Growth Of Domestic, Offshore Shared Services Outpaces Traditional Outsourcing: KPMG Survey

NEW YORK, April 26, 2012 /PRNewswire/ -- As organizations continue to expand their use of global business services (GBS), the growth of both domestic and offshore shared services continues to outpace that of traditional outsourcing, according to the latest quarterly survey of sourcing service providers and KPMG advisers by KPMG LLP, the audit, tax and advisory firm.  

This continues a trend that has been identified by KPMG's Sourcing Advisory Pulse Survey that has been growing over the past 24 months.

Shared services, which refers to centralizing administrative functions that were once performed in separate divisions or locations, was cited as the strongest area of growth within the GBS portfolio by over half (52 percent) of the KPMG professionals polled in the first quarter 2012 survey. 

While outsourcing remains a core component of GBS efforts, the relative growth of its usage has slowed.  This has been especially the case with traditional business process outsourcing (BPO), which only 27 percent of advisers polled cited as the strongest growth area.   

A webcast discussing the survey findings is scheduled for 11 a.m., Eastern, on April 26.

Greater Demand for Specialized BPO
"These relatively weak BPO growth expectations reflect diminished demand for more traditional, generic, transaction-oriented outsourcing arrangements, such as in finance and accounting, in contrast to the greater demand for more specialized BPO," said Stan Lepeak, global director of research for KPMG Shared Services and Outsourcing Advisory.

"This trend in focusing on more specialized outsourcing is an outgrowth 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 Lepeak. 

However, neither KPMG advisers nor service providers in the survey saw a major trend in buyers pulling back from global sourcing in general or in their use of India-based service providers overall. 

Deal Pipeline Growing for Service Providers
Service providers also indicated they have become more bullish on growth projections in their new deal pipelines, with 68 percent citing pipeline growth over the past quarter, an increase of 7 percent from the preceding quarter.

These findings highlight the continued globalization of service delivery models.  While many businesses are re-examining their use of domestic service delivery models, for example via shared services, 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.

Use of Cloud Enablement Services
The survey also found that service providers and KPMG advisers are seeing an increase in usage of cloud enablement services to complement, extend and in some cases supplant traditional 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 buyer organizations need to continue to improve their cloud skills and acumen, especially relative to addressing data security, risk and regulatory compliance requirements," said Lepeak.

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.

About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative ("KPMG International.") KPMG International's member firms have 145,000 people, including more than 8,000 partners, in 152 countries.

Contact: John Cline
KPMG LLP (U.S.)
201-307-8169
[email protected]

SOURCE KPMG LLP