At first blush, KPMG’s announcement this week that it will start packaging IP as algorithm-based software fit the familiar theme of white collar jobs threatened by automation.
CEO Gary Wingrove and chairman Peter Nash in fact believe the opposite. Graduate hiring will likely remain unchanged at 400 a year and the firm will start moving jobs back from India to Australia.
The Big Four firm will even break with the traditional services model where more revenue requires more staff.
“I don’t think revenue will grow linear with headcount. That correlation will change for the better,” Wingrove says.
KPMG has two objectives with its new software division. It will develop software that streamlines existing services by digitising processes and standardising them. “We will be moving away from traditional mechanisms of spreadsheets, PowerPoint and email,” says Anthony Stevens, chief digital officer.
And it will take IP from the firm and “mash it together” with technology to create brand new types of software, Stevens adds. These new services will draw on machine learning, big data, cognitive and artificial intelligence.
KPMG believes it will continue to provide the same professional services to its clients and use software to deliver results faster. This in turn would open the door to deeper strategic engagements paid on success fee rather than hourly rates.
“As staff move away from routine tasks and checking off figures, they will get to a more sophisticated engagement, (with) better insights into the client’s business,” Nash says.
“For a number of service offerings the best way to provide them is no longer people and piece of paper, it’s a digital portal where clients can choose how to procure those services,” Wingrove says. Clients could choose a digital product, or digital product and consulting and services.
KPMG will target smaller businesses through its digital-only products which will cost less than KPMG would charge for an hourly rate.
“It will be inevitable that there will be price declines in some product offerings. You can re-categorise your time and skill set so clients can make decisions faster,” Wingrove says. “The mix of what clients are looking for will change.”
KPMG has launched two software products in the past two months. R&D Edge streamlines the process of R&D tax incentive claims. “We have shifted away from providing it with consultants and advisers to a web based, automated framework,” Stevens says.
The second program works out clients’ obligations in employee share schemes and provides the advice in a similar web-based interface.
The programs were launched in the past 10 weeks and already have 100 clients.
Other opportunities for software lie in tax, advisory and audit. Risk management is a prime candidate for packaging into software. The research required is typically only available to Fortune 500 clients but could be made more affordable through algorithm-driven recommendations.
KPMG clearly intends to make quite a lot of software. It will market it on KPMG Spectrum, an online app store only for apps produced by KPMG subsidiaries.
My point of view:
Software development at scale is an ambitious undertaking. KPMG clearly sees it as a golden opportunity, despite the risk. The importance of this announcement is less about the software than the impact of automation on accounting and consulting.
Accountants should be heartened by the fact that at least one of the Big Four sees automation as a path to greater profits and more satisfying and valuable work.
Commercial software developers will inevitably build similar products which smaller practices can use themselves. KPMG is betting that the value is not just in the software; it’s in the next-level strategy they can sell on top.
Sholto Macpherson