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Reflections from my time as Chief Digital Officer at KPMG

Anthony Stevens |

March 25, 2024
Reflections from my time as Chief Digital Officer at KPMG

Audio version

Reflections from my time as Chief Digital Officer at KPMG
6:23

Contents

Between 2016 and 2018 I held the role of Chief Digital Officer at KPMG, responsible for strategy and the development of software assets to underpin key areas of the firm’s go-to-market.  Prior to KPMG I had worked for public enterprise businesses as a Chief Information Officer or a divisional leader. 

As with all things, I now realize that some of the most profound lessons from my time at KPMG were not clear at the time. Now crystallized with hindsight, I hope these lessons offer valuable insights for advisors and managed service providers focused on their own growth and digital transformation.

Lesson 1: Swim with the tide, not against it

It’s obvious to say, but at their core, KPMG and other global systems integrators, are services businesses, not software businesses. Their core economic engine centers around human capital and the value they bring is to help solve problems for clients, deeply understanding and reflecting industry issues and providing assurance, largely in relation to financial matters.

However, in my experience, to build and sell great software you need three things, that are in short supply in most large advisory or managed services providers:

Committed risk capital.

There’s often plenty of free cash-flow generated in services businesses, but most of the profit (>95%) gets distributed back to partners as income. In this context, multi-year investments to build software assets are hard to stomach. Compounding this is the ongoing maintenance and further investment that’s needed with software to keep up with a fast-moving market, adapting to customer expectations, and balancing upgrades and a continually changing technology landscape.

The economics of any services business relies on the demand and supply of human capital. The payback period is relatively fast, and processes are well refined moving university graduates through the ranks, increasing their value and more intrinsically being involved in the professional services value chain. However, the available capital and associated risk profile needed to build and sell software is very hard to commit for most services businesses.

The right environment

To build great software, like anything in business, you need the right processes, tools, expertise and culture. The likes of KPMG has a great culture and leadership to drive effective service delivery, but it’s just not geared to build and sell software, and in a very competitive environment, this lack of experience and expertise hurts.

So, having seen different models in terms of software: build, buy, integrate, leverage and align, play out firsthand, what I learnt is that building software within a services business doesn’t work over time. To be clear, I am not talking about building software for client’s building which is a different story because the environment is that of the clients, not the service providers.

The key point is that increasingly, to build, own and sell software it needs to be something you are obsessed with and 100% focused on. Not a side hustle.

Marketing

Any great software business has been really effective at marketing. It’s intrinsic to the value chain as a software business and the related go-to-market model. The marketing model for software is very different to that of a software business and has changed quickly over the years with shifts from enterprise software sales to product led growth. Services business rely heavily on client relationships and domain and industry expertise but with software, it’s a different game that’s deep rooted in the different economic model with software compared with services.

The common issue with building and selling software in a services business is getting the necessary leverage – the sales required on the investment in R&D. If the return is only derived through

Lesson 2: Significant growth can be found in adjacency

Around the world, the business demand for managed services is on the rise with an expected 15-20% CAGR depending on your reference point. Organizations are seeking reliable partners who can not only provide advice but also transform and manage their operations. During my time at KPMG, the shift, and increasing demand for managed services was well understood. By offering comprehensive and integrated services that encompassed everything from strategy and implementation to ongoing support and maintenance, KPMG positioned itself as trusted advisors and partners in our clients' digital transformation journeys.

What I’ve reflected on are the key drivers for this adjacent delivery model:

  1. Clients are shying away from large scale systems integration projects with traditional, monolithic software. There’s just fewer of these projects out there, and the services required to implement and configure are falling rapidly. Gone are the days of multi-7-figure implementation projects – there’s just no need with more contemporary software solutions that are available
  2. Traditional audit and assurance-style services are being commoditized, with lower margins and a greater exposure to automation so service providers need a solution to replace this revenue stream. As we’ve seen in recent times, the brand and trust equation is also very sensitive too and the risks with delivery are increasingly acute as business models.
  3. By their nature, managed service offerings are more predictable and leverage the economies of skill and scale that exist with most reasonably large service’s providers.
  4. Managed services provide a alternative revenue stream from consulting and advisory services that are more cyclic and trend-oriented than managed services.

In summary, my time at KPMG as Chief Digital Officer revealed two critical lessons. Firstly, it's essential to align with market trends and recognize the distinction between services and software businesses. Secondly, embracing opportunities in adjacent areas, such as managed services, can drive growth and adaptability. These insights underscore the need for strategic focus and agility in navigating digital transformation within advisory and managed service providers.





Anthony Stevens

Written by Anthony Stevens

Ant Stevens is a luminary in the enterprise software industry, renowned as the CEO and Founder of 6clicks, where he spearheads the integration of artificial intelligence into their cybersecurity, risk and compliance platform. Ant has been instrumental developing software to support advisor and MSPs. Away from the complexities of cybersecurity and AI, Ant revels in the simplicity of nature. An avid camper, he cherishes time spent in the great outdoors with his family and beloved dog, Jack, exploring serene landscapes and disconnecting from the digital tether.