Don Ryan — Research Fellow, HFS Research[00:21]
I’m a Research Fellow at HFS, and I’m here today with Ron Walker, who is the US leader for managed services at KPMG. HFS has been a research partner with KPMG on understanding and forecasting the demand characteristics of managed services, both in the United States and globally. Today we want to explore in depth topics associated with managed services consumption: how managed services differ from traditional outsourcing — just note that 62% of enterprises see it as distinct, based on research we’ve done — and the role of technology in supporting managed services deployment. But first, Ron, the most important question I think is, how do we define managed services? How does KPMG define managed services today, and what are some of the leading-edge examples that KPMG is doing in working with clients around new sources of value? And maybe parenthetically, how does KPMG differentiate its managed services offering in the market from legacy outsourcers and other Big Four competitors?
Ron Walker — US Leader for Managed Services, KPMG[01:13]
I guess I’d say managed services, as we’ve all seen, has really been evolving. How KPMG probably best defines it is, we consider it the concept that we are participating in the plan, the build, and the management of an end-to-end process over an extended period of time. That could really be a part of the client’s operations, and it’s usually outcome-driven, Don. So I’d say how we differentiate ourselves is we really do intend to become a part of the client’s own services. We participate in strategic meetings and sessions, and we add our own input and advice, and vice versa, where we use and incorporate the client’s intelligence to help with our other clients. So I’d say that’s probably how we broadly define managed services as it is today. And that translates into several of our different offerings. When you look at KPMG’s brand in the market, it’s certainly a part of that trusted area. So when we look at cybersecurity, for example — identity management, or managed detection and response areas — those are really differentiators, because we become a part of that client, and we bring not only our own intelligence, but what’s happening in the client locations and databases full of different threats that come about.
Don Ryan — Research Fellow, HFS Research[02:30]
So you see, Ron, the subject matter expertise as a critical component in KPMG’s value around managed services.
Ron Walker — US Leader for Managed Services, KPMG[02:54]
Yeah, it’s critical. We’re not just coming in, understanding what the client’s challenges and issues are, and applying kind of an ad hoc solution. We’re bringing our experience from our consultants — hundreds of years of cumulative experience — as well as our database and technology associated with those specific solutions. So it’s more than just, if we think of the services that providers offer today, a lot of this is very transactionally oriented.
Don Ryan — Research Fellow, HFS Research[03:24]
So you’re kind of defining managed services as that end-to-end capability, linking process to delivery with strong subject matter expertise. Is that the value proposition that you’re describing?
Ron Walker — US Leader for Managed Services, KPMG[03:46]
It is, and I’ll take it even further: you have to understand not only the industry but the client. Each client has specific politics and areas of understanding, and so the more time we spend with a client and with that management team, the better we understand their needs and can respond. That is particularly true — and you’d asked this before, and I’ll answer it again — in financial services and in big tech. That is required for us to operate effectively and truly add value. We have to understand those client environments and specifically what’s taking place in them on a day-to-day basis.
Don Ryan — Research Fellow, HFS Research[04:13]
Yeah, I see that as important, because one of the reasons for managed services in the first place is to be more business-outcomes-driven in terms of delivery, versus more outsourcing-based cost reduction. And I’d argue that it’s very hard to drive that outcomes mindset if you don’t have that strong industry, functional, process, and client understanding going in. So I think that’s a distinction between KPMG and maybe more traditional legacy providers of services across different industries, right?
Ron Walker — US Leader for Managed Services, KPMG[04:57]
And I’ll even add to that: we make a significant investment in those client experiences, Don. We plan on being with a client for the life cycle, so our consulting and managed services practice — but certainly outsourcing too — is invested in, and we spend the time, money, and effort in understanding the challenges, because we know that’s going to pay off for both of us, both the client and KPMG, in the long run.
Don Ryan — Research Fellow, HFS Research[05:17]
What do you see, and how does KPMG view the role of GenAI as a disruptor and maybe an enabler of managed services delivery, and maybe as a differentiator? I know we work with Steve Chase and Cliff Justice; we understand the impact that KPMG wants to bring to the market through AI.
Ron Walker — US Leader for Managed Services, KPMG[05:52]
Yeah, it’s all of those things that you mentioned. Obviously it’s a disruptor, it’s an enabler, and we’re getting accustomed to what it can truly drive. I think we’re in the midst of 40-plus significant pilots or initiatives right now that we’re working directly with clients and industries. What we’re trying to ascertain is small scale — because AI at small scale and on a tactical basis, we can see tremendous benefits — but, back to the same challenge we had with automation and RPA, can we put together large-scale initiatives? I think GenAI is going to enable us to do that. So we at KPMG are investing significant dollars. You mentioned Steve and Cliff and what they’re doing, and we are client zero — both KPMG as well as our managed services is client zero for many of our initiatives. One of them that’s turning out to be tremendously valuable is the suspicious activity reporting that we’re doing for financial services. It’s called SAR reporting, where we’re trying to detect fraud. In one of our client examples last year, there were over 4 million incidents where this takes place. There are automation techniques you can use to identify them, but it typically takes anywhere from 45 minutes to 2 hours for an analyst to respond to these. What we found is we’ve reduced that response rate using GenAI anywhere between 30% and 45%. And not only is it a reduction in the time to respond, the quality of those responses is greater in depth, because we’ve trained the models with some of our best analysts in how they respond. So it’s faster too — we’re reducing the timeframe, we’re reducing the speed with which we identify the area, and then the quality on what tactics to take.
Don Ryan — Research Fellow, HFS Research[07:28]
So it’s interesting. This transformation — we think many times about AI providing transformation to the process itself, but it’s also a transformation to people and organizations and how KPMG as a whole can deliver. You’re citing 30 to 70% greater efficiency, but I’d argue that in the long term that might translate into 30 to 70% greater value and financial outcomes ultimately.
Ron Walker — US Leader for Managed Services, KPMG[08:05]
Well, therein lies the trick. As we develop these technologies — because it’s not inconsequential; it’s the cost associated with developing and training models — we can’t just simply lower our price in order to respond to this. So it’s back to a value quotient for our clients. I’ll point back to the example I gave you with the SAR reporting: not only is it faster and cheaper, but the quality of those responses is better.
Don Ryan — Research Fellow, HFS Research[08:29]
So, just coming back on the point you were just making about the linkage between managed services and consulting to drive ongoing value, especially in regulatory risk and compliance — could you cite maybe some other examples where this linkage between consulting, advisory, and managed services is really at the nexus of the value that KPMG brings?
Ron Walker — US Leader for Managed Services, KPMG[09:16]
Because I think there are many companies that provide different levels of managed services. Our consultants can be much more valuable the better they know that specific client environment, not just knowing the challenging solution. So, engaging that client on a regular basis, the ability for us to work with the consulting team and get them to understand the environment more closely, the better they are able to serve our clients. We’ve quantified this at anywhere from 10 to 14 times pull-through when we have a good managed services relationship with the client and our consulting organization. As a managed services entity, we understand the client, and then, when our client asks or we proactively identify areas of opportunity, we bring the right teams in. And vice versa: when our teams come in, they identify additional areas of value that the client may want to expand upon and drive into a managed service.
Don Ryan — Research Fellow, HFS Research[10:02]
Just to finish up, if you were to highlight 2 or 3 industries and 2 or 3 things that companies should be doing immediately with managed services — is there something you can point to in consumer goods, financial services, or pharmaceutical that companies should be immediately looking at?
Ron Walker — US Leader for Managed Services, KPMG[10:45]
Sure. More broadly, anything as it relates to cybersecurity is an absolute immediate need. Most organizations don’t have the depth, the talent, and the tools to really address the ongoing issues of cybersecurity risk that’s out there — so identity management, managed detection and response. And you can’t just have a managed service; you also need access to true experts who can come in, because organizations will have an event and will require significant support. We’ve talked about regulatory response, so cyber is across the board, all industries. In financial services specifically, the regulatory requirements they’re being asked to respond to on a regular basis run the gamut — banking and financial institutions, SEC requirements. It is crazy what is required of our financial institutions right now, and for organizations to respond themselves across the board, they can’t do it on an effective basis. Then there’s the government space, so federal — things along the lines of grants management. When there is a natural disaster and funds come from the government, there is a requirement to actually manage those funds and distribute them to the right entities at the right level and prevent fraud. This is giant, and that’s an area where we’ve actually developed some specific technology using AI, as well as understanding the specific entities, where there’s huge value, because states, cities, or municipalities can’t respond quickly enough to get these in place. In order to use the funds properly, the funds may not get distributed if it’s not there. So there’s a huge opportunity in the government sector for things along those lines. And I think we’ve talked in the past about intelligent forecasting across industries. Learning management is one that’s coming up — it’s really hard for organizations to deploy the right technology on a cost-effective basis globally to help with learning management. So those are some of the areas that are out there that are high value.
Don Ryan — Research Fellow, HFS Research[13:13]
With that, Ron, thank you very much for your time today. This has been very insightful and enlightening for me, and I hope for our audience. So we’ll talk to you soon. Thank you.
Ron Walker — US Leader for Managed Services, KPMG[13:13]
Appreciate it, Don. My pleasure.
