continue to improve their cloud skills and acumen, especially relative to addressing data security, risk and regulatory compliance requirements,” said Rae.
Mike Petrook, KPMG Press Office
020 7311 5271 (t), 07917 384 576 (m) or firstname.lastname@example.org
Notes to Editors:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
About the KPMG 1Q12 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 2011. For a comprehensive discussion of the 1Q12 Pulse Survey, please register for the webcast on Thursday, April 26, 2012 at 11 a.m., Eastern, by clicking here. Presenting on the webcast will be Nico Boot, partner; Cliff Justice, U.S. leader, Shared Services and Outsourcing Advisory, and Stan Lepeak, global research director, Shared Services and Outsourcing Advisory. To obtain a copy of the KPMG Sourcing Advisory 1Q12 Pulse Survey, as well as past survey reports, please go to www.equaterra.com/pulse, or to KPMG Institutes, available immediately following the webcast, approximately 12:30 p.m., Eastern.