A Robust Cost Takeout Strategy Can Ensure Savings of up to 2
Businesses have had to adopt liquidity planning and cash conservation to create a financial runway
Proper classification of core vs. context activities and exploring newer engagement models can create efficiencies in outsourcing
SANTA CLARA, California, June 19, 2020 /PRNewswire/ -- Zinnov, a leading global management and strategy consulting firm, released the findings of its rapid cost takeout study, focused on Engineering and IT organizations. The study helps empower business leaders to make informed decisions in their cost optimization measures, particularly in the current volatile, uncertain, complex, and ambiguous business environment, brought on by COVID-19.
The Zinnov study revealed that organizations can achieve up to 20% savings by focusing on three essential cost levers – Globalization, Outsourcing, and Product Portfolio Optimization. Globalization is the strategy where an organization expands its geographical footprint by setting up global centers in key locations. Globalization can potentially save up to 15-20% of costs for an organization by aligning roles and skills to current business needs, optimizing talent and location strategy, and redistributing talent from high-cost to low-cost locations.
Organizations are witnessing a fundamental shift in the demand for certain skills and roles, in the wake of the ongoing pandemic, such as cybersecurity experts, security engineers, privacy engineers, sales roles, etc. Further, globally distributed, mature teams eliminates the dependency on one particular location, thus ensuring business continuity. With acute cost pressures come rapid cost optimization measures in the form of talent redistribution from high-cost to low-cost locations. Additionally, global centers should be leveraged to operate as multi-function centers to achieve further cost savings.
Zinnov's analysis highlighted that organizations can achieve significant savings on outsourcing through effective management of vendors and optimal work portfolio allocation. The five key elements to achieve maximum cost savings through an effective outsourcing model includes consolidating vendors, redefining engagement models, having clear pricing models, revisiting in-house vs. outsourced portfolio, and having a better vendor governance and management structure.
The third essential lever that emerged from the Zinnov study is product portfolio optimization, which can potentially save organizations up to 15% in costs. In this process, organizations need to invest, optimize, and divest products based on the product development life cycle (PDLC) stage and its strategic importance to the business. The decision is based on key dimensions such as revenue, product roadmap, talent needs, infrastructure complexity, cost & margin pressures, and customer/market complexity.
Speaking about the cost takeout study, Nilesh Thakker, Managing Partner & Global Head, Zinnov, said, "Cost pressures have increased in the wake of COVID-19-induced uncertainties for organizations across verticals, across the globe. Given how the pandemic is reshaping entire ecosystems, cost takeout isn't merely an important step but a necessary one. Companies today are asking themselves the questions – am I getting my post-COVID strategy right? How are my employees going to be most effective? How are my customers interacting with me? Right now, companies aren't getting any additional budgets from their CFOs so they are figuring out how to leverage their current budget to spend on initiatives for future growth."
"The remote working experiment has yielded success for many organizations, which in turn has influenced companies to explore teams that can be dynamically redesigned and geographically distributed, for business continuity. Companies have begun to understand that cost takeout doesn't mean organizations are just solving for cost, but are also solving for quality and output," he added.
Founded in 2002, Zinnov is a leading global management and strategy consulting firm, with presence in Santa Clara, Houston, Bangalore, Gurgaon, and Paris. Over the past 18 years, Zinnov has successfully consulted with over 250+ Fortune 500 enterprises and technology companies to develop actionable insights that help them create value – across dimensions of both revenue and optimization. With core expertise in Product Engineering, Digital Transformation, Innovation, and Outsourcing Advisory, Zinnov assists clients by:
- Enabling global companies to develop and optimize a global engineering footprint through center setups, and technology and functional accelerators to achieve higher R&D efficiencies, innovation, and productivity;
- Advising global PE firms in asset shortlisting and target evaluation, commercial due diligence, and value creation;
- Growing revenue for companies' products and services in newer markets through account intelligence, market entry, and market expansion advisory;
- Structuring and implementing Digital Transformation levers enabled by technologies like AI/ML, Cloud, IOT, and RPA;
- Helping global companies outline and drive their open innovation programs, design and operate accelerator programs, and enable collaboration with start-ups across specific use cases and predefined outcomes.
With their team of experienced consultants, subject matter experts, and research professionals, Zinnov serves clients from across multiple industry verticals including Enterprise Software, BFSI, Healthcare, Automotive, Retail, and Telecom in the US, Europe, Japan, and India.
For more information, visit http://zinnov.com.
Chief Marketing Officer, Zinnov