Addressing Cost in a Challenging Climate

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I’m often asked by clients – what are the top 3 challenges facing all of my other clients at the moment?

Number one is a softening revenue.

More than half of our clients are forecasting significant reductions in revenue and many others are forecasting reduced, or no growth.

Number two is cost pressure.

Many clients are under immense pressure from inflation and wage pressure, whilst still needing to invest in growth capability, and to meet regulatory obligations and also harden cyber security.

The third is capacity and capability gaps.

Many organizations are still experiencing shortages in talent, which is being further constrained by operating model and headcount reduction activities – that is leading to a lack of capacity and capability to drive the business forward and to address these challenges.

I’m also being asked – how are businesses addressing these cost challenges?

Many organizations are pulling a headcount lever. However talent shortages mean that headcount reduction can be a little risky in the long term, unless you have a long term solution to sustain the business. Of course, almost every organization is looking at third party spend, to reduce operating costs, although many organizations are finding this a lot more difficult than in previous years. We’re also seeing a greater investment in automation tools designed to sustain the headcount reductions.

I’m also being asked – why it’s more difficult these days to reduce third party costs than in previous years?

With inflation impacting everyone, supplier margins are under the same pressure that we are all feeling, and traditional procurement techniques are not yielding the same level of benefit. Additionally, most organizations do not have a flexible or agile cost base, which means it is not flexing up and down with the revenue peaks and troughs.

Then when we add in the talent shortages, it’s resulting in business having the capability and capacity gaps to address these more complex cost challenges. In some cases, even visibility of spend is still an issue.

So how are we addressing these more complex and difficult cost challenges for our clients?

Well, we look at costs more holistically and we apply a full set of value levers to the spend. We look at what the client is buying and why they buy it, and we respectfully challenge the appropriateness of these decisions.

We challenge the internal use cases and consumption and recommend alternative, more cost effective ways to achieve the required outcome.

ArcBlue Savings Programs deliver an average return on investment of 10:1. Our program starts with a rapid diagnostic to identify and size the savings, which creates the business case for investment. We’re finding there is significant support from the business leaders to invest in these programs, as they recognize the challenges and unusual circumstances being faced. But they also need to accelerate and maximize the savings.