CASE STUDY KPMG Unlocks Hidden Value in Client Information with Smartlogic Semaphore Sponsored by: IDC David Schubmehl July 2014 IDC OPINION Dan Vesset Big data in all its forms and associated technologies, skills, and processes promise to radically change how information is used to make better decisions, to interact with customers, to optimize operations, and to provide services. A big part of realizing this promise involves looking at unstructured data in addition to and in conjunction with structured data. Although unstructured content accounts for 90% of all information according to IDC, organizations to date have focused primarily on structured data and have overinvested significantly in technology and processes for structured data management. Structured data tells only part of the story, but organizations have long struggled to find efficient and accurate ways to unlock the value and insights hidden in unstructured content. The amount and pace of information that knowledge workers have to deal with on a daily basis are increasing dramatically, which exacerbates the challenge. A key type of unstructured information comes from communication with an organization's prospects, customers, and partners, which may be emails, text messages, blog entries, social media, or even phone calls. How organizations deal with this information is still somewhat fragmented. IDC's latest research indicates that 61% of knowledge workers access four or more systems on a regular basis to get the information they need to do their job and 30% of knowledge workers need to access seven or more systems. This unstructured information is locked in a variety of formats, locations, and applications made up of separate repositories that don't interact or relate to each other. Providing unified access to varied unstructured and structured information is still not easy for many organizations, but 77% of knowledge workers surveyed indicated that a single unified information access point to all of the information they need for work would be beneficial or very beneficial. In this case study, we examine how KPMG LLP (KPMG) has overcome this information challenge and has harnessed the pervasive use of information access and analysis technologies. As part of this case study, we look at how KPMG is using text analytics and unstructured information handling processes to improve and streamline its client onboarding service. July 2014, IDC #249968
METHODOLOGY This case study is part of a broader research study titled Unlocking the Hidden Value of Information. The study identifies the challenges faced by organizations looking to leverage technology to access and analyze structured and unstructured content, and it provides recommendations for overcoming such challenges. The goal of the study is to identify methods and technology that can improve knowledge workers' productivity and unlock the value hidden in unstructured information, thereby enabling improved communications and decision making as well as optimized business processes. The methodology included a survey of over 2,000 knowledge workers from private and public sector organizations in 5 countries and in-depth interviews with 11 organizations. IDC defines knowledge workers as employees who are connected to the Internet and use a computing device to find, create, share, access, or enter information or data electronically in the course of performing their job. Skilled task workers, researchers, salespeople, analysts, managers, IT staff, executives, and professionals are all included as knowledge workers. One of the organizations interviewed was KPMG LLP, a leading audit, tax, and advisory company. The company and its managers who were interviewed by IDC analysts were recommended to IDC by Smartlogic, which is one of the cosponsors of the Unlocking the Hidden Value of Information study. SITUATION OVERVIEW Organization KPMG LLP, an audit, tax, and advisory firm, is the U.S. member firm of KPMG International Cooperative (KPMG International). KPMG International's member firms have 145,000 professionals, including more than 8,000 partners, in 152 countries. KPMG delivers a globally consistent set of multidisciplinary services based on deep industry knowledge. Its industry focus helps KPMG professionals develop a rich understanding of clients' businesses and the insight, skills, and resources required to address industry-specific issues and opportunities. KPMG global member firms' combined revenues totaled $22.7 billion for the fiscal year ending September 30, 2011, a 10.1% increase from 2010 in U.S. dollars, or 6.2% in local currency terms. Requirements As part of its consulting services, KPMG provides a client onboarding managed service 1 for financial services customers that need to comply with laws and regulations. The client onboarding process can be a tedious, painstaking, paper-intensive, and manual process that often requires reading and analysis of anywhere from hundreds of thousands to millions of pages of documents, depending on the type of client and type of entity being onboarded. These documents contain a great deal of data, both structured and unstructured. Typical customers range from small corporations to tier 1 banks. As an example, if a bank's prime brokerage arm wants to do business with a hedge fund, KPMG's client onboarding service can help the bank customer go through the steps and processes needed to onboard the hedge fund. In this example, the bank has to understand who its client is and what the 1 KPMG LLP patent pending 2014 IDC #249968 2
client needs to do to comply with U.S. regulations, such as the USA PATRIOT Act. This bank will also need to conduct an extremely detailed background check of the hedge fund organization. Some of the services described herein may not be permissible for KPMG audit clients and their affiliates. The nature of necessary documentation will vary depending on the type of organization being onboarded. Documents could include articles of incorporation and various SEC filings, such as 10-K reports, investor reports, fund handbooks, and trust agreements, among others. Some of these documents will be structured; others will be unstructured. For example, structured documents might be W-8 or W-9 forms that have predefined fields, boxes, and checkmarks; unstructured documents could be any free-format text documents that don't have predefined fields. Typically, customers use manual processes to onboard their clients, including having people read and extract information from the various documents to be placed in a structured repository. That requires a large number of analysts, operators, and others to manually go through the specified documents, read the documents, and then certify the content accuracy. Extracted information might include, for example, the fact that a corporate entity exists in a certificate of incorporation filed in the state of Delaware, as well as other metadata, such as the date, time, and name of the parties. KPMG wanted to replace the extensive manual system with a more automated approach that could improve client onboarding time as well as the accuracy and completeness of the information while reducing overall costs. Reference data therefore would need to be identified, extracted, and verified through the use of an advanced system that could read and identify the important data from these structured and unstructured documents, thereby replacing labor with technology. Solution KPMG looked at a number of different vendors and ultimately chose Smartlogic Semaphore as the platform to organize and mine the reference data in its customers' information. Semaphore classifies content using semantic models such as taxonomies and ontologies and automatically generates metadata that represents each classification decision. Semaphore uses semantics, text analytics, and visualization functionality to perform five primary functions: Ontology and taxonomy management Auto-classification of unstructured data Text analysis (including entity, fact, and sentiment extraction) Metadata management Content visualization Semaphore uses a scalable, rule-based categorization engine alongside content analytics to analyze, extract, and categorize content in a consistent manner across all kinds of content and repository types. The platform's integrated ontology management provides the option to use that ontology to power search and navigation. In this particular case, KPMG was most interested in Semaphore's text analysis capabilities to extract the key parts of the documents provided by its clients in the onboarding process. 2014 IDC #249968 3
Deployment KPMG implemented Smartlogic Semaphore as part of an onboarding managed service solution that started with either electronic or paper documents. Paper documents were converted to an electronic format using imaging systems and an optical character recognition (OCR) process. Then, KPMG's solution used Smartlogic Semaphore to analyze and extract reference data from the converted and native electronic documents. In essence, this system replaced the manual process of identifying and extracting the elements KPMG called "reference data." The solution allows customers to set an acceptance tolerance to identify which documents should be verified by people during the client onboarding review process. This capability replaces the manual process with a semiautomated process, providing KPMG customers with an opportunity to significantly improve efficiency and accuracy. To make the most of Smartlogic's text analysis process, KPMG defines up front the types and variety of reference data needed for a particular onboarding process. As an example, hundreds of reference fields may need to be extracted from a particular document. KPMG uses industry, regulatory, and tax subject matter knowledge to identify which fields are required to meet regulations and then defines them and sends them to the Smartlogic system. Once Smartlogic knows which fields it needs to pick up, the system will extract those fields from the document automatically. The solution calculates a confidence rating for each extracted field and allows customers to set their own tolerance for flagging manual review items. Outcomes and Benefits KPMG believes the primary benefit of its service has been a quantum leap forward in the way client onboarding services can be offered to customers to improve the accuracy, speed, and completeness of the process. KPMG measures this benefit by the amount of cost savings it helps customers achieve as they integrate this solution across their enterprises. Specifically, KPMG estimates that approximately 40% of its onboarding service cases have seen an efficiency improvement of 50% or better. In the remaining 60% of its onboarding service cases, the confidence rating for information extraction is limited by the quality of the image scan and the OCR process, not by Semaphore's processing. Another benefit to using Smartlogic text analytics and entity extraction as part of the client onboarding solution is that KPMG can offer an ongoing reference data update service. As an example, whenever a corporate action happens in the market or something changes with the organization that was onboarded, updated information has to be added and checked. Smartlogic enables the system to pull in that updated information as it becomes available to refresh the reference data. 2014 IDC #249968 4
LESSONS LEARNED Identify point solutions where technology can be a driver. The financial services industry has been slow in the adoption of unstructured information handling capabilities. To prove the use of this type of technology, the KPMG implementation team chose a very specific process, client onboarding, as a "pilot project" for the use of advanced text analytics. Now that this system is in place, the organization has identified other areas where this unified (structured and unstructured) information access technology can be used. Organizations should consider pilot projects as a way of building experience and trust in this type of technology. Improve business processes through the use of automated systems. KPMG's use of Smartlogic Semaphore changed the way KPMG's onboarding service worked. Processes that previously required a great deal of manual effort could be partially automated, resulting in improvements of more than 50% for some types of documents. To select a project, organizations should examine areas where manual business process improvements would change how information is managed, accessed, and analyzed. Use text analytics and auto-categorization to locate and extract hidden value. KPMG was able to extract hundreds of "reference fields" using automated text analytics as part of its new automated client onboarding process. With Smartlogic Semaphore, KPMG's customers are able to analyze, extract, and use that information. Many organizations ingest large amounts of paper and unstructured information as part of their daily business processes. Nearly any organization could take advantage of the type of capability KPMG can offer by automating the document ingestion process and extracting the needed data. Automated systems don't need to be 100% accurate to be valuable. KPMG deals with a wide variety of documents as part of its onboarding service; some are paper based, and others are electronic. In both cases, the accuracy and efficiency of the reference data extraction process can vary. However, even with that level of variety, KPMG is experiencing enhanced value from its new onboarding system. Organizations implementing similar technologies should understand that the goal is to improve their business processes and achieve better efficiency by automating as much of the process as possible and directing manual effort to cases that fall below required confidence levels. 2014 IDC #249968 5
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