Dilemma: Save or Invest?
It is already a while behind us, but a few weeks ago the government presented the Budget Memorandum 2021 on Prinsjesdag. The budget of the State of the Netherlands faces many challenges, including growing unemployment, an increasing budget deficit and a rising national debt that exceeds the European agreed maximum of 60%. Partly through a €20 billion investment fund, the Netherlands is trying to invest its way out of the crisis. But what about this for your organization? Do you need to make savings? Can you invest in IT solutions? In short, how does your ICT organization contribute to the challenges of keeping the products and services provided by your organization affordable?
The economy will shrink by 5% in 2020 according to the Central Planning Bureau, at the same time they expect growth of 3.5% for next year. All in all, we will then see a contraction in two years, but it is manageable. This contraction will be larger if the second Corona wave lasts longer and involves heavy measures. In turn, the extent to which this will affect your organization will depend on the industry in which you operate. We see and hear that the government is not directly slashing IT budgets next year, but if you are in the travel or retail industry you may face major challenges. Not counting exceptions, such as web shops, for example. If your organization faces the challenge of bringing costs down, there are roughly two ways to get through and out of the crisis:
Cut costs or save costs on ICT.
Of course, keeping a close eye on costs is always a good idea. But more than once we see organizations that do not pay enough attention to this during good economic times. When the tide turns, they wonder where to start. There is insufficient insight into the contractual agreements, nobody dares to make choices or there is no direct insight into the costs of requirements and wishes of the business. At the various organizations we advise, we see potential savings in various places. For example: scrutinize the formation, organize processes more efficiently, cancel contracts and phase out applications that are no longer used (application rationalization), downsize IT processes (do you really need that 24×7 support?) or perhaps downsize the user hardware. In addition to these, there are many examples of potential short-term cost-saving measures.
Innovate and thus Invest, or save costs with ICT
Innovating, of course, means investing, or the opposite of cutting costs. Organizations choose the investment strategy because major changes provide an opportunity to renew the IT platform and the IT organization. With this, the organization tries to invest its way out of the crisis just like the government. At the same time, with investments you can ultimately save on costs. By automating and digitizing processes, you are able to perform the processes with perhaps fewer employees. Consider using Robotics Process Automation (RPA) to automate the process. Another example that we see more and more is by renewing the IT landscape to the requirements of the business but opting for a Cloud solution right away. Here, you first have to invest in setting up this solution and then only have the operational costs instead of regular investment costs.
Long term
When making choices, we always advise you to look at the long term. For example, it makes no sense to phase out an application, only to implement it again after a year. Therefore, we advise you to make a business and IT vision. Along the lines of this vision, you can set up a strategy and thus make informed choices to save on parts and perhaps invest in others.
What suits you
There are arguments for and against both variants (saving or investing). Paying attention to the little things should not only take place in times of economic adversity, but always. Innovating is a good way to make conscious and perhaps hard choices under the pressure of economic adversity. This will ensure that your organization comes out of the crisis stronger.
Continued
In both cases, save or innovate, Highberg can help you gain insight into the possibilities and coordinate the follow-up. In the coming period we will focus on this. In several blogs we will discuss saving costs or investing and innovating in more detail. At the same time, we want to gain and share more insights through a survey. We will publish the results of this survey during our webinar on strategic cost management which we will organize in early 2021.
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