KPMG's Royal takes local e-commerce seriously

KPMG was the first of the 'big five' consultancies to make a serious tilt at e-commerce in New Zealand, investing heavily as long as three years ago. Russell Brown talks e-commerce with KPMG's e-commerce strategy chief Phil Royal in this week's Friday Fry-up.

KPMG was the first of the "big five" consultancies to make a serious tilt at e-commerce in New Zealand, investing heavily as long as three years ago.

Now the company is stepping up again - this year acquiring the Wellington firm The Web and sealing a partnership with Auckland's Clearview Zivo. It is also seeing the changes brought by KPMG's spinning off of its consulting arm, in conjunction with its key partner, Cisco Systems.

KPMG's e-commerce strategy chief Phil Royal is talking about all those things to local businesses, but first he's showing them a documentary about a charity pop festival: Net Aid, the huge global concert and Webcast whose logistics were handled by KPMG and Cisco. Russell Brown watched the movie on Royal's laptop and then got talking.

Phil Royal: You talk to a lot of chief executives and boards in New Zealand and for some of them it's still like trying to take a vegetarian to a hot dog stand. We haven't got it yet in a lot of cases.

And for me, it's when you show them this sort of stuff, it's a lot more believable. I know this is in the B-to-C space - and we think there's 10 times more work needs to happen in the B-to-B, which is about re-engineering an organisation - but it does make it real. And it makes people in New Zealand realise we have to play in a global world. And I don't think we've really had that in New Zealand yet.

I think there are a number of younger or more progressive chief execs that do get it. There are three or four organisations we're working with now which are working for their whole organisation to be online by the end of the year.

What size companies are we talking about here?

In two cases, major companies - in the top one or two in their fields in New Zealand. In different sectors - in financial services and utilities. Their chief execs have said: “We will do it, we will re-engineer ourselves to be online companies.”

You just need to take our partner Cisco and see where they've gone. They do a billion dollars of sales online. They have 19,000 employees and three people doing expense claims. We're working towards that. We're not quite as quick as them because they were able to move to being an online company only two or three years after they were founded. But we're certainly doing things internally.

I'm an evangelist on this and I'm passionately interested in getting New Zealand there. We've got a hell of a lot to gain and lot more to lose if we don't get there. We bought (Wellington-based Internet developer) The Web earlier this year and we did that because if we're going to talk it we've got to be able do it as well. We've worked with them for a couple of large clients.

What kind of people are you recruiting? What parts of your organisation are recruiting?

We've got two angles. What we are is an end-to-end solutions integrator. In New Zealand we typically haven't done an enormous amount of implementation. But where we're heading, and one of the reason we bought The Web, is towards delivery. Our whole structure has changed to one of an end-to-end e-solutions business.

We're recruiting high-level people who understand the business and the technology, the strategy and the process ends of the space - whether it be customer management, knowledge management, supply chain, whatever. And that the other end we're recruiting or acquiring technical Web development type people.

But you've also got to remember that a lot of these projects now don't require a cast of thousands. They for us delivering quick, delivering at the lowest possible cost, and basically get a result. An example of that in the information resources area is the online library we did for a major organisation [Telecom], inside three and a half months. It was rolled out to 2500 people.

Those projects are not unusual, and that's probably the challenge for senior execs to get over - the days are gone of a two and a half year development. I would say to an exec, if you're not getting a 90-day delivery on something around the technology space now, don't do it.

That is a big change to the traditional business experience, isn't it?

It is. The view we have now is that if a project runs for more than a year, don't do it. And if takes more than 90 days to see your first, second or third deliverable, don't do it. There'd hardly be a project we do now that doesn't have that view.

What percentage of your business has an Internet component now?

About 50-60% - compared to 20-30% early last year. There is growth on the ground. We've had four US people in the last six weeks talking to government - and there's huge opportunity for them to become more efficient.

The government went into the election promising to move to electronic procurement and online services - how quickly do you think they can actually make progress there?

I think we have to understand what e-government is. It isn't just putting a department online. It's the difference between the depart-to-citizen type view and the department-to-department view. So you need to understand what it is. But there's no there's no reason e-government shouldn't be in 90-day deliverables and take no longer than a year to get to where it needs to be. There are vertical solutions coming out around the Internet for government.

When you look at some of the projects that have been before - Incis is a classic example - a lot of what's been spent is on interfaces between different departments. A lot of that was old-world - it was picking up information and shoving it down a pipe. And the guy at the other end picks it up and puts it into his organisation's database. You have to ask the question, at a fundamental level, why you do that any more.

We assisted Emco in the customer registry system for the new electricity market. That's basically a virtual customer switching database. No one owns it. You just go in and a customer is switched automatically through the Internet. You've got to get away from the view of ownership - you still own the data but you don't have to own the system.

Which is exactly the kind of idea that's going to make a lot of established private-sector companies nervous, isn't it? The idea of transparency is something of a challenge.

Dead right. Two things come out of that. One is that it's going to be a lot more transparent and a lot more people are going to see it. And secondly, the value of partnerships and alliances is just going to be critical. Even in our space, we've had to move from where we were two years ago, to recognise that we can't go out do everything.

Through the logistics chain you're seeing the big courier companies, your DHLs and FedExes, teaming up with companies so that they can collapse the supply chain down so there's transparency all the way through it. You can see when some goods were despatched, when payment took place, all the way through the cycle.

For that customer, that pushes a lot of things down to a commodity. You're in a much better position to bargain.

I think local early adopters of e-business like Axon have discovered that their suppliers can now get a better look at their customers too - they can see right through the business.

I think that's right. And even in our space, our suppliers will get a much better look at our customers and our customers will get a lot better look at what we offer. We can't ship out all the information we have running round in a global firm.

What impact is the global KPMG Consulting spin-off going to have for what you do here?

It'll be a positive impact. We work with a number of global clients, and that's not going to change. We'll still be in the same building, we'll still be part of the KPMG world. The spin-off is that we will have access to a lot more of that global resource for our key clients.

We've been seeing that process winding through already. We've had government specialists through, we've got an e-procurement specialist down. The benefit to our customers will be that they'll have better access to the world's best. The US is two or three years ahead of us in the electronic business space.

You and your partners in the spin-off, Cisco, will also be able to realise a lot of value in the project via your IPO. Obviously that's something anyone's going to struggle to do on the NZSE. How much of a problem is the poor performance of our exchange, in your view?

I think if we can get the momentum going … it's the way the world's going so we've got to get used to it. The majority of bricks and mortar business have limited life spans. Companies like Telecom and others recognise that - that's why they're re-inventing themselves.

I'm not so pessimistic about the New Zealand scene. There's a lag behind the US, and signs of things moving, like BeautyDirect announcing it intention to list. The challenge for us will be grasping it early enough, because the competitor for BeautyDirect is not the store down the road, it's someone from Australia or the US. If I can buy what I want from the states and it gets here in two days and it's half the price, I'm going to buy there.

But one of our advantages is that we have a relatively free market. If you look at Flying Pig - I went in there and looked for a book the other day, that was $80 in the US, plus shipping. I could get in through Flying Pig for $50. Our goods are typically cheaper than most other countries now. So we've got that advantage, but if we don't get the ownership of the customers sorted out, Amazon will own them.

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