Transformation and XaaS success hinges on employees

Tech companies must navigate change management, worker burnout, and talent retention amid digital transformations

Mark Gibson

Mark Gibson

Partner, Advisory, NSL & Teams, KPMG U.S.

+1 206-913-6558

While digital transformation is powered by technology, it still requires skilled employees to integrate the new solutions with legacy systems, learn how to extract maximum value from them, and continually monitor and optimize them. Digital transformation is a continuous process, not a one-time event, and employees must be included in the journey. Change management during a transformation and delivering an exceptional employee experience are more important than ever in today’s business world while trying to ensure employee well-being, satisfaction, and retention.

KPMG research conducted during the COVID-19 pandemic finds a new paradigm for successful transformations. Among the most important changes for this new model is an emphasis on the people issues, which can make or break a transformation. A key finding is that 90 percent of companies that had successful transformations did three things:

  1. Built a culture of trust that embraces new ways of thinking
  2. Used a mix of financial and nonfinancial incentives to spur change
  3. Carefully managed the transformation pace to avoid employee burnout

Many of today’s transformations represent a shift from legacy products to an “everything-as-a-service” (XaaS) business model, and people are one of the operating layers that cannot be overlooked. Lack of top-down communication about the strategy can lead to poor employee buy-in. Without effective change management, the transformation can be hindered by unnecessary complexity and resistance to change.

Other hurdles companies must overcome include outmoded, manual data entry and analysis; legacy, unintegrated technology; poor governance and controls; and a highly decentralized structure with a lack of shared services. But tech company leaders still say the main inhibitor to their digital transformation efforts is the lack of internal skills and expertise.

Limiters of digital transformation at technology companies

Source: KPMG Technology Industry Survey 2021, n=802
Multiple responses allowed. Partial list shown

Given the rapid pace of digital acceleration over the past two years, and the fact that transformation is a continuous journey, how are tech company leaders addressing both employee burnout and the skills shortage? The majority are mitigating these issues with contingent workers.

Primary method tech companies are using to modify their workforces for the adoption of new technologies

Source: KPMG Technology Industry Survey 2021, n=802

As technology companies shape their workforces and advance along their digital journeys, here are two key considerations:

  • Train employees in strategic and innovative thinking. New technologies were often used mostly to automate processes historically performed by people and benefit the bottom line. However, a KPMG study shows this tech is now being used for top-line activities like increasing market share and enhancing customer loyalty. Employees should focus their newfound bandwidth on developing innovative ideas to deliver personalization and win the customer experience. However, they may need to be trained first in strategic and innovative thinking to break free of old paradigms.
  • Expand the talent pipeline. Hybrid work/life demands, the Great Resignation, and the tech talent shortage have converged to provide tech employees with tremendous leverage. This is forcing technology companies to adapt with new workforce models that mix retrained full-time and part-time workers with contingent workers to a greater extent than ever before. And this approach may still not be enough to meet every tech organization’s future requirements. Tech organizations should continue to partner with universities but expand talent pools by also engaging in apprenticeship programs, adult training, and tech bootcamps.