Managing IT costs during crisis: four suggestions on how to generate revenue growth that exceed traditional cost-cutting

Many companies have built up complex application environments with ongoing support requirements and, unfortunately, companies rarely reach internal agreements on business priorities for information technology. Still, some companies nowadays have to improve their cash positions merely as a survival technique. Selling non-current assets, including IT, is a solution that companies needing to generate cash have already started to take.

Companies not yet confronting with critical cash generation strategies could use their current IT status to increase revenues and reduce operational costs. For instance, they can use data more effectively and optimize processes through technology. IT could improve supply chain management by enhancing logistics and inventory management. Similarly, better data can sharpen insights into customer segments, pinpointing opportunities to change prices or focus sales efforts.

James Kaplan and Johnson Sikes concluded, in one of the latest McKinsey Quarterly, that over 12 to 18 months, these kinds of projects may return up to ten times the bottom-line impact of simple IT cost reductions. In many areas, IT functions can realize further efficiencies by changing management practices and models and promoting more interaction with the rest of the business.

Let’s further look into four considerations while planning IT cost cutting:

1. Use technology investments that can have a substantial impact to develop insights into customer segments and increase revenues without increasing prices, to optimise supply chain processes and improve delivery scheduling and/or inventory management;
2. Use experienced IT specialists to find efficiency opportunities by combining a detailed understanding of business processes with straightforward analyses of consolidated data;
3. Optimise processes: Pareto’s 80/20 approach can highlight a fairly small number of activities that, once you correct them, you may deliver a substantial amount of value;
4. Use targeted technology investments to increase productivity as in many areas they generate revenue growth exceeding the savings from a traditional cost-cutting.

You may see above that a fresh perspective of your company’s activities and targets helps you focus on technology investments that can actually increase productivity proving an intelligent, business-driven cost optimisation process as your IT crisis strategy.

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4 thoughts on “Managing IT costs during crisis: four suggestions on how to generate revenue growth that exceed traditional cost-cutting”

  1. This is a great article! Thanks for posting this. My company, G2iX can offer companies affordable solutions when thinking of cutting on IT budgets. It’s all about innovative technologies, automation and offering fully supported and fully managed services. By offering all of these features, companies can focus on other matters while feeling confident and secure with a solid, flexible, IT infrastructure environment.

    Do you consult companies re: IT cost cutting? What do you offer as solutions?

    1. Hi, Carmen. Yes, we do offer cost-cutting consulting. Solutions are tailored for each company considering its strategy, structure, processes, people (culture, governance) and technology.

  2. addition to above points:

    1.) need to more focuss on sales area, and reduce your costs by tieing up with vendor’s who offers you best services in reasonable cost and time.
    2.) fixed cost project contract should given to vendor
    3.) prefer vendor who are ready to work in your timezone
    4.) reduce your support staff and work with minimum required.

    -Aman Khan
    Vice President of Services and Delivery
    360logica software testing services
    http://www.360logica.com

  3. Everyone is looking for methods of cost reduction and I completely agree that simply slashing budgets doesn’t work. It leads to all kinds of unintended consequences and costs often increase.

    There needs to be a highly analytical approach to eliminating waste and inefficiency in all aspects of business.

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