Athlete bicycle

Perspectives

Are TMT companies managing costs with a strategic foresight?

They can save mindfully to support digital transformation costs and grow their businesses

Compared with their counterparts in other industries, technology, media, and telecommunications (TMT) companies are more likely to use cost management to support their growth mind-set. In fact, they’re counting on cost management to help achieve a much broader, two-pronged business objective: sales growth and technology implementation.

November 7, 2019

Are the business objectives of cost management, sales growth, and technology implementation unrelated? According to Deloitte’s 2019 Global Cost Survey, “Save-to-transform as a catalyst for embracing digital disruption,” nearly eight in 10 TMT executives say that they will undertake cost-management initiatives in the next two years.1 However, nine in 10 also project an increase in annual revenue growth over the same time frame.2 Let’s take a closer look at the possible reasons for this apparent dichotomy.

Direct internal and external factors that impact costs—unfavorable cost position versus the competition, dips in consumer demand, shortages of liquidity and credit—can push businesses toward cost management.3 However, a much broader goal might be at play here: using cost management to support growth and transformation costs.

TMT executives report that the top three drivers of their cost management initiatives are required investment in growth areas, intensified competition, and increased international growth opportunities (see chart). These cost-management drivers are often more pronounced in TMT than in other industries.

Such drivers can lead to cost-intensive imperatives. The top two strategic priorities for TMT companies in the next two years are sales growth and technology implementation.4 Implementing technologies to transform businesses can have a far-reaching impact on revenue and other financial metrics.5

TMT companies are ahead of other industries in implementing cloud solutions, business intelligence tools, and emerging technologies like artificial intelligence (AI).6,7 Consequently, they might be more disciplined in such implementations. For example, they are more likely to establish enterprise-wide strategies for AI, explore multiple ways to access AI solutions, identify talent needs, and train their workforce.8 Implementing such capabilities at scale can add to their digital transformation costs.

However, emerging technologies also present growth opportunities for TMT companies. Business adoption of AI and cloud is poised to surge in the future.9,10 Positioned as major solution providers in this space, TMT companies can improve their revenues through product innovation, advanced marketing and sales capabilities, geographic expansion, and market consolidation.

Hence, TMT companies can leverage their leadership in technology adoption to accelerate innovation, identify untapped opportunities, and acquire new customers.

Cost management can be a lever to push the two-pronged TMT imperative: implementing technologies and enhancing growth, both internally and for their customers. TMT companies can benefit from applying cost-management initiatives to specific business areas beyond their core strategic focus. In turn, the saved resources can fuel their top business priorities. Beyond just addressing bottom-line growth, this holds the potential to leverage resources much more optimally and advance their broader goals. For TMT companies that are still managing costs as a siloed initiative, this may call for applying a more holistic lens and an integrated business strategy.

This charticle authored by Sayantani Mazumder.

Endnotes

Omar Aguilar, Jason Girzadas, “Save-to-transform as a catalyst for embracing digital disruption,” Deloitte, April, 2019.
Ibid.
Ibid.
Ibid.
Blake Morgan, “7 Examples of How Digital Transformation Impacted Business Performance,” Forbes, July 21, 2019.
Omar Aguilar, Jason Girzadas, “Save-to-transform as a catalyst for embracing digital disruption,” Deloitte, April, 2019.
Mic Locker, Jeff Loucks, Susanne Hupfer, and David Jarvis, “Seasoned explorers: How experienced TMT organizations are navigating AI,” Deloitte, January 25, 2019.
Ibid.
Jeff Loucks, Susanne Hupfer, David Jarvis, and Timothy Murphy, “Future in the balance? How countries are pursuing an AI advantage,” Deloitte, May 1, 2019.
10 Louis Columbus, “Public Cloud Soaring to $331B by 2022 According to Gartner,” Forbes, April 7, 2019.

Fullwidth SCC. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.

Site-within-site Navigation. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.