Manage IT in the Times of Recession Part 1 :

How can CIOs pivot their IT strategy?

Retailers need to make the most of what they have, keeping customer experience front and center. Since the best brains are buried deep strategizing and implementing contingency plans, reshaping the operating model to be more customer centric and taking data-driven decisions can also help. Using technology to handle time-consuming, error-prone tasks reduces operating costs. Therefore, including outsourced business and IT processes and managed support services in your business continuity and contingency plans is one of the major ways to sail the storm.

Based on Aspire Systems’ interactions with customers and mapping current trends, we see a lot of cloud implementation and optimization, offshoring, automation and process improvement, and move to more evolved models like managed services.

1. Managed Support Services

Retailers require a level of support and skillset that may not be easily acquired during a crisis. Relying on a managed service provider to keep the lights on is inevitable, and a safe option, given managed service providers help companies manage an environment that historically was for 20% of their workforce and now it's 80-100%. Among all the hard stops a retailer may have to put, perhaps the one in their locus of control is to look inward and see how expenses linked to managed IT service providers (MSPs) can be curbed or optimized.

What sets MSP apart is the proactive end-to-end monitoring and management benefits, from incident management to using those incidents to build more secure and resilient systems. There is continuous improvement with governance and prioritization of the workflow. So be sure to choose a partner that can customize offerings and help optimize costs. This will let you focus on business in an environment enabled for innovation. That is cost optimization driving innovation at its core.

Managed services answer the question for you: How do I save my cost-on operations? It helps if you consolidate your overall managed services support to one MSP contract and run the business in a lights-on support for the value of lean managed support at a lower cost.

2. A review of your solutions and cloud licenses

Any organization using an enterprise application like Oracle EBS, SAP, Salesforce or any other ERPs is subject to a license audit, where a detailed analysis is conducted of your license usage. This could potentially reveal that you are using hundreds or even thousands of licenses that you have not paid for, and you may find yourself with a huge and unexpected bill for the extra licenses, not to mention possible retrospective payments and increased ongoing support costs.

Therefore, retailers should look at performing a regular license review to help ensure they are compliant with their software license agreements and thus help avoid any potentially unexpected license costs.

In the same stretch, cloud services, which are simple to run, flexible, scalable and stackable, can be easy to overuse, slippery to track and challenging to control. Cloud asset management can help understand the cloud services you use, and how they are running. By keeping tabs on what is being consumed, and analyzing your cloud licenses and migration, you can build an effective cloud management process and reduce wastage and overspend.

3. Test away your fears of failure

One software bug can trigger irreversible damages to a brand and revenue. Softwares have a lesser margin for errors and QA outsourcing services. Test automation ensures high productivity and lowers costs and risks. A good testing framework should include performance and functionality testing that are both aimed at optimizing the return on investment, especially if the testing team has invested in advanced tools. Downsizing the artifacts to the extent possible is part of your action plan. Portability across platforms and the shareability of the testing automation framework components are important for this. For example, a line of Test Automation Coding is equivalent to the expenses in per-minute Script Maintenance. The tools used for deploying across the test automation process also determines it. Also, companies should pick test automation tools that host a single test execution with a single script. It enables a company to operate with a unique text, rather than having multiple scenarios to facilitate test automation. Outsourcing QA testing to companies based offshore can also help optimize testing costs.

4. Increase your offshore/go nearshore

COVID-19 has shown that working close to the business is an assumption. Companies should embrace a mix of lower cost offshore, lower cost nearshore and optimizing the onshore staff, to drive down the cost to serve and make the global delivery model more efficient. The best shoring mix is built around your CX needs.

As per market data, nearshoring to Mexico or Poland can give substantial cost savings to U.S customers that were comparable to cost savings in offshoring because indirect costs such as contracting costs, due diligence, communication, and travel were lower.

Nearshore is not a replacement for off-shoring, but it can augment off-shore capabilities, time zone, can make global delivery model more efficient. The tangible and intangible costs of nearshoring are far less than offshoring and North American and West-European companies have started to realize the competitive edge nearshoring to IT service providers in these countries could provide them in the current global crisis. Countries such as Mexico and Poland have become popular destinations for businesses due to their fast delivery times, software engineering skills, cultural resemblances and proximity.

5. Business process automation

Businesses which invest in automation have proven to recover faster from recession than their competitors, and to get a head start in the recovery market. Merchandize planning and automation and reducing workload at the point of service/sale (POS) is paramount.

The one sure-shot way to streamline any business operation is by automating workflows. Automation speeds up your process and enables a human error-free environment, at the same time, ensuring that all business processes are operating as expected. Since mitigating risk during a recession is paramount, it is pertinent to prepare early and have a solid automation portfolio in place.

Several aspects of CX can be automated, enabling a scalable 24X7 support service. Retailers could consider automating the customer touchpoints where immediacy of response trumps contact with a live agent. Customer analytics can help identify and understand use cases for automation, that will help you implement solutions that drive cost efficiencies without risking customer satisfaction and engagement, at the same time, reducing associate workload at the POS.

6. Inventory optimization

Retailers’ and wholesalers’ needs for storing inventory are dynamic, with many supply chains now able to drive high levels of optimization across not only their logistics operations, but their retail operations as well.

7. Clearance and pricing optimization

Retailers such as Walmart and Target have already accepted that inflation has caused shoppers to spend more on necessities and less on items like clothing and electronics, vacations or eating outside. This has caused retailers to mark down items that customers don’t want. But groceries have lower profit margins than discretionary items, the stress shifts on value. No free-returns policies can help offset profit margins hit by cancelled orders and marked down merchandise and can also help you rank higher in ESG ratings. Inventory optimization can help make the best use of best margins of the current inventory. A quick solution inventory optimization implementation requires a few weeks and can help retailers gear up for raking in revenues through high volume sales during the holidays. Item and assortment planning solutions can also help, but this needs further discussion and strategizing.

Conclusion

Cost optimization is a need-to-have during economic downturns. It does not matter whether recession is here or is coming soon. Consumers’ changing buying behaviors are a telling sign that cost optimization is a core strategy to ride this storm. But technology and business challenges in this scenario can be managed. With the help of readily available, cost-effective solutions such as managed services, automation technologies, and business strategies such as clearance pricing and improved inventory visibility and planning, all you need is good governance to sail through business and IT cost optimization to ride through the rough recession.