How Companies Can Leverage Technology for Cost Optimization


As a business discipline, cost optimization is the practice of continually controlling and reducing internal costs and external spending while transforming and maintaining a high level of business value. Companies often use a variety of strategies, including - platform standardization and simplification, digitizing and automating, integrated sourcing strategies and analytics and AI. Driving these efforts in the digital era is technology.

There is a vast selection of tools and strategies to optimize enterprise costs and improve efficiency. How those tools and strategies are used matters. Companies must have a clear vision of their cost optimization goals, integrate them into modernized operating models, and drive adoption through OCM if they hope to put the right tools to use in the right ways.

Why Companies Pursue Cost Optimization

Merely knowing that cost optimization is important to long-term success isn't good enough. Organizations need to know why they are pursuing it. They should have a clear idea of what they hope to achieve. The 2023 ISG Buyer Behavior Study provides some good insights for organizations struggling to understand the finer details of cost optimization.

We surveyed more than 250 executives about their cost optimization plans and the expected impact. The survey produced some interesting results:

  • 70% of respondents report long-term efficiency and growth as their primary motivation.
  • 23% report being motivated by economic factors.
  • 58% report leaning heavily on platform providers to achieve cost optimization.
  • 19% report lack of leadership as their biggest cost optimization challenge.

In terms of automation, 14% of the respondents said it was a cost optimization challenge in 2023. At the same time, 45% also reported working with a big technology firm to help them tap into better cost optimization strategies.

Making the Best Use of Technology

Our 2023 survey clearly indicates that decision-makers believe cost optimization is important. And because long-term efficiency is a big part of the picture, technology must play a bigger role in how companies achieve their optimization goals. In simple terms, organizations need to make the best use of their chosen technologies.

Technology Rationalization

A key first step is to take stock of existing platforms in place and determine redundancies, how they connect or should connect, and how they may fit into the roadmap for more effective and COST effective landscape. Most technology enabled cost optimization amounts to improved collaboration, analytics and automation driven savings, and its important to first think about how the pieces will fit together and how to eliminate the cost and effort to support redundant applications and integration points.

Automation Opportunities

With a technology roadmap and rationalization plan in mind, Automation is an excellent next step. With automation, routine and mundane tasks can be streamlined for greater efficiency and commensurate cost reduction. Organizations can automate things like data entry and report generation. Even certain customer interactions can be automated, allowing employees to concentrate on higher-value tasks.

Leveraging automation to streamline workflow can reduce the need for costly manual intervention and delays. Applying automation to inventory management makes for more accurate stock-level monitoring. The result is more effective inventory replenishment and fewer issues with overstocking and understocking.

Opportunities in the Cloud

Making the best use of technology for cost optimization includes taking advantage of opportunities in the cloud. At the top of the list of opportunities is cloud-based software and infrastructure that mitigates the need to build and maintain on-premises operations. Companies can save money on both hardware and software by leaving both to the SaaS publisher or service provider, but optimizing processing and storage workloads first, and then having a strong FinOps and SAM strategy are critical elements to ensure that the cost savings will be real.

An additional savings benefit is that Cloud-based platforms can also be leveraged to facilitate better collaboration across multiple locations. Teams work together better, maintaining productivity while reducing the need for expensive travel.

The Opportunities Are Endless

Technology Rationalization, Automation and cloud-based software and infrastructure only scratch the surface. The opportunities to leverage technology for cost optimization are almost endless. Technology opportunities extend into artificial intelligence (AI), data analytics, security compliance and Internet of Things (IoT) and Edge Computing enabled operational efficiencies.

By strategically leveraging technology, organizations can both reduce their costs and maintain the quality required to be competitive in a changing business landscape. ISG works with clients around the world to develop cost-optimization strategies that get results. Contact us to learn more about how technology can drive your cost optimization plans in 2024.