Three steps to effective cost-cutting

News Analysis

Three steps to effective cost-cutting

Karl Flinders

Businesses can cut costs by 30% if they automate, standardise and offshore processes, in that order.

That is the view of Matt Havens, director of Europe at Cognizant Business Consultancy.

Offshoring your back office processes without fixing the processes first will mean you pay the offshore service provider three times more than you need to, he warns.

The economic slowdown has triggered thousands of job cuts as business volumes fall, but offshoring to cut staff should not be the first thing businesses do, Havens says. "You have to identify what processes can be automated. Once processes are automated, they should be standardised and centralised, and then they can be offshored."

Completing these steps will give businesses a better view of what their employees do, allowing them to make informed decisions about redundancies rather than just wielding the axe.

Many European companies have fragmented back office support and would benefit from automating and centralising their back office systems before offshoring, says Havens.

Andy Gallagher, consulting director at Compass Consulting, agrees that businesses are missing out on savings by failing to fix their processes before they offshore.

"We worked with a financial services firm that had a system of shifting processes offshore as they are. It was satisfied that it had saved £30m a year by offshoring. But when we looked at it, we found that by not optimising the process before offshoring it to an Indian firm, it was being charged £60m more," he says.

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