The knee-jerk reaction in any economic crisis – particularly during Covid-19 – is to take a red pen and begin cutting costs hard and fast.
Whilst cost cutting is important, it’s cost optimisation that will allow organisations to improve productivity and give them room to innovate and invest in growth areas.
Cost optimisation is a rapid, multi-phased approach to identifying and then delivering savings – optimising services and resources that are currently in use, eliminating wastage & rearchitecting for optimal cost management into the future.
The key to cost optimisation is freeing up resources through rapid but selective cost-cutting and improved operational efficiency resulting in productivity gains, which then helps fund future expenditure. That way they can capitalise when times are good again.
At SXiQ, we believe we have a responsibility to our customers, our teams and our communities to not only cut costs, but to help our customers optimise their operations in order to help them retain staff and find smarter ways to keep innovating.
The Impact of Covid19 on Our Clients
From extensive conversations with our clients we’re seeing three major problems emerging:
1. Significant Operational Disruption:
Organisations large and small suffered widespread operational disruption as governments around the world moved to prevent the virus spread by restricting movement and implementing safety policies.
2. Major Revenue Loss:
Many organisations are facing months of exceptionally poor trading conditions. For many, the revenue lost during this time will be permanent, rather than just a timing difference. This is putting sudden, unexpected pressure on existing working capital.
3. Protecting People and Protecting Profits:
Most businesses are now focused on protecting employees, understanding the evolving risks to their business and managing the supply chain disruptions. To keep their heads above water, they need to reduce costs, maintain cash and protect profitability.
A Balanced Response is Needed
It’s easy to see why cost cutting is an instant reaction to any economic crisis. And in the short term, big cuts in loss-making products, underperforming geographies and inefficient businesses can be a terrific first step.
A year-long Harvard Business School study has found organisations that ignore productivity improvements, suffer sub-optimal outcomes as the world returns to normal operations.
SXiQ’s view is that rapid productivity change, rather than just cutting costs, will improve your cost-to-income ratio and allow you to reinvest your savings. We encourage our clients to reinvest their savings in the four R’s we believe will drive ongoing, long-term business benefits. Our four R’s:
- Retain talent. It’s important that productivity improvements feed further productivity improvements, this means as gains are realised, your people are freed up to focus their energy on higher-value, higher-return activities, thus feeding further gains.
- Build Resilience! Keep investing in efficient infrastructure. No matter how bad things get, resilient underlying technology, processes and teams will ensure business sustainability.
- Reinvigorate your customer centric operating model. Customer needs are in a period of widespread change. Understanding their changing dynamics in real-time will keep your organisation relevant and competitive.
- Reinvent and Innovate: Seize the moment and maintain the momentum for change! Many organisations have rolled-out two years worth of transformation in just two months. In IT we have an immense capability to drive fundamental change and to position our organisations to take advantage of emerging opportunities.
It might seem difficult to consider now, when uncertainty is the prevailing mood, but the Harvard Business School study reinforces what some SXiQ clients are experiencing, that executing a combination of cost-cutting, improving efficiency, and re-investing for growth helps organisations achieve a permanent re-structure of costs and allows those organisations to better survive during a recession and to thrive post a recession.
SXiQ’s Approach to Cost Optimisation and Productivity Improvements
At SXiQ, we know that out-of-control technology costs can be an ongoing headache for business viability, which is why a period of economic upheaval is a poignant time to implement a cost optimisation strategy.
During an 8-week program, we take a rapid, multi-phased approach to bring those cloud costs sharply down, while building an ongoing FinOps cost management capability that ensures lasting benefits and helps your business improve productivity.
The cloud is a powerful tool, and every day we see companies missing out on some of its formidable capacity and a great deal of lost productivity.
If you’re ready to unlock trapped IT costs, contact us today.