Will you need help from third parties in the metaverse? Without a doubt
Is application development, maintenance and testing different in the metaverse? No
Is design different? Yes
Is the level of creativity different? Yes
Is there interaction with the Internet of Things (IoT)? Yes
Will I need to use artificial intelligence (AI) in the metaverse? Yes
Can we augment existing third-party outsourcing contracts? Absolutely—this is how we do it
What is the metaverse and why is the metaverse important?
While there is no clear definition of the metaverse, it can best be described as the next iteration of the internet (Web3). The internet is of course our boundaryless connection to the world’s vast amount of knowledge, products, people, and creative thinking such as AI, ChatGPT, and Hyperautomation. The metaverse will offer a seamless virtual, persistent, immersive, and interconnected experience enabled by emerging technologies that are generally unfamiliar to the enterprise. This is important because of the impact on business strategy and models; think about how your company went from having an internet website which shared information to one that allowed purchases. Your metaverse “site” will go from a video demonstration on the value of your product to a virtual interaction with your product and your customers product to experience how, and if, the products can be seamlessly integrated into your customers value chain. Gaming, entertainment, and education are the most prevalent use cases in 2023; however, enterprises are investigating use in manufacturing with digital twins, retail outlets with virtual shoes and virtual conferences such as Microsoft’s Mesh for Teams1. The metaverse continues to expand and contract (a.k.a. evolve) with many examples such as IBM’s Second Life in 2003, SCADA systems, Google Glass, Zwift, and virtual reality (VR) headsets.
Regardless of the phase of evolution, or what we call it, the metaverse will require information technology (IT). IT has made great strides in “earning a seat at the C-suite table” by focusing on business outcomes versus just being an enabling technology. The language of the business has made great strides by moving away from obscure words like transformation, innovation and continuous improvement to integration, convergence, and flexibility. As IT and the business coalesce, we still have the age-old opportunities of changing workforce habits, new technologies, and attracting new talent that can adapt to the fast pace of technology changes; to which we’ve always looked to third-party outsourcing providers (Providers) for help. For the metaverse to be successful Providers, IT and the business must converge, prioritizing integration, increased collaboration, and more flexibility to drive value and operational excellence. All these trends and more are covered in our newest report “The Future of Outsourcing”.
Traditional IT outsourcing contracts
The focus of traditional IT outsourcing contracts was for tower specific resource units like infrastructure (e.g., network, database, server, storage) and two-dimensional (2D) application development, maintenance and testing (ADMT). These traditional contracts have progressed in recent years to include Cloud support, Anything as a Service (XaaS), Cyber Security, Infrastructure as Code and Provider solutions that focus less-and-less on labor arbitrage for IT and more on value to the enterprise. These contracts do not typically account for the disruptive technologies needed in the metaverse like Blockchain, Non-Fungible Tokens (NFTs) or three-dimensional (3D) VR experience design resulting in value leakage for the company and a high volume of profitable projects for Providers. Realistically you cannot account for every permutation of disruption, however, as you contemplate use of disruptive technologies across integrated strategies you can reduce the value leakage - here is how.
Future of outsourcing contract impacts
You can of course get metaverse work done using project SOWs; however, adding metaverse activities to your managed services contracts can help reduce costs, implement performance management, and have more responsive alignment to long-term business expectations and outcomes.
KPMG believes the future of outsourcing is flexible contracts which allows the business, not procurement, to contract for the work it needs, when it is needed, at an optimal price. Micro-Sourcing is a hybrid sourcing strategy which contracts for all delivery model approaches at once, aligning business needs with the optimal delivery model. You can read more about Micro-Sourcing and how to contract for Agile Managed services in our blog series. Micro-Sourcing was designed with enough flexibility to accommodate the latest disruptions in the market, like the metaverse.
To understand the disruption of the metaverse on managed services contracts we need to understand the convergence of technologies that are making 3D applications a reality.
Metaverse technology impact considerations on Provider managed services outsourcing contracts:
- Extended Reality (XR) – These are the “Things” in the Internet of Things (IoT). Think VR headsets and mixed reality applications on your smart phone that allow you to see a piece of furniture in your home before you purchase it. Product manufacturers include, or sell, software development kits (SDK) to interact with the Things in a standard way which eases and speeds application development and maintenance as the Things, virtual worlds and future technologies evolve. Outsourcing contract document impacts:
- Financial Responsibility Matrix
- Application inventory attachment
- Virtual worlds – Roblox, Decentraland and Fortnight are popular today. They require developers to move beyond 2D application development on Platform as a Service (PaaS) cloud application to persistent and immersive 3D graphics, animations, and the ability to interact with environment (i.e., The Climb on Oculus) of the virtual world using tools from the gaming industry like Unity and Unreal. Virtual Worlds require creative thinking, spatial design, and optionality beyond end-to-end business process standardization; As Chris Corteen asked “why do you have stairs if you can just teleport to the next floor” to which Brian Lewis replied, “why even have a floor if your space is limitless?”. Outsourcing contract document impacts:
- New Description of Service – 3D architecture and design
- Tools attachment – 3D Development tools like Nvidia Omniverse and Pixar Universal Scene Description
- NFTs – These are the digital assets you purchase in the virtual world; Afterall who doesn’t want to be sporting virtual Nike’s, riding a purple Pegasus unicorn flying across the Rocky Mountains on your way to the next meeting? NFTs exist on a Blockchain, which means you need to be able to support both Blockchain and the creation of NFTs to support the enterprise, both of which continue to evolve. Outsourcing contract document impacts:
- New Description of Service – Blockchain development and maintenance
- New Description of Service – NFT development and maintenance
- Database – While blockchain is a form of database it can be slow and requires large amounts of compute resources. With IoT you need near real time retrieval of data to operate your metaverse avatar, understand the state of components in the Virtual World, or determine your relative position to an object in the metaverse. MongoDB, immudb, MySQL, NoSQL and SQLite are all being improved upon to be able to operate in an IoT, persistent state and quickly retrieve the information desired, like with Amazon Alexa. Outsourcing contract document impacts:
- New Description of Services – Physical and Logical Database Services Convergence
- New Description of Services – Database and Storage Services Convergence
- Network – “I feel the need, the need, for speed” (Lt. Pete “Maverick” Mitchell, Top Gun). In its current state, internet infrastructure is unsuitable for the type of immersive experience needed in the metaverse. Most round-trip video and calling done today in across the enterprise can tolerate 75 – 150 millisecond delays (i.e., quicker than the blink of an eye)2, however, to avoid a jittery and unpleasant experience in the metaverse you need sub-12 millisecond response time (i.e., The speed of light travels ~186 miles per millisecond)3. This means that metaverse components will need to be both near you and distributed globally (e.g., 5G/6G providers, Edge Computing, Serverless Architecture, Quantum Computing). Outsourcing contract document impacts:
- Performance Management Methodology
- Integration – This is where all the technology components must interoperate, exchange data, and interact securely with one another to generate an immersive experience; you are interacting with a 3D object in the metaverse making design changes to improve user experience while those changes are sent directly to a 3D printer. Integration occurs in the form of Application Programming Interfaces (APIs) which are typically included in SDKs. Outsourcing contract document impacts:
- New Description of Services – Full Lifecycle API Management Services
- Performance Management Methodology
- Experience – The interaction of the technologies above is not new. The speed, integration, and flexibility at which they must interoperate to generate the metaverse is. Today companies like Talkwalker, Brandwatch and Meltwater are using AI to perform social media listening to help determine impact on enterprise brands. The metaverse will need to integrate data from multiple sources in the virtual world (e.g., voice, VR interaction, duration of XR views, etc.) with that of Social Media Listening (e.g., Twitter, Instagram, etc.) which makes root cause analysis of experience performance extremely difficult. How to hold the right Provider accountable for performance in the metaverse is still open for debate (e.g., SLAs, XLAs, Outcomes, etc.). However, it is certain that AI will be analyzing the vast amount of data generated and that new business focused measurements will play a part (e.g., dollars spent, time spend, sentiment statements, etc.). Outsourcing contract document impacts:
- Performance Management Methodology
- New Experience Schedule – This goes beyond the current-day collaboration schedules to articulate the experience of the customer. No longer are we talking about font size or button placement in 2D applications. We are talking about interaction, environment manipulation, and associated effects for the customer and the enterprise.
Yes, legal terms need to adapt - KPMG is not able to provide legal advice, however, contracts still need to have appropriate protections of which the Blockchain Council is actively working on, such as intellectual property laws, defamation law, non-disclosure agreements (NDAs) and regulatory and tax implications.
KPMG’s experience in the metaverse
KPMG has designed, created, and deployed over 20 different metaverse spaces for both internal and external use. This includes large collaborative spaces, that are used for meetings, learning and development as well as client facing ideation sessions and small customizable meeting spaces.
These collaborative spaces are hosted in a secure enterprise focused metaverse which KPMG has also used to deploy client solutions for collaboration and training.
KPMG has metaverse capabilities in solutions, strategy, design, development, and deployment as well as the traditional services that the firm has to offer.
KPMG outsourcing advisors can help you along this complex outsourcing journey, with experience spanning the outsourcing lifecycle, from strategy and assessment to detailed contract development, negotiations, and implementation or transition.
We invite you to review KPMG thought leadership:
1. The Future of the Metaverse
2. The Future of Outsourcing
3. Outsourcing Blogs
4. The Metaverse is here (video)
5. The Metaverse: More than we can imagine (video)
6. Welcome - KPMG In the Metaverse (video)