Cost Cutting in the Time of Corona – Reducing Annual ERP Spending

Digital capabilities are now a necessity for enterprises who are re-assessing their operations to increase operational efficiency. This report features an exploration of use cases among ASEAN enterprises who have sought to reduce costs through streamlining their Enterprise Resource Planning (ERP) systems to illustrate the possibilities that technology brings to the future of business operations and IT spending.

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The world has been put in lockdown as countries implement strict protocols including social distancing, quarantines and travel restrictions to curb the spread of Covid-19. Though it is gradually easing, anxiety on the economic prospects remains high. Multiple recovery models have emerged ranging from the V-shaped to L-shaped scenarios. Regardless of these theoretical models, many believe that it will be a long road ahead to recovery with the International Monetary Fund (IMF) estimating the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis to be around $9 trillion. This number is greater than 3 times the economies of ASEAN (11 countries) combined.

Enterprises are put under severe duress during this period of economic downturn and uncertainty. Survival is the first priority, but decision makers can utilise this period as an opportunity to reassess internal processes and capabilities, an exercise that might not rank highly during periods of economic expansion. To effectively do this self-assessment, we could go back to the basic formula of Return on Investment (ROI) = Utility of the investment / Cost as a reference.

A common pain point for enterprises would be how to improve ROI by reducing costs, instead of spending more. Even during economic expansion, enterprises in ASEAN have been very conscious about this notion. In 2018 and 2019, the findings of the AIBP ASEAN Enterprise Survey showed that cost reduction is amongst the top 3 goals that they want to achieve through digital transformation initiatives. This cost aspect, the denominator in the equation, is further magnified during this time of crisis.