Do you anticipate your business will be slow to recover? Do you anticipate permanently lowered demand for your offerings? Do you have an immediate need to reorganize your business to materially reduce operating and/or capital costs? Is your workforce under-skilled or misaligned with the needs of the business going forward?
If yes, then your business may be in what we call the Hard Reset pattern.
Hard Reset companies need to rapidly assess cost optimization opportunities to sustain the business
Hard Reset companies are in for a protracted challenge, and will need cash and new strategies to reposition for the new reality. Businesses expecting a permanent reduction in customer demand due to COVID-19 need lean IT operations and cost optimization now.
For the IT organization, the immediate primary driver will likely be the need to survive through cost cutting (both OpEX and CapEX) and removing fixed capacity, requiring significant changes to the business and IT operating models.
KPMG firms offer a data-driven approach to delivering lean operations focused on rapid, but sustainable cost optimization and a holistic approach to shaping the workforce of the future.
Watch this video to learn about IT's role in business preservation in the new reality.
Resetting IT to sustain the business
Steve Bates, Principal, KPMG in the US, Global Leader, CIO Center of Excellence, KPMG International
Hard reset companies are in for a protracted challenge and will need cash and new strategies to reposition for the new reality. Companies in this quadrant will struggle to recover from COVID-19 due to “permanently” lowered demand for offerings, insufficient capital to ride out an extended recession, or suffer from poor execution of previous digital transformation attempts. Without a clear strategy that emphasizes reduction in cost and elimination of inefficiency, hard reset firms will likely struggle to remain viable. Key activities executed well can create “breathing space”, but the market landscape for these organizations has fundamentally changed.
For the IT organization, the immediate primary driver will be the need to survive through cost cutting (both OpEX/CapEX) and removing fixed capacity, requiring significant changes to the business and IT operating models. As you move beyond the immediate focus, building a tangible, executable plan to create sustained cost optimization is essential. Our strategic cost diagnostic and quick wins service fills this need, leveraging the opportunities identified and applying a deeper dive into the technical and operational feasibility needs of the business. KPMG firms help clients understand what is “keepable” and may return vs. what needs to be “cut” or “scaled back” permanently.
The final phase of optimizing your IT costs is to build a portfolio of initiatives based on your strategy and execution plan. KPMG firms can help you establish a multi-lever execution program that can sequence and prioritize validated opportunities including leveraging near term savings to fund projects requiring larger investments. KPMG teams can also help manage the execution of your program to aggressively and effectively “walk” costs out of the organization. In such challenging times, having a fact-based and intentional restructuring program is critical.
Hard reset organizations are also making the tough choices around their workforce. Many workers who were furloughed or laid-off may never return, and top tech talent will be targeted by Surge or MBAU companies looking for strategic skills upgrades. Additionally, firms considering selling assets need to ensure core capabilities and talent do not exit the firm with divestiture.
Our research finds that organizations that have started or are advancing automating core activities, will accelerate that investment to further streamline costs and supplement for lost workers.
While being in the hard reset quadrant focuses on right-sizing the business and streamlining the IT estate, emerging to the new reality is a very real opportunity. KPMG knows what levers need to be pulled to help support your organization through this challenging time. We hope you’ll let your local KPMG firm help you on your journey. Interested in exploring how your organization can succeed in today’s new reality? Let’s talk.
Benefits of IT transformation for Hard Reset organizations
For a portion of the economy, long-term transformation will be defined in terms of sustaining operations in the near-term while pivoting to a new model. Understanding the difference between good costs and those holding you back is essential. In addition, IT sourcing, infrastructure modernization, and reshaping the workforce are important levers for Hard Reset businesses. The potential benefits are many:
- reduced opex by eliminating fixed capacity and shifting to As-a-Service or variable cost models
- limited sprawl and project growth through rigorous demand and portfolio governance
- streamlined operations through vendor/supplier rationalization and contract renegotiation
- an aligned workforce sized to fit the business with the right skills for today and tomorrow
- reduced risk and enhanced ability to decouple portions of the business due to divestiture activity
- increased transparency to cost, consumption, quality, and value of IT services.