Cost Reduction Or Cost Optimization - What will be the decisioning focus post-COVID19?

Value optimization vs cost optimization in the post Covid era

Welcome to the second installment of our CIO Extreme IT Strategies to Navigate the COVID-19 Pandemic webinar conducted by Cloud4C, where IT Leaders from reputed organizations in the Middle East region participated as panelists and shared their experiences and views on the above questions raised by the audience.

In the first blog post, we spoke about the measures taken by these IT leaders to deal with the new world order. Cost optimisation measures and value optimisation decisioning were also discussed. You can read the first part here.

Now that organizations have weathered the first disruption by the pandemic, there is a greater focus on preparing for the new world order post-COVID19. 

The crisis will almost definitely see the economy weakening in the aftermath. Organizations have already started tightening their wallets to be able to weather the uncertainties. But will there be an absolute stop on spending? Can organizations even afford to not make any investments in growing their business? 

Of course not. There will be, and will have to be organizational investments. The truth is that some organizations will be able to thrive even in the new world order. Especially the ones who understand the importance of cost optimization vis-a-vis simply reducing costs. Without investment, there will not be growth driven by new, faster systems or even skilled employees. So where should the focus be in the new normal? 

Saji Oommen,  Chief Information Officer at RAK Ceramics, UAE shared his insights: 

“In the context of expenditure, there will be a greater focus on the holistic picture. Spending will be restricted at all levels, but this won’t necessarily mean that there won’t be investment in infrastructure. 

Instead, it will be a matter of value optimization. Each dollar will be measured against the value that it will bring in return. The difference post-Covid 19 will be that cost optimization will play a smaller role as compared to maximizing value. This will include contingencies in technology and infrastructure for future crises. Each future project will be measured in this perspective only. 

Another aspect that we need to consider is that we are not yet out of the crisis. Recovery is most likely going to be turbulent, and we don’t know for sure how the new normal is going to look like. So organizations worldwide will focus on becoming truly agile. Agility will be the measure of how well organizations can thrive in a crisis-like situation where it can face challenges successfully. 

Creating long-term strategies at this time may not be wise. True, there will have to be a framework for how to proceed, but it will have to be flexible enough to adapt to the day-to-day changes. As per changing situations, organizations have to be dynamic. For CIOs, the priority will be to make IT infrastructure and solutions more agile. Whatever opportunity presents itself, IT has to enable organizations to capitalize immediately.  The best example is the Cloud, which has given a lot of adaptability to businesses today, including ours. Going forward, we will be deploying IBM’s Watson, which will factor in the probable crises and potential solutions for them. We will undoubtedly be in an even stronger position in the future.  Businesses will have to be ready for a lot of things, as barriers fall down further in the aftermath of the crisis. Organisations, and teams, will have to be ready for multiple things. So investments will also be geared towards responding to business challenges and be ready for quicker responses.”

Shafique R Ibrahim, Group IT Head - AL FARDAN GROUP, agrees. “In a way, IT departments and CIOs are used to this kind of a journey. We moved to Cloud to be able to adapt faster to change.  From the IT perspective, we have seen organizations, industries, and even customers change over time. This has helped us stay agile throughout our organizational journey. For CIOs, change is constant. So we have always prioritized value over immediate benefit. It takes time for results to be apparent in technology investments, so this is an argument we are always prepared for: cost vs. value. 

We were able to cope up with various turbulences which has given us the flexibility that protects our investments. From convincing our customers to walk into our branches when we started to empowering them with app journeys, the IT department has always kept pace with change. 

Even our business meetings deal mostly with what went wrong with the plan rather than the plan itself. There are always surprises when it comes to real world deployments, and IT teams today are agile enough to come up with solutions on the go.”

Conclusion:  The pandemic crisis is sure to have a strong negative impact on the economy. Though these are challenging times, leaders understand that there is an opportunity to grow as well. Organisations will continue to invest in technology and employee training, not just to respond to this situation, but also to be prepared for any such situation in the future. 

Core business advantages such as agility and adaptability will drive decision-making even in terms of costs. From our discussion, most leaders will focus on cost and value optimization to manage and grow business. 

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