Peter meets ...Gaston Vankan (Partner KPMG, IT Advisory)

An independent opinion to improve sourcing deals

Although KPMG is the number One in Sourcing of the Big Four Auditing Firms in the World, it doesn’t belong to the top Sourcing players in the Netherlands. One of the reasons for this is market image, says Gaston Vankan, who is responsible for Sourcing Solutions and is a member of KPMG’s Global Sourcing Network.

 

Market positioning

Gaston sees at the top of the market the Strategic vendors like McKinsey and at the bottom of the market the Operational vendors like Atos Origin. Both vendor categories are strong in their specific fields. But there is a gap to bridge between the strategic advice and the operational reality. Here is where KPMG comes in. Gaston depicted this as follows:

 

Strategic Services: McKinsey, Booz Allen, etc

How to bridge this Gap?

Operational Services: Atos Origin, Capgemini, etc

 

With its Sourcing Services KPMG translates the Strategic advice into operational results. This means that KPMG develops a clear project plan how to reach the strategic goals within time, including all the practical aspects like procedures, asset inventory, contracts, financial impact etc. Gaston emphasis that besides the wide scope of the Sourcing Services the independency of KPMG is an added value for its customers.
A peculiar thing is that the Sourcing market sometimes perceives KPMG as a competitor of the operational vendors. KPMG is an Audit, Tax and Advisory firm and not an IT operator. Therefore it's unique selling point is that KPMG can always put it's client's interests first, without considering which way the sourcing deal will go.

 

Who are the real competitors of KPMG?

Spontaneously vendors like Equaterra (former Morgan Chambers), Quint and Everest are mentioned. All vendors with a proven track record in Outsourcing for the last ten years.

 

What makes KPMG Outsourcing so special?

All the Sourcing experts of KPMG have a strong business background. Business cases are build from a business and not from an IT perspective. The broader scope of our services and our independency differentiates us from our competitors, says Gaston. In addition to that, the availability of KPMG's Global Sourcing Network means that whether you are outsourcing to European countries or to countries in the Asia Pacific or the Americas, KPMG will always be able to put in knowledge of the local markets.

 

This leads us to the question which Sourcing services are most wanted by the market?

 

Re-evaluation/Service evaluation.

There are already many companies entering the second and third wave of Outsourcing. Based on the experience with the first vendor they often have the need to evaluate the existing contract. This service evaluation and sometimes re-evaluation is a big part of the engagements of KPMG.

 

In a Sourcing contract there are a lot of vendor obligations. It sounds peculiar, but customers do not have always sufficient insight in the real KPI’s upon which the invoices of the vendors are built. This is also confirmed by the KPMG Global Sourcing Survey (www.kpmg.nl/sourcing). The aim of the service evaluation is to provide the client with more grip on the actual services levels and the performance indicators in order to create services the client initially desired when closing the deal. In the end desired, actual and perceived service levels should all be the same.

 

In Outsourcing contracts the vendors guarantees a certain level of performance described in Sla’s. The customer can have the right to perform a third party audit to assure himself that the vendor really has taken the right measures to live up to his guarantees described in the contract. Many customers do exercise this right nowadays and not without reason.

 

Some quality vendors do think ahead and deliver a so called SAS 70 report regarding the quality measures they have taken to safeguard the interest of their customers. A good advice is to check your Outsourcing contracts on the obligation of the vendors to issue such a SAS 70 statement. If you don’t have it, please do renegotiate this obligation! Not all the big vendors do have the right procedures to issue easily a SAS 70 statement and to make this more complex the capability to issue a SAS 70 report can differ per country with the same vendor.

 

What can you expect from a SAS 70 statement?

Statement on Auditing Standards No.70 (SAS 70) was issued by the American Institute of Certified Public accountants. It gives the Sourcing vendor a means to provide insight in the quality of the internal controls to provide reliable outsourced services. It is also an opportunity for the vendor to distinguish itself from its competitors. In the short run it can also be a competitive advantage. Within a few years it will be common practice and a disqualifier if you don’t have a SAS 70 or TPS.
When an organization prepares itself for a SAS 70 examination, the internal control structure will be visible and more transparency and uniformity will be introduced into the processes. So when you request a SAS 70 report you can see if the vendor gives value for money. Bear in mind that you have two types of SAS 70 reports, type I the so called ‘snapshot’ statement and type II, a statement regarding a specific period.

 

Sourcing Lifecycle Methodology

For all Sourcing engagements KPMG uses its Sourcing Lifecycle Methodology.
Through its worldwide presence KPMG has competencies and track records with clients regarding all the phases of the Sourcing Lifecycle Methodology. We will not describe the methodology in this article but we just pick out some important statements of Gaston. First it is important to formulate the Sourcing Strategy before you decide to go for it. If you don’t know the reasons why you choose for Outsourcing the results will always be disappointing. Be clear about your main reason(s): is it to safeguard scarce knowledge, cost reduction, quality improvement, better procedures and so on? Although it may seem as an open door, often this so called "Why" question is not answered adequately.
When you have finally signed the contracts and prepare for migration it is a Must that you have a 100days plan. How and when will the IT operation be transferred to the vendor. What is your Day One scenario? You should be very clear what will change from Day One on. When there is an incident need the business to call an other phone number? What changes will there be in the billing process, etc?
And last but not least how do you organize your Service Level management? From Day One on the retained organization needs to function on an other level. There is a change from tactical/operational towards tactical/strategic way of working. Sometimes vendors do report on facts that are not measured at all, says Gaston. What to think of a case that a vendor do report on the availability of a network, that was subcontracted without any information from the subcontractor? It pays of to look into kitchen of the provider.

 

Is KPMG the ideal partner for the contract negotiation phase?

To answer this question we must divide the negotiation phase in two parts: the legal issues and the money issues. Since it is by law forbidden that audit and law firms are part of the same organization, KPMG does not deal with the legal issues. However, with its Sourcing Lifecycle Methodology KPMG can be of great help and gives you "value for money".

 

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