If you ask someone in technology to do word or phrase associations with the term ‘innovation,’ they’re likely to conjure up mental images of fancy new gadgets, “born-digital” business models, and small nimble start-ups with cryptic names created by 20-somethings wearing ironic t-shirts and hoodies.
What you won’t often hear about is innovation around repetitive processes, regulatory compliance, and by a global services company that has provided tax,audit and advisory services for over 140 years.
Well if this rings true for you, prepare to have your perception changed in a big way.
Digital Labor Solution
Just recently, ComputerWorld awarded one of their Data+ Editors’ Choice awards to KPMG for their “Digital Labor” service for client onboarding. Digital Labor solutions are the hot new “it” thing providing new productivity benefits in service delivery. The solution KPMG developed focused squarely on the inefficiencies around the people-intensive processes associated with banks’ onboarding of new clients. A large number of these onboarding processes require proper vetting of new clients to not only meet the requirements of internal controls and policies but also to meet the requirements of government regulators.
For example, starting in 2012 in the U.S. the IRS put into law the Foreign Account Tax Compliance Act (FATCA) which places certain requirements on non-U.S. financial institutions that do business with U.S. taxpayers. Regulations such as these, compounded by an ever-increasing surface area of customer information has made it increasingly difficult for financial institutions to keep up with the costs of regulatory compliance, particularly since 2008. In fact, the costs associated with meeting such requirements have gone up significantly since 2008 from three to four percent of net revenue pre-2008, to over 20 percent of net revenue today, according to Michael Henry of KPMG, one of the visionaries behind KPMG’s solution. He goes on to say that “it’s foolish to attack the regulatory reporting problem with more human beings because Digital Labor can do it better.”
That last statement – about doing it better and not just faster or cheaper – was a particular attention-getter for me.
The quote mentioned above is from a session that Henry headlined earlier this year at the MarkLogic World (MLW) EMEA event in London. If by chance you were not one of the people in attendance at the KPMG session at MLW EMEA, watch it now. It was one of the most eye-opening things I’ve seen in a while. I am confident that once you start watching, you’ll make it a point to see it to completion, for the simple reason that the data that backs up the business case is just so compelling.
Faster, Better, More Cost-effective
What the KPMG team demonstrated involved order of magnitude reductions in the number of people required to handle the typical tasks associated with client onboarding while at the same time making qualitative improvements to the end result. In other words, faster, better and more cost effective. Following are just a handful of numerical anecdotes shared during the presentation:
- A mention of time-and-motion studies that demonstrated 1 to 2 orders of magnitude reduction in human efforts.
- An order of magnitude reduction in the number of people needed for regulatory compliance processes, resulting in additional positive side-effects. For instance, a major global bank was considering increasing its offshore headcount from 3,500 to 8,000 to address its global regulatory reporting requirements. By using KPMG’s COB solution, the head count could be reduced to ~400, and at that level would make sense to run with in-country resources.
- The ability to apply over 8,000 FATCA validation rules for every account via automation, improving quality far beyond what humans can achieve via manual processing.
And while many of us in technology have gotten used to such levels of automation when the data being analyzed conforms to well-understood structures, it is particularly challenging when the data being analyzed is not only inherently unstructured but also open to interpretation based on varied context. For these processes, technology is often viewed as a secondary enabler, ready to automate only after humans have first provided the much-needed context and organization. What KPMG did was turn these assumptions inside-out by using Digital Labor to first provide the context and organization of the data, and then have the humans handle the exceptions after-the-fact. Not only did this approach work but KPMG has the data points from customer implementations to demonstrate the value of a Digital Labor approach.
Not bad for a company that has been offering professional services since Edison patented the light bulb.
Their approach married their domain expertise with off-the-shelf technology in a creative yet sensible way. In other words, they recognized that they had a business problem to solve and knew that even though some of the technology topics were advanced – semantics, ontologies, text analysis, multi-model data – they also knew that the technologies needed were available today and didn’t require massive technical engineering on their part. Or as Henry noted in the Q&A part of the aforementioned session, KPMG’s domain knowledge and the integration of this domain knowledge into the advanced technology available represented “their IP.”
Now if you’re wondering more about the technical details, I’ll at least start by mentioning that the database at the core of the solution is MarkLogic’s Enterprise NoSQL database. Our product is one of four core products that comprise the end-to-end solution. What’s also notable is that all of the products, like MarkLogic, are mature enterprise-class products that are leaders in their respective fields. In other words, although there was a lot of science involved in figuring out how to apply automation in an intuitive and contextual way, there was no appetite for embarking on an engineering “science project” particularly when considering that mistakes in this domain translate into banks losing real money.
So congratulations are certainly in order for KPMG. And while we’re at it, an honorable mention should go to ComputerWorld for delving into the substance of the KPMG offering. They certainly took the time to watch the video and if you have any doubt about the choice they made, here’s the link again to watch the video yourself. You’re certain to be won over.