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2016 Q1 China Shared

Services and Outsourcing


Survey Results

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

Table of Contents
1. KPMG SSOA Practice

Pg. 3

2. About this Survey

Pg. 4

3. Business Outlook

Pg. 5

4. Captive Centre

Pg. 11

5. Outsourcing

Pg. 17

6. Robotics Process Automation (RPA)

Pg. 23

7. KPMG Contacts

Pg. 29

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

KPMGs Shared Services and Outsourcing Advisory Practice


KPMG has the ability to help member firms clients transform enterprise services to help improve
value, increase agility and create sustainable business performance.

The Shared Services and Outsourcing Advisory practice brings a specialized


global team of more than 1,000 professionals within KPMGs global network of

Who
we are

independent member firms operating in 155 countries. Our professionals help


clients design, build, and manage information technology (IT) and business
processes across the enterprise.
We help clients align their business strategy, organization and execution

What
we do

to enable them to manage the entire IT and business process life cycle,
improving business performance, and laying the groundwork for genuine
business transformation.

How
we do
it

We apply focused research, automating tools, proprietary data, clear


business acumen, and a forward-thinking mind-set to provide timely,
objective, actionable advice and practical approaches for clients.

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

About this Survey


KPMG China Shared Service and Outsourcing Surveys
KPMG China is proud to present the results of our 2016 Q1 China Shared Services and Outsourcing Survey.

Input sources:

Topics evaluated:

KPMG sourcing advisors


throughout China and Hong
Kong

Companies (MNC ,SOE ,POE)

Leading global business, IT,


and cloud service providers

KPMG thought leadership

New for 2016!

Primary functional focus:

China Overview

Finance and Accounting

Human Resources

Information Technology

Customer Care

Data & Analytics

Procurement

Business Outlook, growth and


overall enablers

Shared Services

Internal Captive

Outsourcing

Robotic Process Automation (RPA)


and overall observations

Starting this quarter, we have added new survey questions to address the global
trend of Robotic Process Automation (RPA)

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

Business Outlook

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

China Overview

70% of companies surveyed viewed internal captive centres as critical to reaching their goals and
objectives

People experience at a leadership & team level are key challenges when setting up and maintaining an
efficient internal captive center

Companies look to third parties for assistance in Process design, benchmarking and risk management

Internal captive centres continue to focus on operational efficiency and effectiveness improvements helping
the business to focus on revenue growth and outpacing local market competitors

Outsourcing is growing slightly in acceptance with the main challenges being funding and change
management

Growth expectations continue to be a key company challenge with 60% predicting less than 10% revenue
growth

Robotics Process Automation (RPA) technologies have not gained sufficient visibility and momentum
amongst China organizations, whereas globally this is a very hot trend

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

Growth Expectations
Q:

What are your Organization growth expectations within the next 1 - 2 years?

Company

Advisor

Over 20%Growth

10%t o 20%Growth

0% to 10% Growth

Negative Growth

0%

Company

10%

20%

30%

40%

50%

60%

50%

40%

30%

20%

10%

0%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

Enablers
Q:

What do you feel are the biggest enablers of growth for your Organization over the next 1 to 2 years?
Company

Advisor

Improved access to capital and funding

Improving regulatory environment


Better execution of sales and marketing efforts
Innovation in products/services improved return on
research and development
Improved operational efficiency reduced operating
cost, reduced investment costs
Improved operational effectivenessimproved process
performance, greater
Growth via mergers/acquisitions
Export growth for good/services
Domestic market growth for goods/services

0%

Company

10%

20%

10%

0%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

Challenges
Q:

What is the biggest challenge for your Organization within the next 1 to 2 years?
Company

Advisor

Reducing SG&A Costs


New Local Market Competitors
Slowing Demand for Core Products & Services
Access to Capital and funding

Slowing Business Demand


Growing Exports
Increased Competition
Restrictive Regulatory Environmnent
Leveraging Technology
Managing Supply Chain
Developing and Executing a Competitive
Managing Wage Inflation
Merger Execution and Integration
Finding and Retaining Talent

Increasing Net Income


Revenue Growth

Company

Advisor

0%

5%

10%

15%

10%

5%

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

0%

Shared Services Criticality


Q:

How important and critical is the usage of Shared Services (Internal Captive Centre / Outsourcing)
to helping your Organization achieve its goals and objectives over the next 2 years?
Criticality of Internal Captive Centre

Criticality of Outsourcing

Company

Very important 5
4
3
2
Not important 1
0%

10%

20%

30%

40%

Criticality of Internal Captive Centre

30%

20%

10%

0%

Criticality of Outsourcing

Advisors

Very important 5
4
3
2
Not important 1
0%

Internal captive centre

15%

30%

45%

60%

45%

30%

15%

0%

Outsourcing

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

10

Captive Centre

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

11

Management Expectations
Q:

What is top expectation from the executive management for your / your clients Internal Captive
Centres efforts for the coming 2-3 years?
Company

Advisor

Improve governance of efforts


Improve talent/skills of resources
Increase scope of efforts
Greater efficiencies gained
(harmonization)
Greater of commercial enterprise software
Greater use of cloud
Greater use of data analytics
Improve in-scope process performance
and operations
Drive down ongoing costs
0%

Company

5%

10%

15%

20%

25%

20%

15%

10%

5%

0%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

12

Adoption Drivers
Q:

What do you think are the most important drivers to your clients adoption or expansion of Internal
Captive Centre?
Advisor
Standardization, simplification and harmonization
Support business growth/expansion agendas
Reduce operating costs (OpEx)
Reduce future investment costs (CapEx)
Redirect resources to more strategic activities
No specific reasons/many competing reasons
Improve process performance
Improve global delivery & operating models
Improve financial flexibility/create more variable cost model
Productivity and efficiency gains
Gain economies of scale
Gain access to external skills/talent/resources
0%

5%

10%

15%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

13

Current Challenges
Q:

What are the top challenges your organization faces with your current shared service center (internal
captive center)?
Company

Advisor

Organizational structure design

Use of technology
Inexperienced Governance Organization
Inability to drive improvements and
efficiencies
Lack of a viable business case,
assumptions have changed
Change Management Challenges
Lack of operational team experience to
manage efforts/weak governance
Lack of Leadership Team Experience to
manage the center / relationship

Lack of funding
Lack of Executive Leadership
0%

Company

5%

10%

15%

20%

15%

10%

5%

0%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

14

Third Party Assistance


Q:

In which of the following areas do you feel your organization / your clients would seek third party
assistance regarding shared services (internal captive center)?
Company

Advisor

Benchmarking / health check


Continuous improvement
Governance structure and design
Transition support
Retained organization design
Location assessment
Risk assessment and mitigation

Business case
Process design
Scope Assessment
People and change management
Stakeholder management
Stakeholder alignment
Project Management
0%

Company

5%

10%

15%

10%

5%

0%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

15

Demand
Q:

What do you feel are the major demand areas for Internal Captive Centre for your clients today [next
24 months?] ?

Advisor
Sales Support & Marketing Research
Supply Chain - Sourcing & Procurement
Research & development
Real estate & facilities management
Information technology
Industry specific services

Human resources
Finance & accounting
Documentation services (scanning, print, mail)
Data and analytics
Customer care / Customer Service
Administrative services
0%

5%

10%

15%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

16

Outsourcing

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

17

Management Expectations
Q:

What is top expectation from the executive management for your / your clients Outsourcing efforts for
the coming 2-3 years?
Company

Advisor

Improve governance of efforts


Improve talent/skills of resources
Increase scope of efforts
Greater efficiencies gained (harmonization)
Greater of commercial enterprise software
Greater use of cloud
Greater use of data analytics
Improve in-scope process performance and
operations
Drive down ongoing costs
0%

Company

5%

10%

15%

20%

25%

20%

15%

10%

5%

0%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

18

Adoption Drivers
Q:

What do you think are the most important drivers to your clients adoption or expansion of
Outsourcing?
Advisor
Standardization, simplification and harmonization
Support business growth/expansion agendas
Reduce operating costs (OpEx)
Reduce future investment costs (CapEx)
Redirect resources to more strategic activities
No specific reasons/many competing reasons
Improve process performance
Improve global delivery & operating models
Improve financial flexibility/create more variable cost model
Productivity and efficiency gains
Gain economies of scale
Gain access to external skills/talent/resources
0%

5%

10%

15%

Advisor
2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

19

Current Challenges
Q:

What are the top challenges your organization faces with your current shared service center
(outsourcing)?
Company

Advisor

Organizational structure design


Use of technology
Inexperienced Governance Organization
Inability to drive improvements and efficiencies
Lack of a viable business case, assumptions
have changed
Change Management Challenges
Lack of operational team experience to manage
efforts/weak governance
Lack of Leadership Team Experience to
manage the center / relationship
Lack of funding
Lack of Executive Leadership
0%

Company

5%

10%

15%

20%

15%

10%

5%

0%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

20

Third Party Assistance


Q:

In which of the following areas do you feel your organization / your clients would seek third party
assistance regarding shared services (outsourcing)?
Company

Advisor

Benchmarking
Governance structure design
Transition project management office support
Negotiations support
Retained organizational design / restructuring
Site selections
Service level / reporting requirements
Scope definition

Opportunity case / Business case


RFP development / Management
Service provider identification and assessment
0%

Company

5%

10%

15%

20%

15%

10%

5%

0%

Advisor

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

21

Demand
Q:

What do you feel are the major demand areas for Outsourcing for your clients today [next 24
months?] ?
Advisor
Sales Support & Marketing Research
Supply Chain - Sourcing & Procurement
Research & development

Real estate & facilities management


Information technology
Industry specific services
Human resources
Finance & accounting
Documentation services (scanning, print, mail)
Data and analytics
Customer care / Customer Service
Administrative services
0%

5%

10%

15%

Advisor
2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

22

Robotics Process
Automation (RPA)

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

23

Changing How Business is Done


Shifting to a digital labour force
Digital Labor (a.k.a. Robotic and Cognitive Automation) is a range of technologies that
companies can use to automate both business processes and operations. It includes
automation of transactional parts of a business process through the application of
technologies such as workflow, screen scraping and rules engines, up through automating
more strategic business operations by leveraging more sophisticated technologies involving
cognitive machine processing and elements of artificial intelligence. .

These types of technologies will drive exponential and unparalleled transformation of


business models. Their use is set to enable a progressive digitization of labor. Their
development has been driven by significant advancements in natural language processing,
machine intelligence, digital engagement, analytics, big data, social, mobile, and cloud.

Ranging from basic optical character recognition (OCR)/screen scraping technologies, these
technologies sit on top of existing IT architecture components. In their most advanced form,
they interpret data from multiple sources to make decisions like a human would.

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

24

Benefits of a Digital Labor Force


WAVE 1:
LABOR ARBITRAGE

WAVE 2:
LABOR AUTOMATION

Digital
Business Models
Social

Mobile

Cloud

15 - 30 percent
Cost take out

Data/
Cognitive
Analytics

40 - 75 percent
Cost take out for relevant functions

Model is scalable to the extent that


you can scale labor

Model is scalable through technology, and is


largely independent of labor growth

Custom/complex, legacy:
Your Mess for Less

Transformative new way of doing business

Ongoing access to low cost labor necessary


to provide continuous value

Revenue/profit correlated to people

One-Time (and limited ongoing) access


to analysts who can codify
manual processes
Revenue/profit not correlated to people

Source: The Outsourcing Institute, Three Secrets Your Traditional Service Providers Are Not Telling You, June 2014
2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

25

Digital Labor Automation (DLA)


Natural
Language
Processin
g

Adaptive
Alteratio
n
Large-scale
Processing

Processing of
Unstructured
Data & Base Knowledge

Machine
Learning
RULES
ENGINES

Artificial
Intelligence

SCREEN
SCRAPING

Basic Robotic Process


Automation (RPA)

WORK
FLOW

Big Data
Analytics

Macro-based applets

Screen scrapping data collection


Workflow
Visio-type building blocks
Process mapping
Business process management BPM

Enhanced Process
Automation

Built-in knowledge repository

Learning capabilities (e.g. learning assist)


Ability to work with unstructured data
Pattern recognition

Reading source data manuals (e.g. NLP)

Autonomic/Cognitive

Artificial intelligence
Teaching versus programming
Natural language recognition & processing
Self-optimization / self-learning
Digestion of super data sets
Predictive analytics
Hypothesis generation
Evidence-based learning

High value use cases across key financial service providers

Customer On-Boarding
Account Opening
Fund Payments

Cross check multiple systems, with


structured and unstructured data, to
ensure compliance

An intelligent virtual personal assistant


can rapidly solve customer problems and
help users navigate and connect to the
correct information

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

26

RPA Deployment Global Survey


Q:

What is your organizations level of activity relative to the deployment of robotics process
automation and cognitive automation technologies?
Enhanced Process Automation

Basic Process Automation


1%

Cognitive Automation

2%

5%

8%

9%

15%
43%

38%

19%

28%

14%

22%
36%
32%

28%

Source: KPMG Global Pulse Survey 2015Q4


2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

27

RPA Deployment China Survey


Q:

What is your / your clients current level of activity relative to the deployment of Robotic Process
Automation (RPA) technologies and systems?
KPMG observed large scale cross functional RPA deployment globally, while China has
limited awareness and almost no activity
Level of activity relative to the deployment of RPA
Company

Process areas involving RPA techniques


Customer care

Advisor

Information technology
Live implementations

Human resources
Supply chain/procurement Other

Experimenting and
running pilots

Finance & accounting - Other

Self-education and
planning

Record to Report

No activity

Procure to Pay

Quote to Cash

Source to Procure
0%

Company

20%

40%

60%

Advisor

80%

60%

40%

20%

0%

0%

20%

40%

Source: KPMG China SSOA Survey 2016Q1


2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

28

Key KPMG Contacts

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

29

KPMG Contacts
Gary P. Nowak

James OCallaghan

Kai Cui

Partner-in-Charge

Partner

Partner

Shanghai Office

Beijing Office

Hong Kong Office

Gary.nowak@kpmg.com

Kai.cui@kpmg.com

James.Ocallaghan@kpmg.com

Webster Shao

Yong Zhu

Max Yang

Director

Director

Director

Beijing Office

Shanghai Office

Guangzhou Office

Webster.shao@kpmg.com

Yong.zhu@kpmg.com

Max.yang@kpmg.com

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a
Swiss entity. All rights reserved.

30

2016 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.
The information contained herein is of a general nature and is not intended to address the circumstances of any
particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no
guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the
future. No one should act on such information without appropriate professional advice after a thorough examination of
the particular situation.