With escalating uncertainty and disruption of business continuity, the COVID-19 pandemic is affecting organizations across all industries. As the world braces for unprecedented economic implications, one thing is certain: a wait-and-see approach is not an option. To have the best chance of weathering the storm, organizations must take logical and decisive action now.
From our ongoing engagements and dialogue with forward-thinking leaders of Fortune 1000 companies, we see some major trends emerging in enterprise strategy. Here are the top priorities that are expected to unfold over the next few weeks:
1. Cash unlocking and cost optimization measures
Cash unlocking measures are emerging as a top priority as companies mitigate disruption to expected workflows and prepare for a prolonged slowdown period.
Jointly funded programs
To do so, organizations are reviewing jointly funded client-partner programs and associated agreements to free up unused funds. Among these programs, new investments are being deferred or stopped for the foreseeable future.
Operating costs and third-party contracts
Given the importance of cash flow in these uncertain times, organizations are also reviewing their operating costs and third-party contracts to unearth hidden value and optimize payment terms. Contract benchmarking has proven to yield substantial results with the potential to realize gains of 10%-15%, as do quick price renegotiations. By renegotiating extended credit terms, organizations ensure financing viability, while maximizing automation-led efficiencies reduces cost bloat to realize tangible savings.
Technical debt assessments
Technical debt not only causes financial strain due to opportunity cost, it also shackles organizations from being able to evolve. With operations effectively paused, many organizations are prioritizing near-term opportunities in technical debt reduction. These opportunities include reducing capital expenditure, variabilizing operating expenditure and maximizing resource utilization. Because technical debt encompasses multiple facets, equal priority is given to optimizing infrastructure, software and services.
2. Focus on operations assurance programs
Cloud readiness assessments and execution
Office closures, social distancing, and work-from-home requirements have put cloud computing at center stage for organizations around the world, most of which are pressed to scale up to accommodate remote work. To cope with the sustained surge in users accessing their systems remotely, organizations are migrating both backend IT and business workloads to public clouds with expedited rollout plans.
Business continuity and disaster recovery reviews
In the same vein, organizations need to ensure their business continuity and disaster recovery programs encompass remote connectivity, cybersecurity, and cloud-based solutions for backup, recovery and archival purposes. Many are turning to third-parties for business continuity, cybersecurity and delivery health checks. As organizations rapidly enable their employees to work from home, they must also ensure sufficient tools are in place for remote workforce management and governance for both enterprise and third-party models.
3. Reevaluation of enterprise-wide investments
Given the rapidly evolving situation and high number of unknowns, it is in organizations’ best interest to pause enterprise-wide programs that are still on the drawing board. Meanwhile, ongoing programs are being driven to the nearest minimum viable product, instead of an abrupt ‘Hold’.
We expect organizations to plan and prepare for two likely eventualities: 1) a prolonged slowdown period and 2) an uptick in demand post-recession. As such, companies are prioritizing projects and investments for immediate operational sustainability and future growth.
4. Reassessment of new and in-progress sourcing programs
Hold-off on new programs
New sourcing programs and competitive RFP processes that are still in the planning stages should be put on hold. However, organizations are making necessary preparations — including internal baselines, process documentation, critical paperwork, templates, communication transcripts, and so on — to ensure they can hit the ground running when the programs are rebooted.
Run in-flight sourcing programs to the nearest milestone
Sourcing programs that are in progress should be run to the closest checkpoint before making a decision to cease or continue the program. This ensures informed decisions are made based on the available data for each program, instead of a blanket decision that may have unknown repercussions.
Contrary to popular belief, top companies are still running in-flight sourcing programs uninterrupted at all stages of the sourcing lifecycle. MSA negotiations, contract execution, due diligence and even transition phases are being done 100% remotely — highlighting the importance of technology enablers for connectivity, collaboration, knowledge scraping, digital signatures, onboarding and governance.
Update sourcing models and contracts
Companies are reviewing new and existing arrangements to update sourcing models and contracts to include location dispersion or consolidation and provider diversity or re-insourcing. What may have been deemed as far-sighted solutions is now seen as necessary contingencies in a global pandemic, when a solid technology footprint is the only viable solution.
In response to the pandemic, we can expect to see inclusions of ‘Pause’ scenarios in updated contracts instead of typical ‘Run and Stop’ scenarios in traditional contracts. We can also expect the inclusion of clauses specific to pandemics, in addition to force majeure, which is open to interpretation and may be difficult to prove.
5. Flexible advisory models
As organizations strive to stay lean and agile, enterprise advisory models are shifting towards flexible pricing and payment options as well as turnkey engagements with quick turnaround (two to four weeks) on point solutions, data, and analysis. This not only eliminates cost bloat, it also ensures that companies focus on the right priority areas and solve the most pressing problems with cascading effects throughout the organization.
Strategy workshops and ideation sessions are already being planned for 100% remote execution among some of our clients, highlighting both the importance of having the right infrastructure in place as well as the need to take decisive action in these challenging times.
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