Taking the Offensive: 6 Key Areas to Cut Costs and Still Drive Efficiency and Growth

Resolving inefficiencies embedded in ongoing contracts can lead to substantial cost savings. They tend to stem from poor awareness, neglect over time, and changes in prioritization of resources. Improve your visibility of resource allocations and optimize them by:

• Shopping for better contract terms and pricing. Switching to a more competitive, industry-standard model is the most significant contract-related cost-saving method for most businesses.
• Introducing a “pause over play” policy for ongoing contracts. Is the service an immediate need in the new business environment? If not, can payment and implementation be moved to a future date?
• Upgrading to best-in-class service-level agreements. Clarify responsibilities and evaluation metrics to leave no room for misinterpretation. Stringent fee-at-risk charges protect the business in the case of conflict and incentivize vendor performance.

Internal resources and structural complexities are easy targets for cost-cutting. But many businesses engage in indiscriminate efforts that cause detrimental long-term effects. To execute more targeted optimizations, you can:

• Review your full-time equivalent headcount. Remove overqualified FTEs with no excess value contribution to justify their higher cost.
• De-clutter staffing pyramids, which often accommodate more senior positions than necessary. Expand managerial spans of control to cut labor costs further.
• Align cost-of-living adjustment clauses with rising inflation, keeping allocations fair and value leakage minimal.
• Improve oversight of vendor team compositions. Audit third-party teams and reduce bloat by eliminating excessive headcount.

Software asset management programs centralize your software ecosystem to improve the visibility of applications and processes. Effective software asset management will:

• Identify overengineered software licenses. Downgrading these prevents paying for benefits that aren’t used to full capacity. Modular solutions and add-ons can cover the shortcomings of cheaper packages.
• Introduce a dedicated Software-as-a-Service management platform. Diagnostic data of software utilization will expose underused applications for removal.
• Rationalize software portfolios by removing duplicates and unused legacy systems.

Poor visibility and communications can make vendor management a chaotic process. But there are incremental measures to bring vendors to order, such as:

• Centralizing supplier governance to inspect existing contracts. Ensure your suppliers are meeting their service agreements and you are getting what you paid for.
• Rigorous invoice management and strict collection of unpaid performance credits.
• Optimizing your supplier portfolio for run-rate savings and purging it of redundant technical services.
• Aligning trusted providers with your new strategies and priorities in the emergent business environment.

Like vendor ecosystems, supply chain networks are often characterized by legacy technology, decentralized structures, fragmented communications, and lethargic responses. You can modernize and optimize your supply chain by:

• Digitizing your supply chain processes. Slowed economic activity is the perfect opportunity to integrate the supply chain with your digital ecosystem.
• Standardizing supply chain technology to accelerate communications and efficiency.
• Simulate business scenarios to prepare contingencies and improve response times to crises.

An enterprise architecture organizes IT operations within a central framework. Clear visibility enables integration with business objectives, enhancing collaboration. Creating one will allow you to:

• Measure IT service request contributions to business objectives, communicating the department’s worth in real terms.
• Map incoming requests within a framework of departments, processes, and objectives. Knowing where IT stands within the broader organization makes precise resource allocation easier, enhancing efficacy.
• Form a clearer picture of backend processes behind products and services. This cuts down on duplication and complexity, improving process efficiency.

Used effectively, cost optimization is an offensive measure – an enabler that drives operational efficiency to innovate strategic growth.

Our recommendations cover a range of operational areas, and optimization opportunities will vary based on capabilities, processes, and aims.