Don Ryan — Senior Research Fellow, HFS Research[00:21]
Hi, everyone. I’m Don Ryan, Senior Research Fellow at HFS Research. I’m here today with two principals at KPMG: Thomas Davies, National Managed Services Leader for Risk, and Ron Walker, US Leader, Managed Services. HFS has been researching the market and its demand characteristics for managed services for over five years and has authored, along with KPMG, two groundbreaking studies published in 2023 and 2024. Today, we want to discuss the importance and transformative characteristics of managed services and the outlook for managed services over the next three years. KPMG has a strong and committed service delivery emphasis on managed services, both in the United States and globally. To start, Ron, how does KPMG define managed services, and why is it different from traditional outsourcing? In studies we’ve done, 40% of enterprises have implemented managed services at scale. Some categories we see include ESG sustainability, compliance, risk, and cyberservices.
Ron Walker — US Leader, Managed Services, KPMG[01:28]
Well, thanks, Don. I’d say we provide the same kind of traditional industry definition of what managed services is, which really means when we take over the ownership and the accountability of a business process, which would include the people, the process, and the technology associated with that — and probably more along the terms of reverse of that, right? We start with technology first these days, and then we look at the overall, how we deliver that.
Don Ryan — Senior Research Fellow, HFS Research[01:55]
So, Thomas and Ron, where do you see managed services gaining traction and scale? Are there specific industry-focused services and other core applications where KPMG is placing its emphasis and investments?
Thomas Davies — National Managed Services Leader for Risk, KPMG[02:08]
Yeah, so if I sort of draw from Ron’s statement around really partnering with our clients and being collaborative, oftentimes we see the components in financial services, in government, and in power, utilities, and energy, really where the client needs greater scale and speed. This would typically be a scenario where sometimes their existing team just isn’t sufficient. They might be brilliant, but don’t have the capacity necessary to potentially onboard applications at speed or review financial crime-related data in a timely manner. And so where we see the greatest demand from our clients today is with sophisticated teams that understand the problem but need greater support throughout the execution, and they need it at the highest quality possible, because it might be in scope for regulatory or other such reason.
Ron Walker — US Leader, Managed Services, KPMG[02:55]
One of the reasons why we see clients really reach out and partner, particularly, as Thomas said, is the large sophisticated clients — they can deliver a lot of these services. For example, there’s a probability to achieve associated with a likelihood to take it on. So clients just don’t necessarily have the focus, or they have a lot of competing priorities that would actually impact them, because people get promoted, they move on, they move to different things, or funding gets pulled based on what they had initially identified as an opportunity. Whereas when you engage with a provider such as KPMG, you’re actually financially contracting to achieve the objectives that you together have set forth.
Don Ryan — Senior Research Fellow, HFS Research[03:24]
It’s interesting. So how do you distinguish between transactional and transformative managed services? Do you make a distinction in your offerings and the impact that those will have on the enterprise?
Ron Walker — US Leader, Managed Services, KPMG[03:51]
Absolutely. Again, when a client reaches out to us and wants to partner with a provider, that makes all the difference in the world. And to give you an example of where we’re seeing more transformational execution, it’s along the lines of either cyber and/or financial crimes. So there is a significant threat, as well as regulatory requirements that our clients are having to follow through on, and they just don’t have the skills, the capability, the focus — along the lines of what I mentioned previously — to be able to address that. So when you look at the ability of a client to first identify, monitor, and address perhaps a significant cyber threat that’s coming in, we’ve taken reporting down to a factor where it would take two hours to address a significant activity report where we’ve identified a potential breach, down to seconds, using AI, using automation, and using our global capabilities and understanding those industry perspectives. Whereas a client — although, you know, a big bank could probably get there — they have other priorities and other components where they need to spend their dollars.
Don Ryan — Senior Research Fellow, HFS Research[05:06]
So that’s transformative, in terms of the example you gave — it’s transformative around the cyber process, going from hours to minutes with greater accuracy through the use of AI, and clients understand this when you talk to them about it. So Thomas, this is an important question. Could you weigh in on this one also, please?
Thomas Davies — National Managed Services Leader for Risk, KPMG[05:24]
Yeah, I love the way Ron put it, because I think what the client is looking to get to is to transform into transactional. They want it to be more simplified, and I think our approach really focuses around what does the landscape look like today — and that might not be perfect, but the intention for our managed services is to augment over that period of time into something that makes it easier, whether that’s a process enhancement or helping skill up the client. And that comes back to that collaborative nature of that partnership. That sort of discussion is, they have a sense of what could good look like, and they’d like our support to get there and do it at a greater velocity, giving their team that capacity to do some of that, but also innovate within their own organization.
Don Ryan — Senior Research Fellow, HFS Research[06:21]
It’s interesting. From the work that we’re doing, 25% of the companies today, and roughly 40% in two years, cite business model transformation and strategic outcomes as major impacts. So this linkage between transformation, innovation, and new process delivery is very critical, and I think increasingly well understood. Can you both comment on how you link advisory to delivery, and how that drives the transformative and innovative process?
Thomas Davies — National Managed Services Leader for Risk, KPMG[06:48]
A client engages us because they understand that there’s some component of ambiguity in the way that they’re delivering the service, or the way that they want the outcome today. And so we work collaboratively with our leads across a number of different areas depending on the client’s ask of outcome, to really hone that ambiguity down to a place where it’s reasonable to be able to turn at the required level that the client wants, to be able to execute on these individual outcomes over time. And so oftentimes the discussion, which really starts with trust, is better understanding the organization and having that institutional knowledge really pull through the entire process. It helps us culturally in terms of how we would deliver the solution inside of this organization.
Ron Walker — US Leader, Managed Services, KPMG[07:29]
Yeah, I would say it’s really augmenting our capabilities with our very large advisory capabilities. You think about the experiences that we’ve had, but our consulting brethren in various parts of the organization have different experiences and different capabilities. So we’re able to bring in change management experts based on certain skill sets, or technology experts that we may or may not have addressed inside of our managed services organizations. So we continuously both augment as well as supplement our teams, and we transfer people in and out, going back and forth, to really enhance the client’s experience and our ability to deliver to their needs.
Don Ryan — Senior Research Fellow, HFS Research[08:21]
What are some other unique differentiators and value propositions for managed services that KPMG brings? The survey that we did with you cited talent and advanced tech deployment, and we’ve discussed advisory and consulting services.
Ron Walker — US Leader, Managed Services, KPMG[08:44]
So there are a couple of other things that are really key differentiators. We’ve been noted as ranked number one in quality for our AI advice, which is obviously everybody’s top of mind.
Thomas Davies — National Managed Services Leader for Risk, KPMG[08:55]
Yeah, I was going to add — I think our brand globally around regulatory, as Ron alluded to earlier, there’s a lot of asks that are done at speed, required at speed because of regulatory requests. I’d say the one that we don’t bring up as much as we should, because we are quite proud of it, is our transaction advisory group. We have a lot of talent as it pertains to actual mergers, acquisitions, and integrations. And if I look across a lot of the work that we’ve done over the last couple of years, it’s really been around how we’ve helped an organization merge with another, and how we use managed services through that transaction life cycle to drive additional value.
Don Ryan — Senior Research Fellow, HFS Research[09:22]
Where are the results exceeding expectations when it comes to managed services? In our surveys with you, 70% of enterprises cite they are exceeding expectations in their use of managed services. They cite things such as cost reduction and stakeholder experience. Importantly, 78% say they’re exceeding expectations for access to scarce talent when using managed services. Can you give us a couple of real-world examples where people have just hit it out of the ballpark with managed services?
Ron Walker — US Leader, Managed Services, KPMG[09:48]
Well, one of the areas that we haven’t talked about, which obviously is one of our name-brand recognitions, is our ability on the risk agenda. So when you talk about organizations having to both address their own internal risk environment as well as handling what any regulators may want, we’re able to bring in that talent. And Don, you mentioned it earlier — we’ve got industry expertise, so they’ll know what’s happening in financial services, or in consumer, or in energy, and what they have to address. We have technology specifically associated with those areas as well, because it’s not the same technology across the board. So bringing resources together — diverse resources and specialized expertise, quickly — and then solving these problems quickly.
Don Ryan — Senior Research Fellow, HFS Research[10:49]
Thomas?
Thomas Davies — National Managed Services Leader for Risk, KPMG[10:50]
Yeah, I’d say along those lines, as we improve these processes, there’s a component of the program we’re supporting where there are so many other stakeholders involved in that process, and so really having a process improvement creates a quality-of-life improvement for so many others. And I think having their own internal teams get some of that time back, that breather, and that quality-of-life improvement has actually seemed to be helpful in terms of retention and execution and fulfillment of their roles. So I think when we are working closely alongside the existing stakeholders through the process, helping with knowledge transfer, helping with process improvements, it creates a much better work environment.
Don Ryan — Senior Research Fellow, HFS Research[11:19]
So one of the elephants in the room here too is the role of AI in accelerating value across key business drivers, such as operating model transformation. How is the use of AI linked to managed services delivery in KPMG’s experience, because 80% of the respondents in our surveys have cited AI as a critical underlying capability?
Ron Walker — US Leader, Managed Services, KPMG[11:43]
I’ll take a couple of shots at this, but first I want to say — we keep saying AI, but it’s a broader terminology, right? It’s traditional automation and AI, all wrapped in, and certain technology aspects that are out there. But actually, as it’s continued to get much better and much less expensive for us to engage, it is the first thing we reach to when we look at a process that we’re taking on, either brand new or one we’re trying to reengineer — we’re trying to move everything into an automation or AI model. And even going down to how we train our folks, we put that into AI models so that we can actually train folks within hours of taking on a process, so that we can leverage and scale, and, say, bring agents — both AI agents as well as real people agents — up to the level of expertise that they need in order to address whatever we’re being asked for the client. And we’ve cut our learning costs substantially, by up to 80%, on just training our own people, using the AI models and large language models that we have to pull from.
Don Ryan — Senior Research Fellow, HFS Research[12:52]
So lastly, what are the top three actions or considerations that an enterprise must take to develop a comprehensive managed services delivery strategy, and how does KPMG support these? So Ron, I’ll let you go first.
Ron Walker — US Leader, Managed Services, KPMG[13:04]
OK. Well, I’d say, first, we need to engage the entire stakeholder community and get aligned there — both the client and the provider, and the provider environment that they’re using, because it’s not likely they use just one provider. So we really need to align the overall objectives through that process. That’s critical, and then setting out what you’re trying to achieve. Then, as we’ve just now talked about, it’s really and entirely leveraging both the technologies as well as the functional and/or industry expertise together. And then finally, which we touched a little bit on but not as much — as it becomes problematic in any of our engagements with clients — is the whole change management and user adoption. So if that change management process is underinvested, the user adoption is lower, which tends to mute the potential capability of that function or that process we’re taking on. So that’s very critical. So I’d say those three — the stakeholder alignment, the technologies and expertise, and then finally the change management — are the top three things we need to get aligned with together.
Thomas Davies — National Managed Services Leader for Risk, KPMG[14:07]
That was really well said. I don’t think I’m going to add too much on top of that, aside from remembering the process is cultural — inside your organization it might be slightly different. We’ve got very clever ways to deliver the solution, and we’ve got the breadth globally to understand where this has been done well, and depending on the organization, what the best approaches are. So we want to bring those forward and have that collaborative conversation around — tell us about where the tricky points are inside the organizations, to Ron’s point, and that stakeholder discussion. And then let us help you transform that function into a simplified version, so that we can collectively deliver at a greater scale.
Don Ryan — Senior Research Fellow, HFS Research[14:54]
I like the linkage between managed services, culture, and change management, versus the discussion just being ‘I can do it faster at 50% less cost’ — which is important, but I think the culture, the transformation, and the change really trumps many other aspects of delivery over the long term. So, Ron and Thomas, thank you very much for this discussion today. I learned a lot, and hopefully we can do this again soon.
Ron Walker — US Leader, Managed Services, KPMG[15:31]
Thank you, Don. Appreciate it. Thank you.
