ISG Cost Optimization Survey Gives Deep Insights into Savings Opportunities

Cost optimization goals have evolved as the business landscape continues to become fiercely competitive. Instead of just a financial strategy, they have grown to encompass operational efficiency and innovation. The goals span freeing up critical resources and bolstering the bottom line to gaining a decisive competitive edge, among others. However, achieving these goals requires a partner capable of offering robust technological solutions that iron out the existing wrinkles and adapt to resolve emerging challenges.

Cost Optimization Survey Insights

Let’s first explore the motivators behind organizations making cost optimization a goal and how Hexaware’s technological capabilities can help them achieve it. To understand the various factors at play, let’s refer to a recent ISG Cost Optimization Survey. The cost optimization report gathered insights from 225 executives across the globe, focusing on several critical areas, including:

• Strategic priorities and protected areas
• Cost optimization targets and success rates
• Involvement of third-party providers
• Levers and challenges for cost optimization

Understanding these dimensions will help you select the right cost optimization techniques, navigate your cost optimization journey more efficiently, and drive business growth.

Cost Optimization Motivators

While benchmarking played a crucial role—with about half of the respondents comparing their cost savings against peers—the survey revealed a wide range of cost optimization techniques, making benchmarks obsolete and indicating the need for tailored strategies. However, these two were the primary motivators driving cost optimization initiatives:

• Long-term efficiency and growth: Most respondents highlighted long-term efficiency and business growth as their key motivations, even for newly launched programs.
• Economic conditions: Around a quarter of respondents cited economic conditions as a motivating factor, emphasizing the impact of external pressures.

While the survey reflects on the cost optimization strategies in an increasingly digital landscape, read this blog to gain insights into how Hexaware’s cloud financial management framework encourages long-term efficiency and growth through financial management practices and establishes business value with cloud investment to negate economic conditions.

Strategic Priorities

While traditional goals like productivity and market penetration remain foundational, organizations increasingly prioritize customer-centric and risk-mitigation strategies. Security has emerged as the most critical concern, underscoring the critical need for robust protection against cyber threats and data breaches. This emphasis highlights a proactive approach to business continuity and trust-building.

At Hexaware, security is embedded in all solutions that have a real-world impact. For instance, read this case study to explore how our micro-segmentation and zero-trust approach helped a global beverage company overcome the vulnerabilities presented by its flat network architecture.

Recent AI focus on the customer experience area suggests that it will remain important through 2025. Businesses are recognizing the pivotal role of exceptional customer interactions in driving growth and retention. Maintaining product and service quality remains an imperative for success, emphasizing the importance of delivering value and meeting customer expectations.

For instance, this whitepaper explores how modern contact centers can move beyond mere service centers and transform into strategic assets, driving greater customer experience and loyalty. Hexaware’s thought leadership showcases how these centers can redefine retail success by enhancing revenues, reducing costs, and contributing to product development.

Program Maturity and Ownership

While the launch and implementation of cost optimization programs peaked in 2022, learnings from the outcomes in 2023 are guiding the next wave of cost optimization efforts. However, given the early stage of development, a fragmented ownership structure, which disperses responsibilities across various organizational silos, hinders the creation of a cohesive strategy.

Cost Optimization Targets

The survey indicates how cost reduction target setting remains a complex task for most organizations:

• While cost targets are usually set at a central level, around 60% of respondents indicated that these targets are managed within individual silos.
• The average savings target for 2023 mirrored that of 2022 (~7% savings). This poses a challenge for organizations that have already realized quick wins, as they must now tackle more difficult savings areas in the coming months.
• Approximately 70% of respondents met or exceeded their cost optimization targets, with leadership and measurement identified as critical factors. Enterprises that manage cost optimization holistically and exceed cost-saving targets are doing more measurement and formal management.

Protected Areas

While cost reduction initiatives touch all parts of organizations, some areas are protected from cost-cutting:

• Customer Experience and Security are the top two priorities for businesses. Around half of the companies surveyed ensured these areas were protected from cost-cutting. Maintaining high levels of customer satisfaction and robust security measures are crucial for business success and reputation.
• Although Environmental, Social, and Governance (ESG) was not as high on the priority list as customer experience and security, it was still protected in about a third of the companies surveyed. This protection is often driven by regulatory requirements, ensuring companies meet necessary standards and avoid potential legal issues.

Cost Optimization Partners

Enterprises work with multiple external providers to drive internal cost optimization:

• They are likelier to engage platform providers and big tech firms than managed services providers or BPO specialists.
• More than half have sought assistance from advisory firms (like ISG) or strategy consultants. Transformation-led cost optimization programs are more likely to engage strategy consultants and tier-one service providers, while efficiency-led programs tend to approach BPO providers.

Achieving Cost Optimization Goals with Hexaware

The survey highlights how cost optimization is a priority for enterprises aiming to maintain competitiveness and sustainability. Significant technological trends are supporting this priority:

• AI and automation: Enterprises are increasingly adopting AI and automation to eliminate manual processes, improve accuracy, and reduce operational costs. These technologies are driving efficiency by automating repetitive tasks and enabling data-driven decision-making.
• Cloud migration: Shifting to cloud platforms is a major trend, offering scalability, flexibility, and cost-effective infrastructure management. Businesses are moving from legacy systems to cloud financial management solutions to optimize costs and enhance agility.
• Platform-driven solutions: A growing preference for platform-driven models allows for rapid deployment and easy scalability. These solutions integrate various functions into a single platform, reducing the need for multiple, costly systems.
• Focus on agility: With market conditions constantly changing, companies prioritize agility. Cost optimization strategies are increasingly centered around creating adaptable processes that quickly respond to new challenges and opportunities.

These trends are shaping how businesses approach cost optimization, shifting towards more integrated, technology-driven strategies that support both short-term gains and long-term success. Hexaware integrates seamlessly with this evolving landscape of cost optimization, aligning its service offerings with emerging trends.

Hexaware’s comprehensive solutions also address the key challenges and opportunities outlined in the survey. Integrating AI and automation into our platform-driven solutions enables businesses to achieve cost optimization with precision and speed. Our advanced technologies drive process efficiencies, reduce manual intervention, and optimize resource utilization, ensuring enterprises can meet their cost targets without compromising quality or innovation. Our transformative cloud solutions focus on strategy, modernization, migration, and end-to-end management services for lasting business success.

Hexaware’s role extends beyond traditional managed services and BPO, mirroring the industry trend towards platform providers and big tech firms. Moreover, our advisory services provide strategic guidance, helping clients navigate complex cost optimization challenges and identify high-impact opportunities. Learn more.

Key Levers and Challenges

Success Factors

Effective cost measurement and strong leadership were highlighted as the two most important success factors for cost optimization in 2022 and 2023. Leadership is becoming increasingly important as programs mature.

Challenges

The global economic situation and inflation’s impact on staffing costs were major challenges in 2023. Measurement aspects are becoming more challenging as enterprises seek their next wave of efficiencies. Among cost optimization technology investments, automation is considered the most impactful.

The takeaway

ISG’s Cost Optimization Survey provides valuable insights into the current state of cost optimization across various industries. By understanding the motivations, strategic priorities, and challenges, businesses can develop more effective cost optimization strategies, ultimately driving growth and achieving goals. With a focus on leadership, measurement, and leveraging technology like automation, organizations can navigate the complexities of cost optimization and secure their competitive edge in a dynamic economic landscape.