By Sebastian Hartmann & Ashish Madan.
Many professional services firms had to expand and improve their virtual collaboration, operations, sales, and digital service delivery environments drastically over the past years. The global pandemic these past months has even further accelerated the digital transformation of legal, consulting, tax and accounting. This change of pace, in terms of technology implementation and adoption, is unprecedented for an industry where on-site service delivery, people and relationships are considered to be the "secret sauce." By now, many lawyers, consultants, accountants and other experts have had to deeply embed technology in their ways of working – all the way from sales, to delivery and into their business support functions.
As of today, it is quite unlikely that firms will dial back on their technology investments - instead, we even see increasing technology investments in order to keep up with a faster evolving competitive landscape. Gartner predicts an annual growth of 5 to 15% for the technology spend of professional services firms – even factoring in the steadily decreasing unit costs for many technologies (e.g., storage, processing, etc.). As firms work through the selection, implementation and adoption of more and more systems and tools, it is obvious that there is barely a true alternative to a “cloud first” strategy. In fact, we may have already passed this foundational stage for moving to the cloud:
The status of cloud adoption and the key benefits for professional services firms
CLOC (Corporate Legal Operations Consortium) found out that currently, 82% of law firm clients allow their service providers to store data in the cloud. Among Fortune 500 respondents, the percentage is even higher (92%) – and this includes historically cautious financial services organizations.
Survey results presented at ILTACON in August 2020 indicate that only 21% of law firms are already mostly in the cloud. But another 35% of firms are considering the cloud for upcoming system upgrades, and another 32% see the cloud as their future default setting.
Key motives stretch beyond the immediate needs of supporting a fully remote or hybrid workforce. With increasingly data-driven processes and decision-making comes the need to access and make available large amounts of information in a flexible and transparent way. Moving to the cloud enables time-efficient and transparent collaboration in a B2B environment and offers a high degree of flexibility and mobility, as data can be accessed and shared from anywhere. Firms also find benefits in the cloud around their expanding client portals and virtual assistance services, which improve customer experiences and provide better service flexibility.
Business and IT leaders are also beginning to realize that their data is more secure in the cloud as well. After all, cloud providers are making continuous investments in data protection and cybersecurity, way beyond the capabilities of any law firm. Better access to more centralized data (moved out of the traditional on-prem tool silos) is another critical consideration. Lastly, CIOs are starting to see the financial benefits of seamless up- and down-scaling and leveraging new, innovative cloud features.
Now, with 88% of survey respondents reporting that their firms have "seen the light on the advantages of the cloud," it is a critical moment in time, to review technology strategies across Professional Services firms.
How to future-proof your cloud and technology strategy
We believe that it is important to start this process by reviewing some fundamental assumptions about the firm. Therefore, this exercise should be as much about business models, competitive strategies, and operating models as it is about technology and moving to the cloud. In order to reduce the chance of being overwhelmed by the complexity of this endeavor, we suggest considering three practical exercises for aligning business and technology strategies:
1. Review firm and technology architectures – with a view on emerging future business capabilities and operating model implications (or scenarios). Enterprise Architecture capabilities are increasingly moving to strategic core of organizations and determine much of their potential to respond to changing market conditions and technological disruptions. A key reason is the demand to effectively model the ongoing changes to the business model of many legal, consulting or accounting service firms (e.g., moving to alternative fee models, subscriptions and X-as-a-service) and the resulting operating model adjustments in the firms’ architectures. Understanding how technologies map into the evolving business capability model of the firm is critical for making investment decisions without serious and very costly regrets a few years from now.
Unfortunately, many IT departments in professional service firms are still lacking enterprise architecture capabilities and thus struggle to meet increasing demands, especially of a more digital business, and lack the skills and technology capabilities to keep up with fast-changing technology trends and possibilities. Adopting a “business-outcome-driven approach” (Gartner 2019) through systematic and continuous firm and technology architecture work can greatly help professional services firms and their c-suite to make better business alignment, technology investment and roadmap decisions. It is also a foundation to unlock efficiencies and optimize costs by outsourcing non-core activities to shared service centers or by switching the underlying IT delivery models (PaaS, SaaS, IaaS).
2. Map client journeys and experiences – considering traditional, virtual and digital service portfolio scenarios. The quality of client services depends not just on expertise, responsiveness, communication and all the other traditional ingredients for professional services anymore. The perceptions of service quality are increasingly determined or strongly influenced by the digital elements in the overall service experience these days. Systematically leveraging any technology to improve client experiences can, however, easily be disappointing – especially when it is unclear when, where and how it is coming into play for the client-facing business of a firm. Client journey and touchpoint mappings can create exactly this necessary context to the related decisions and the ultimate adoption success.
This context needs to be as firm-specific, service-type- and possibly client-specific as possible, to provide fitting and effective services and technology responses. The journey to the cloud and its promises needs to be underpinned by these mapping exercises in order to unfold a meaningful client business impact down the line. It is also foundational to measuring and understanding IT service, application or infrastructure consumption from a business point of view – which leads to our third recommendation …
3. Assess your business technology management capabilities – regarding its cloud-readiness and systematic consumption tracking and business alignment. Organizations which have yet to integrate the IT function into business management processes are experiencing challenges in aligning IT and business goals. As opposed to viewing IT as a siloed and merely cost-incurring department, Technology Business Management (TBM) is a framework that increases collaboration between and alignment of IT and business. In ‘running IT like a business’, IT is moved to the center of the business and provides deeper insights into IT spending and value delivery. As transparency is improved, and value conversations incorporate both business and IT perspectives, TBM enables better technology and innovation decision-making, e.g., on cloud-readiness, cost optimization and quality management of IT services. TBM is particularly important for firms that want to move towards charging clients for technology or digital services. When moving to the cloud, a solid TBM capability and the resulting transparency will allow the business demand owners and the IT department to systematically manage cloud economics – and thus reap the cost and scalability benefits of a cloud infrastructure and many SaaS applications.
While these three foundational exercises are far from a complete to-do list, they represent views that are often skipped or only vaguely touched upon by many firms. Gaps in these three areas can easily lead to faulty decision baselines for executives and costly corrective actions further down the line.
All three exercises should be carried out in mixed teams of business and technology professionals in order to create a common language for defining the (business) technology strategy of the firm - something that almost two thirds of professional services firms are still struggling with (KPMG Harvey Nash CIO Survey 2019). We believe that these three aspects can greatly help to overcome this hurdle – and drive not just better alignment but ultimately an improved ROI from a move to the cloud.
Cloud technologies are truly changing B2B interactions and have unlocked new opportunities in terms of virtual collaboration, operations, and innovative service offerings, while improving business agility and growth opportunities. The quality of digital experiences will determine much of the future success of B2B engagements and is therefore on the verge of becoming the new “secret sauce” of professional services.
Sebastian Hartmann (l) is in charge of KPMG’s global technology strategy and also leading the portfolio and investment steering team for KPMG International. Aside from his leadership and management roles, he is advising leading professional services firms (e.g., legal, engineering, consulting or creative) and technology companies on strategic management, innovation and operational development challenges. Sebastian holds a Master's degree in Service Management, System Information Science and International Management.
Ashish Madan (r) is a Partner at KPMG Germany within the CIO Advisory - Digital Strategy solution line, and is leading the overall Life Science & Chemicals sector for consulting in KPMG Germany. Within his role as digital strategy Consulting Partner, he is advising leading DAX 30 companies on digital, IT and cloud strategies, organizational restructuring, target operating model development, and other related large-scale transformation projects. Ashish holds a Master of Science in Autonomous Systems and an Executive Master of Finance.