What Are Technology Leaders Doing to Cut Run Costs and Fuel Innovation

Neo recently surveyed a broad group of business leaders. About 70% were senior management or C-level executives. They came from a wide range of industries, some of the largest numbers from healthcare, banking and financial services.

The goal was to find out what were technology leaders doing to cut run costs and fuel innovation. Most industries and business leaders are under significant pressure to reduce costs, especially run costs. At the same time, these business leaders are being asked to do more. They are being asked in many cases to lead the evolution to a digital enterprise, while in other cases, mine customer data to help build new products or identify new customer segments. Often, all this ask comes with no or limited budgets.

Here’s what we learned from surveying over 70 technology leaders:

  • The majority of respondents indicated that their cost reduction strategies are a smart way to do business and a means to fund new growth initiatives.
    Run cost reduction strategies are mainly focused on optimization of product portfolios & applications and leveraging low-cost assets such as outsourcing and in-house low-cost centers.
  • Multiple strategies are used to reduce run costs such as optimization of products and applications, moving to the Cloud, leveraging outsourcing and low-cost centers. However, results from the survey suggest that these methods and others are not being fully utilized and as a result, more opportunity is available to reduce costs further.
  • Respondents indicated that, during the next 12-24 months, their run cost strategies will stay the course and continue to be focused in multiple areas such as optimization of products and applications, moving to the Cloud, leveraging outsourcing and low-cost centers.
  • However, respondents will continue to face challenges as they implement their run cost strategies. The survey data showed that the main hurdles to implementing successful run cost strategies were finding the right talent to drive change, buy-in from key stakeholders and company culture.
  • The majority of respondents find that innovation is being enabled through the use of automation, big data and by encouraging their vendors to innovate. However, the results also indicate that these methods, as well as others, are still not being fully utilized.
  • Over 70% of respondents focus on enabling incremental innovation that keeps their existing offerings competitive.
  • A top-down approach is used by the majority of respondents to enable innovation within their company.
  • Over 55% of the respondents stated that processes used today with their vendors to enable innovation are not effective.
  • The main reasons for an ineffective innovation process with their vendors are that there was little or no attention placed on it during contract development and when it was addressed in the contract the terms and expectations were very unclear.

The survey results indicate that the respondents are focused on incremental innovation that will enable them to keep their existing products and services competitive. They will fund the growth initiatives through smart cost reduction methods such as automation, big data/analytics, leveraging low-cost centers and finding more effective ways to drive their vendors to help them innovate.


by Atul Vashitha, COP; CEO, Neo Group – Founding Member, IAOP; Board Member, Dept. of Defense; Founder, SourcingBoard.org; Author