As the future of work remains uncertain, one thing remains clear – global economies are, and will likely continue, to face the ongoing challenges caused by the pandemic. To survive, organisations across the industry are currently getting to grips with the impact on their businesses and assessing the requirements to adapt to the uncertainty ahead, which will require greater cooperation across all departments.
In light of the current climate, many Chief Financial Officers (CFOs) are working closely with Chief Information Officers (CIOs) and IT teams to optimise technology investments, enable remote working in the short term rapidly and maintaining financial stability in the long term. Technology can be utilised in times of uncertainty to create improvements within business agility while also identifying efficiencies, more effectively than most organisations give credit for.
Pinpointing current investments and business needs
As business priorities continue to shift in the current climate, implementing cost optimisation measures can be challenging. Still, one of the first steps for every department – including IT – is to understand the current investments and contractual commitments. Every finance team will likely ask about this, but we also recognise that this can be a difficult request for some teams as we don’t always speak the same language. Consider starting with simple questions like:
- What are we paying for? A good place to start is your invoices
- What is actually being used? And what is critical right now such as teleconferencing, collaboration tools and cloud instances?
- How much are we really using? And are we getting value from our investments?
- What do we own? This would cover on-premises data centres, laptops, desktops, etc.
Once you have shared visibility of the corporate technology ecosystem, the next natural conversation will be around contractual obligations, including renewal dates and cancellation rights. This insight between IT and finance can be crucial and, as potential decisions are made, opportunities to positively impact the bottom line could be identified and potentially remove the need for redundancies or further cost optimisations.
Recognising what business-critical means for your business
Prioritisation is undoubtedly something that both finance and IT can relate to – whether it’s reviewing tickets that indicate an outage, versus a user error or approving an invoice before the due date. The same principle applies to identify cost optimisations. Finance will likely ask IT to provide details on which resources they deem to be essential, and that generally means which tools are critical to running the business versus those that are more of a nice to have. You may already have this list well developed if you’ve had to update or revert to your business continuity plan recently. In addition to business-critical, you will want to understand which tools can be better leveraged to reduce cost and waste within the organisation.
As both IT and finance teams gain a clearer picture of the organisation’s technology landscape, usage data and user behaviour become essential. In some cases, by understanding usage data, finance and IT teams may be able to review underutilised resources and implement centralised tools across other areas of the organisation – cloud capacity for example – or if applications should be consolidated in favour of a similar, yet more widely used tool. The more data and insights that can be garnered, the more strategic and timely decisions can be made.
Planning for a number of potential outcomes
A lot of finance teams are busy doing a lot of scenario planning right now. There is a necessary and robust bias towards action in this climate, and these plans allow businesses to be more agile, regardless of which direction the market heads. The objectives of scenario planning is to answer questions such as: How much uncertainty is out there? What is the severity of the impact that we will see? How long could we feel it? And be prepared to act quickly when visibility improves.
Here are a few good things to know about scenario planning from an IT perspective:
- Baseline scenario planning: It is important to establish a scenario that could be the most likely outcome. Many people use the 50/50 rule, meaning you could see a 50 per cent probability the results come in above the predicted outcome and a 50 per cent probability the results come in below. Of course, every organisation may need to alter this mix to better reflect their own risk profile, and in fact, this is often the time when many will shift to more of a 60/40 or even a 70/30 type view.
- Upside scenario planning: This plan looks at a short-term impact and the potential for a surge in demand for an organisation’s products, services or solutions. In this scenario, if finance believes a positive outcome is likely, it may be important to consider resources that IT may need to meet potential future demand, such as expanding users’ seats or increasing licenses. As such, it would be prudent to secure certain resources and renew contracts with software, applications, hardware or cloud vendors. If these resources are deemed critical, you get favourable terms if you can commit to a higher volume or length.
- Downside scenario planning: This plan supports a decreased demand environment over a sustained period. This could also be the result of a cascading effect of one market impacting another. If this scenario plays out, finance will look to all areas of the organisation to optimise spend as quickly and aggressively as possible, but with a prioritisation on actions that will have the least operational and human impact. One area that I often see organisations make mistakes with cost saving is that they think optimisation is always about reducing spend in every category. I would urge businesses to look at the investments that will allow you to reduce more cost elsewhere and improve your people’s efficiency, ultimately helping the business through difficult times, but also coming out the other end more efficient and stronger.
Ultimately, scenario planning is only as good as the data. Anything the IT team can do to provide actionable, fact-based insights will result in better decision making for the business.
Maintain focus on people and customers
Despite the current uncertainties facing the market, many organisations are trying their utmost to ensure the safeguarding of employees and avoid cutting staff. Building a strong business requires clear visibility into key metrics on performance, with the right financial protection and governance in place. Every function has a key role to play here, but IT is critical to ensuring employees have the right business solutions and the right data, provisioned as efficiently as possible.
Efficiency is not always about finding ways to cut costs. If new tools are required in a cost savings environment, outline the ways in which it will offer return on investment through expanding capabilities or improving productivity. For example, new technologies could ultimately be used to free up employees and reduce time intensive manual tasks. In turn, employees will be able to refocus their efforts on more strategic initiatives, which certainly makes the case more compelling for finance teams.
While cost optimisation efforts may be a key consideration across the business, it is also of great importance that organisations make sure never to forget about their customers, their partners as well as the wider community. IT should prioritise investing in resources for customer service or support teams when evaluating technology requests.
Change is the only constant. Navigating change effectively requires cross-functional collaboration, a pragmatic approach and agility – all supported by powerful and shared data insights. A strong partnership between IT teams and finance teams will put departments in a better position to help their organisations adapt quickly and securely, when faced with whatever new challenges arise.
James Denena, Chief Financial Officer, Snow Software