ISG Survey: Enterprises Aiming for 7% Cost Savings in 2023
Companies challenged to achieve higher savings this year, after rapid cost takeout in 2022
Decentralized decision-making and inconsistent measurement contribute to missed targets
The latest global ISG Buyer Behavior Study, conducted in
“Companies are raising the bar on cost savings this year, but they will be challenged to do better than last year, when they were able to pick much of the low-hanging fruit,” said
According to the ISG survey, 69 percent of enterprises met or exceeded their 2022 cost-savings targets. Of the 31 percent that missed their 2022 targets, the vast majority (20 percent) narrowly missed them.
“Managing costs at the speed of digital requires a shift in enterprise thinking and sustained, high-level focus,” said
Lewis noted the magnitude of targeted savings was less a factor in whether or not a company achieved its objectives in 2022 than the approach it took to achieving those targets. The ISG survey found the majority of reported cost metrics are not actively or formally managed, and enterprises are challenged by manual cost reporting or consolidating results from a range of tools and sources, and by the delegation of cost leadership around the business.
Nearly all enterprises surveyed had a dedicated cost optimization program, yet around a third said their program did not have a dedicated lead, but instead had distributed responsibility across roles and lines of business for measuring progress against targets, often resulting in a siloed approach to achieving results.
“For cost optimization to succeed, organizations need to understand their business requirements, establish cost allocations and chargeback-enabling tagging strategies, develop KPIs and benchmark internal teams and external industry peers,” Lewis said. “Further, they need to combine strategy, governance and best practices to drive the financial accountability required to achieve their targets this year, because all the easy wins have already been taken.”
Both customer experience and information security were cited by respondents as extremely important to their organization’s strategic direction, with more than half saying initiatives in those areas would be completely protected from cost optimization.
The primary motivations for cutting costs, the survey found, were long-term efficiency and business transformation and growth, cited by 70 percent of respondents. Less than a quarter of respondents cited economic conditions as the motivating factor, even for programs launched in the past year.
“Cost optimization in this environment is about transitioning from long-term fixed commitments to long-term strategic relationships,” Lewis said. “Enterprises should look to achieve cost savings not only for bottom-line impacts, but to free up resources to fund continuous digital transformation programs that improve customer and employee experience, meet increasing ESG requirements and fuel sustainable growth.”
The ISG Cost Optimization advisory practice helps clients identify, achieve and sustain cost savings; improve productivity; re-invest savings in new digitally enabled business models and digital transformation initiatives; enable competitive resilience and reduce technical debt. Click here for more information and the full results of the 2023
About ISG
ISG (
View source version on businesswire.com: https://www.businesswire.com/news/home/20230425005723/en/
Press:
+1 203 517 3119
will.thoretz@isg-one.com
+1 978-518-4520
isg@matternow.com
Source: