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Are your contracts stuck in the Stone Age?

Are your contracts stuck in the Stone Age?

Sourcing partners can either help drive value or hold you back.

David Brown

Global Head of Shared Services & Outsourcing Advisory

KPMG in the U.S.


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Stone Age

Numerous organizations I talk to throughout the world fixate on keeping up with the incredible pace of emerging technologies. Many focus on transforming their legacy systems or trying to create a single solution across functions and geographies. This focus, however, tends to stay within the walls of the organization, often overlooking the impact of legacy outsourcing contracts with technologically inept providers. It’s common that these contracts were inked prior to the technologies that enable enhanced value opportunities such as cognitive, robotic process automation and advanced analytics. As a result organizations can easily end up falling short, finding themselves contractually bound to providers that are anchored to legacy systems. In some cases, these providers can be ill-suited to address the intricacies of new technologies affecting an organization's strategic objectives. The result? Less than expected productivity gains, scope expansion restrictions, decreased benefits of intelligent automation initiatives and unanticipated risks. 

According to KPMG and HfS Research’s State of the outsourcing, shared services, and operations industry 2017 study, outsourcing buyers’ top three selection criteria for a business or IT service provider were their ability to: 

services selected

Taken at face value, it seems that all of these criteria nicely intertwine with an intelligent automation solution, resulting in a win-win scenario in which buyers’ age-old appeal for value beyond cost savings is solved. But when you peel back the onion, you see there’s an issue. There is a big picture disconnect that potentially makes it difficult for buyers to get each of the three criteria from an outsourcing relationship.

The ability to ‘support business objective initiatives’ is the root of the biggest disconnect. For example, an organization’s strategic business imperative might be to get closer to its customers, bring a drug to market faster, develop a more effective supply chain or create a stronger brand image. These types of objectives require cognitive computing and AI as their advanced capabilities can enable more strategic service delivery, better insights from data, etc. Yet, many low-cost providers may never make investments in these advanced intelligent automation solutions along with questionable existing capability claims. So how can you determine if a potential or existing service provider can deliver the capabilities your organization needs to gain competitive advantage? How can you guarantee that your strategic partner is not, in fact, holding your organization back?

I believe that organizations need to be proactive and have deep discussions about these particular topics. 

A few key questions are:

  1. What investments have they made, or are they planning to make, in advanced intelligent automation solutions?
  2. What is their strategic plan for addressing your business outcome needs?
  3. How does that strategy support your organization’s strategy and objectives?
  4. What is the role of all types of intelligent automation – both RPA and cognitive/AI in addressing the above?

In order for any service provider to be successful on your behalf, you must have clearly defined business objectives, be prepared to make the necessary investments in technology and change management and fully embrace intelligent automation as an enabler of greater business performance and value. 

To learn more, please read KPMG’s and HfS Research’s State of the outsourcing, shared services, and operations industry 2017 study.

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