frontiers in financial shared service · global service delivery scale » greater scale to...
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State of Financial Shared Services (FSS) shows continued growth and maturation
— Across the globe, companies are moving toward a Global Business Services (GBS) model to deliver core business processes such as Finance and Accounting (F&A), Human Resources (HR), Information Technology, Sourcing & Procurement and internal customer care.
— Uptake in GBS continues to accelerate as organisations focus more on internal process improvements and use of automation technologies over traditional outsourcing. While many organisations originally looked to GBS as a method to drive process efficiencies and reduce costs, a mature GBS organisation can deliver far deeper benefits with effects felt across the business.
— KPMG’s 3Q 2016 Global Insights Pulse Survey, a quarterly investigation of trends and observations from the front lines of the global business services market, looked at trends in GBS uptake and maturity. While savings and process efficiency remain key factors, findings show that leading GBS organisations share commonalities such as:
— Functional integration of GBS across back office functions — Using data and analytics to advance the GBS organisation beyond purely transactional activities — Focusing on cross-functional process improvements that make the businesses more relevant,
fast-acting, and forward-thinking.
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Latest cross-industry Trends - FSS
Optimise captive SSCs
Scope
Adoption of cross functional shared services
New location boundaries
Outsourcing
• Increased scope of services:• “Higher Value” activities• Geographies served• Multi functional
• Offshore delivery models• Global Business Services
• Maturing of outsourcing market• Emergence of tier two players• Steady number of deals but smaller• Changing mix of BPO vs. in-house• “In sourcing” – bringing work back
• Integrated cross-functional operations, supported by:
• SSCs (captive or outsourced)• Regional hubs• Centres of Excellence• Outsourcing of statutory & tax
• Global process owners• Cross functional SSC management and
customer relationship models• Standard tools
• C. [Country A], [Country B] & [Country C] are established locations
• Emergence of tier 2 locations• Maturity of [Country B]• Move to new locations led by
outsourcers and large MNCs• Financial incentives
• Improve efficiency and service of existing centres
• Focus on continuous improvement • Use of LEAN, Six Sigma and Industrial
Engineering
Automation Increased process automations through robotics, cloud technology and process standardisation
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Current FSS trends – General
SSC maturity
Outsourcing
New location boundaries
Globally Integrated Finance
Optimise captive SSCs
New adopters
• Increased scope of services:• “Higher Value” Finance• Geographies served• Multi functional
• Offshore delivery models• Global Business Services
• Maturing of outsourcing market• Emergence of tier two players• Steady number of deals but smaller• Changing mix of BPO vs. in-house• “In sourcing” – bringing work back
• Integrated Finance operations, supported by:• SSCs (captive or outsourced)• Regional hubs• Centres of Excellence• Outsourcing of statutory & tax
• Global process owners
• C. [Country A], [Country B] & [Country C] are established locations
• Emergence of tier 2 locations• Maturity of [Country B]• Move to new locations led by
outsourcers and large MNCs• Financial incentives
• Many large and mid size companies have not yet adopted shared services
• Agenda for radical transformation, including outsourcing as a first step
• Largely driven by cost savings and standardisation
• Improve efficiency and service of existing centres
• Focus on continuous improvement
• Use of LEAN, Six Sigma and Industrial Engineering
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Time
Finance Shared Services - Focus on Efficiency
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Valu
e • Global service delivery• Central portfolio management• Blended sourcing strategy• Global process owners• Single support structure
• Multi region• Increased scope• Multiple functions• Optimised, standard processes• Optimal internal and external delivery
• Single function• Transactional services• Single region• Enabling technology
Time
CASE STUDY – Consumer goods company
Evolution to Current Landscape
10 year journey 1999 - set up 3 global centres for
back office functions 2003 - outsourced 2008 - developed professional
services elementCurrent Landscape
Centrally managed [Company A] portfolioMultiple outsource providers [Company A] as a strategic group
Drivers of Change $ - + savings
Speedy integration of acquisitions ([Company B] integrated in 15 months instead of 3-4 years)
WAVE 1 WAVE 2 WAVE 3
Finance Shared Services Maturity: Global Business Services
• Technology standardisation
• Automation• Robotics• Flexible Service
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CASE STUDY
Evolution to Current Landscape 1996 – [Company C] signed deal with
[Company D] 2002 – [Company E] BPO acquired by
[Company F] 2005+ Rapid growth of BPO businessMoving up the Finance value chain
Current Landscape Operates 50+ F&A clientsMulti functional 7 global F&A centresMost recent 8th centre opened in [City
A]Drivers of Change
Acquisition of [Company E]s outsourcing and BPO business
Move from Hardware to Services
Process automation, Robotics
Outsourcing has undergone a step change in the last 5 years…..
Out
sour
cing
is m
ovin
g up
the
valu
e ch
ain
Current TrendsOutsourcing
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CASE STUDY – [Country A] an consumer electronics company
Evolution to Current Landscape First full year loss announced for over
a decade Decentralised organisation with
multiple legal entities Background of unsuccessful
implementation of shared services in the past
Current Finance Landscape Newly implemented pan [Country A]
an shared services Establishment of centralised Centre of
Excellence Developing relationship with third
party service provider with centres in [Country B] and Romania
Drivers of Change Process standardisation and
improvement [Country A] an wide cost reduction
Medium
Low
High
LOCAL / WEST [Country A] SSC CENTRAL [Country A] SSC OFFSHORED / OUTSOURCED
Not for Profit and mid sized
companies who have little or no shared services
Key Features
• Mostly in country operations• Limited cross border shared services• Resistance to change from local country• Open to radical transformation, including outsourcing• Largely driven by cost savings and standardisation
Current TrendsNew Adopters of Shared Services
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CASE STUDY – Healthcare provider
Evolution to Current Landscape Background of inefficient and
ineffective processes at an existing shared service centre In addition, high costs led to an
inability to meet operational needsCurrent Finance Landscape
Improvement plan in place, with step by step improvement targetsWorking capital improvements, more
effective business partnering, improved management information and the rationalisation of two offices into one Drivers of Change Process simplification Reduced operating costs , with
forecast savings of up to 40% Streamlined staff base
Many companies have established in-house shared services and are now looking to bring about greater effectiveness from their investment
Typically there are eight key levers which can unlock significant further benefits
Current TrendsOptimise Captive FSS
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Uni
quen
ess
of B
usin
ess
Proc
ess
or F
unct
ion
Transactional Rules Based Requires Judgment Strategic or Critical
Unique to Business Unit
Standard within the Industry
Common Across Industries
Nature of Process of Function
Increasingly organisations are beginning to focus on end-to-end service delivery to further drive process effectiveness and efficiency
Retain & Improve
Candidate for Shared Services
Candidate for Outsourcing
Employee Relations
Global Mobility
Performance Mgmt
LearningRecruitment & Selection
Compensation
Benefits
Employee Data Mgmt
HR Info Systems & Reporting
Employee Contact Centre
Budget/ Forecasting
Mgmt Reporting & Analysis
Fixed AssetsGeneral Accounting
Accounts Receivable
Tax
Strategic Sourcing
Vendor MgmtDemand MgmtDay-to-day purchasing
Performance Mgmt
Procurement Systems
Capital Budgeting
F&A Activities
Procurement Activities
HR Activities
KeyRegulatory & Compliance
Treasury & Risk MgmtRegulatory & Compliance
Spend Data MgmtInternal Audit
HR Strategy
F&A Strategy
S2P Strategy
Unique to Organisation
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Leveraging people
Customer Relationship Management
Service Mgmt
Process
Technology support
Facilities / Supplies
Formal quality management and continuous improvement
• Single point of contact & accountability• Consistent culture & approach to customer
service
Enhanced stature to attract & retain best people
• Formal quality management and continuous improvement
• Common service level management; shared expertise; knowledge mgmt
• Common tools and approaches (e.g., service oriented architecture)
Common Physical Structure
FINANCE HR IT
Multi-functional Shared Service Centre
Procurement
Why take a cross-functional approach to shared services
Single Face of Shared Services for all Customers
Common management processes / technologies
Cross-functional job rotation / career options
End to end process support
‘Shared Services’ within ‘Shared Services’
Synergies of shared locations / facilities
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Why multifunction makes sense: Key leverage opportunities
Theme Leverage Opportunity
Internal Customer Interface » Consistent approach to identifying & responding to voice-of-customer; single point of contact & accountability; common customer experience; consistent culture and approach to customer service
Governance & Sponsorship » Elevated decision and ownership (e.g., operating company Presidents rather than functional representatives)
Talent Management » Enhanced stature to attract & retain best people with both operational and commercial skills; scale to focus on employee development and rewards programs;
Global Service Delivery Scale » Greater scale to facilitate off-shore service model deployment and attraction of Tier 1 external service providers
Technology » Common tools and approaches (e.g., service oriented architecture)
Infrastructure » Center infrastructure (e.g., building, network design, call center hardware & software, imaging hardware, data storage, DRP, etc.)
Process & Service Management & Expertise
» Cross-functional process management; formal quality management and continuous improvement (e.g., Six Sigma); common service level management; shared expertise (e.g., transition mgmt); knowledge management
Business Requirements Flexibility
» More rapid and cohesive response to major business changes such as acquisitions and divestitures
Impact & Access to Capital » Increased relevance and importance of shared services; improved ability to identify improvement synergies and prioritise investments
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Cross-functional aggregation facilitates end to end standardisation
Regulatory / External reporting and consolidations
Financial Analysis
Treasury & Risk Mgmt
Cost/ Inventory/ Project accounting
Tax
Internal Audit
Order ManagementCustomer Service
Supplier enablement / master dataRebate Management
Content Management
Travel ReimbursementBilling
Fixed Assets
Proc-urementStrategic
IntercompanyCash ManagementCash Application
General Accounting
HR Strategic
FinanceStrategic
Tier 0 / 1 inquiryLearning administration
Data & Records ManagementStaffing Administration
Outplacement / severance
Payroll Accounts Payable
Service Desk support
Data Centre Operations Network and voice operations Asset Management
Testing Business Continuity Applications Development / Maintenance
IT Strategic
Site-specific employee relations
Organisational development
Total Rewards design
Learning development
Staffing Policy & succession planning
Performance Management
Strategic sourcing & contracting -Indirects
Tactical / spot buying
Supplier management
CSR / Supplier diversity
Business Line representation
Demand Management Starting point for
Shared Services
Evolving to best practice shared services
Typically largely retained
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How would Shared Services Help?Integrated services – how it could work...
Source: Corporate Executive Board
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• Relationship management between [Company A] and BU’s• Face to face customer interaction• Escalation point for significant/ specific issues• Ensure smooth transition of work into [Company A]• Monitor service levels and ensure resolution of issues• Monitor customer satisfaction• Identify additional scope that could be performed by [Company A]
• Day to day operational contact between [Company A] delivery teams and BU users
• Day to day issue handling and resolution• Operational Performance reviews• General issue resolution• Escalation matrix in place to supervisor/manager levels• Transition management of work from BU into [Company A]• SLA/ KPI reporting
• Strategic direction and governance• Multiple governance groups with Business and [Company A] representation eg Steering Committee, Functional Committee, Design Authority, Customer Board etc
• Performance reviews • Business benefits are realised• Final level of escalation
GBS interaction model
Operational
Relationship
Strategic
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Governance
An integrated governance model across all tiers is essential for the effective operation of Global Business services
Aluminium
Copper
Iron Ore
Energy
Diamonds & Minerals
Other e.g. corporate
ICT
Procurement
Finance
HR
Operational
Relationship
Strategic
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Only certain activities go in to shared services (1/2)
Scal
able
thro
ugh
cons
olid
atio
n &
rem
ote
cent
ral p
roce
ssin
g
Req
uire
s ph
ysic
al
pres
ence
or p
roce
ss
loca
lisat
ion
Routine and repetitive, efficiency focused
Requires skills / knowledge, Effectiveness focused
• Activities are largely repetitive but may require some degree of business proximity
“Evolving to best practice…
…shared services”
• Activities are more specialist but don’t necessarily require proximity to business
“Typically retained”
• Activities are both highly judgemental and tend to stay close to the business
• Activities are repetitive and tend to be suited to remote central processing
“Starting point for shared services”
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The list below is an example and not exhaustive, it indicates typical processes in Finance, HR, IT and Procurement:
Only certain activities go in to shared services (2/2)
Routine and Repetitive Efficiency Focused
Requires Skills / KnowledgeEffectiveness Focused
Req
uire
s Ph
ysic
al P
rese
nce
or P
roce
ss L
ocal
isat
ion
Scal
able
Thr
ough
C
onso
lidat
ion
and
Rem
ote/
C
entra
l Pro
cess
ing
Human Resources:• Site-Specific Policy
Development• Site-Specific Employee
Relations
Human Resources:• Organisational Development• Total Rewards Design• Learning Development• Succession Planning• Performance Mgt.• Staffing Policy & Tools• Communication Development
Finance:• Tax• Internal Audit• Risk Management• Treasury Management• Consolidations• External Reporting• Regulatory Reporting• Financial Analysis
IT:• Application maintenance• Application development• Testing• Training & education• Quality assurance• Business Continuity
Procurement:• Strategic sourcing &
contracting – indirects• Tactical / spot buying• Supplier management• CSR / Supplier diversity• Demand Management
Finance: • Inventory Accounting• Cost/Plant Accounting• Sales/Trade Accounting• Customer/ Product Profitability• Project Accounting
IT:• Site specific technology
development• User requirement /liaison• End user support• Develop local technology
needs• Policy/ standards exception
approval
Procurement:• Policy development /
implementation• Business line
representation• Exception management
Human Resources:• Payroll• Learning Administration• Tier 0/ 1 Inquiry• Outplacement/ Severance• Data & Records Mgmt• Staffing Administration
Finance: • Accounts Payable• Travel Reimbursement• General Accounting• Fixed Assets• Intercompany • Cash Management• Billing• Cash ApplicationIT:• Project management• Problem management• Asset management• Service desk support• Data centre operations• Disaster recovery• Network and voice op’s
Procurement:• Customer service• Order management• Content management• Supplier enablement /
Master maintenance• Rebate management
Starting point for Shared Services
Evolving to best practice shared services
Typically largely retained
Human Resources:• HR Strategy• Workforce Planning• Talent Management• Labor Relations• Policy & Legal Compliance
Finance: • Financial Planning• Management Reporting• Budgeting/Forecasting• Credit Policy
IT:• Technology strategy and
architecture• Technology policies/ stds• Control environment
requirement definition/ approval
• IT Communications
Procurement:• Procurement strategy• Supplier selection• Strategic sourcing and
contracting – directs
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10%20%20%
35%50%
60%60%60%
70%80%80%
90%
95%
Ext. reporting
Planning
Cr mgnt
Collections
Fincl. analysis
Inv. acctng
Cost acctng
Billing
Fixed assets
Cash & bank
Gnl Accounting
T&E
AP
Best practice percentage of processes typically in shared services
5%10%15%15%
35%40%
60%65%65%
75%90%90%95%
HR strategy
Labour…
Policy/compl…
Talent mgnt.
Perf. mgnt.
Comms dvnt.
Rewards…
L&D
Recruiting
Relocation/E…
Emp. services
Benefits admin
Payroll
15%
20%
20%
30%
30%
60%
70%
80%
80%
90%
90%
90%
Demand mgnt.
Sourcing…
Contract…
Contracting
Supp. rel.…
Contract…
Tactical…
Supp. Mstr
Content mgnt.
Customer…
Rebate mgnt.
Contract…
15%
15%
30%
35%
60%
65%
70%
70%
80%
Tech policy
Tech strategy
Tech dvnt.
Tech.architecture
Policy changes
App dvnt.
Data centre ops
Service support
Networkservices
Finance HR Procurement IT
Typically largely retained
Evolving to best practice shared services
Starting point for Shared Services
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Globally Integrated Finance Model
Operating Model components - How activities tend to be grouped
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Using finance shared services (as an example)
FINANCE FTEs distribution
Shared Services(Finance)
Business(Finance)
17% 83%
FINANCE FTEs distribution
Best Practice
Shared Services (Finance)
Business(Finance)
60% - 80% 20% - 40%
What are the Service Delivery Model Options?
[Group A] per [Company M] 2008...
Based on Best Practice...
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Sourcing models – What are my options?
1. Streamlining & Standardisation
2. Business Process Outsourcer
3. Captive Shared Services
4. Business / Regional Hub
Greenfield
Brownfield
5. Hybrid
BPO & Captive SSC
BPO & Regional Hub
Captive SSC &Regional Hub
BPO, Captive SSC &Regional Hub
Single provider
Multi Source
No structural change needed. Efficiency is gained through improving current finance activities.
Requires selecting a single BPO
Requires selecting multiple BPO’s
A SSC owned by the [client], where they have no existing operations
A SSC owned by the [client], where they have existing operations
Several ‘Mini SSC’ at a HQ in each of the Countries or Business Units
Moving transactional activities to a BPO and higher value activities to a SSC / COE
Moving transactional activities to a BPO and higher value activities to a ‘Mini SSC’
This could be an end state, organisations do move activities to 3 different locations in one phase
Move as many activities as possible to a SSC and those that cant to a regional hub
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Captive vs. Outsource sourcing model – Detail - Pros and Cons
PROS
■ Perceived as the lowest cost (initially)
■ Allows most control over processes
■ IP protection and retention of business knowledge
■ Retention of staff knowledge and expertise
■ Allows maximum control over remote team
CONS
■ Significant management focus is required to establish and maintain captive operations
■ Significant resource investment is also required in launching and maintaining a captive centre
■ Significant initial capital investment and resource requirements
■ Operating and financial risk is retained
■ Inflexibility when needing to act on changing market requirements
PROS
■ Accountability for service provision is passed to third party
■ Proven ability to operate in offshore locations
■ Allows operational flexibility (quick ramp up or down of resources)
■ Contractually obliged to deliver long term savings
■ Access to best practice tools / methodologies
2
CAPTIVE
OUTSOURCE CONS
■ Could be perceived as more expensive longer-term (ongoing solution)
■ Perceived lack of control
■ New relationships and management model needs to be established and integrated
■ Still a stigma associated with outsourcing, although less than before
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The evolution of process automation
02
03
01
Rules Engine
Screen Scraping
Work Flow
MachineLearning
Large-scale Processing
AdaptiveAlteration
Artificial Intelligence
Big Data Analytics
NaturalLanguage Processing
Processing of unstructured data
and base knowledge
— Artificial intelligence— Natural language recognition and
processing— Self-optimisation/self-learning— Digestion of super data sets— Predictive analytics/hypothesis
generation— Evidence-based learning
— Built-in knowledge repository— Learning capabilities— Ability to work with unstructured
data— Pattern recognition— Reading source data manuals
— Macro-based applets— Screen scraping data collection— Workflow— Visio®-type building blocks— Process mapping— Business process management
CognitiveAutomation
Enhanced Process Automation
Basic Process Automation
R U L E S
L E A R N I N G
R E A S O N I N G
Robotics Process Automation Cognitive Automation
Digital Labor
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Shifting to a digital workforce
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Process automation and GBS highlights
— The finance function is more actively engaged in process automation than is the HR function and organisations overall are more active with basic process automation, following by enhanced process automation and cognitive automation
— Reduce operating costs of activities automated (75%) and free up resources/staff to perform more strategic activities (60%) are the top benefits process automation bring the GBS organisation
— Lack of appetite, budget and skills to make required process standardization (41%) and disparate underlying IT systems; lack of integration across IT applications and systems (40%) are the top challenges facing GBS organisations’ process automation efforts
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Level of automation activity by maturity level, overall
15%
35%
65%33%
39%
23%
27%
24%
9%24%
3% 3%
Basic process automation Enhanced process automation Cognitive automation
No activity Self-educating and planning Experimenting and running pilots Live implementations
Some types of basic process automation have been around for years but the greatest near term gains will come from enhanced automation while cognitive offer great long term potential but for a more select set of activities
Source: KPMG Global Insights Pulse, Q3 2016
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Level of client automation activity by maturity level, F&A
19%
36%
64%31%
39%
23%
29%
20%
10%21%
4% 3%
Basic process automation Enhanced process automation Cognitive automationNo activity Self-educating and planning Experimenting and running pilots Live implementations
Source: KPMG Global Insights Pulse, Q3 2016
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Top benefits to the GBS organisation from process automation
While the strategic benefits and market changing impacts of process automation are often touted, most adopters today still view its usage as primarily a cost savings exercise
22%
29%
49%
60%
76%
Improve competitiveness to key peers/get a jump onthe competition
Capitalize on “big data” opportunities
Improve performance of activities automated
Free up resources/staff to perform more strategicactivities
Reduce operating costs of activities automated
Source: KPMG Global Insights Pulse, Q3 2016
38© 2016 KPMG, an Australian 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 KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Biggest challenges to process automation implementation efforts
41%
15%
32%
39%
29%
25%
40%
30%
30%
30%
32%
39%
40%
41%
0% 10% 20% 30% 40% 50%
Determining where to deploy RPA technologies,where to start
Inadequate change management focus andcapabilities to execute successfully
Immaturity of technologies
Inability to build compelling and realistic businesscase for investment
Inconsistent and non-standard businessprocesses make broad automation impractical
Disparate underlying IT systems; lack ofintegration across IT applications and systems
Lack of appetite, budget and skills to makerequired process standardization
3Q16 1Q16Source: KPMG Global Insights Pulse, Q3 2016
39© 2016 KPMG, an Australian 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 KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
What is the future of GBS?
— More of the same, drive for optimal and higher levels of GBS maturity— Aggressively augment talent and skills shortages with increased use of process automation and digital
labor— Process automation and digital labour drives the demise of centralised, complex, too often under-
performing, human based global business services models— Blockchain trumps both traditional labour based GBS models and (cumbersome to deploy and maintain)
digital labour models (at least in certain functions and processes)— All of the above, it depends where you are at and where you want to go
40© 2016 KPMG, an Australian 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 KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Final thoughts
GBS of the future: humans need not apply?
GBS of the future: There isn’t one?
Document Classification: KPMG Confidential
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© 2016 KPMG, an Australian 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 KPMG name and logo are registered trademarks or trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation.
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