What to do now, and what next? These are questions every company is busy answering. With so much in flux, it’s challenging to plan for a new “never normal.” But it’s also an outstanding opportunity for reinvention.

As demand for services continues to vacillate, companies’ cost baselines will keep on changing and category spend will require flexible management from now on. Some services, like marketing, will need to be recalibrated for a world where ecommerce has surged. Others, like IT, may need extra investment to support a prolonged shift to home working. But shifting spend from services like, say, events, maintenance and business travel will also create opportunities to either save money, or reinvest those savings in innovation and growth.

By understanding how the landscape has changed (and may continue to do so), CFOs, CPOs and CSCOs can dynamically fine-tune budgets and reimagine their operations, unlocking funds to support whatever comes next. Our “bending the curve” approach, introduced in the first blog in this series, provides a structured process for doing just that – whether spend reinvention is demand-driven, market-driven or due to larger business transformation.

I’ve thought a lot about how this approach can be applied. And in this blog, I’ll be taking a look at the opportunities for spend recalibration in general and administrative (G&A) services.

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Spotting opportunities in marketing

As businesses repurpose their budgets for better ROI, they’re rethinking content strategies and channel mix. This is a great opportunity to accelerate marketing spend efficiency initiatives that were already underway, optimize the marketing mix, and do more with less by, for example, reusing content. We’ve seen many brands pivot marketing to online channels. In the US and Europe, the demand is for more emails and website-based content, whereas in China the spike in demand is more toward content that can be deployed via chat platforms.

For radio and TV marketing, a switch from primetime to daytime makes sense when more people are at home during the day. It also saves money. There may be opportunities to negotiate better rates with agencies. And with many agency employees currently on unpaid leave/furlough, brands may also be able to tap key talent and internalize production. 

More than ever, IT spend is an investment play

What about IT? In the initial race to enable remote employees, we saw peak demand for laptops, monitors, and other IT accessories. Now that that’s business as usual, we’re seeing a slowdown in non-essential tech purchases balanced by essential investments in digital transformation to capitalize on market recovery.

Now’s a perfect time to reduce (or eliminate) unused entitlements, as well as taking advantage of some of the current offers from cloud and data-center providers. SLAs with tech providers need to be scrutinized. Some services may have been wound down and there could be opportunities to lower fees. And of course, VPN and network-access control are high priority investments to improve security for remote work.

The journey to new savings

The pandemic has had a massive impact on business travel, with the sector estimated to have taken an $820 billion hit globally. Although there will be a bounce-back, it’s possible some travel behaviors have changed forever. As companies re-baseline travel spend and revisit travel policies, there are some real opportunities to negotiate new, dynamic deals with airlines, hotels, rental car providers and so on. It may be possible to leverage current market pricing to lock in future rates. 

From a Meetings & Events (M&E) perspective, there’s little likelihood of a mass return to face-to-face for the foreseeable future. So, what should companies be doing in response? To minimize spend on virtual technologies, one priority is to look at taking advantage of some of the new providers now offering these services at low cost. There could be opportunities to use cancelled M&E during the pandemic period for refunds, or credits if refunds aren’t available. And effective results from virtual meetings should be leveraged to establish additional policy standards for in-person meetings, as and when they start happening again.

Scrutinize legal services

Legal services are another area to explore. Compared to late February, there’s been a 40% drop in the number of new legal matters opened each week in the US. With law firms under pressure and many of their attorneys still on furlough, client companies should be prepared for a change in how legal services are delivered. Invoices should be checked for changes in staffing mix. Legal category spend managers should start to run competitive events for all new legal work and consider running micro-bids for work with existing legal panel firms. It may also be worth discussing how to work more collaboratively with strategic partner firms. As well as temporarily reducing costs, that could mean more proactive legal advice.

Every category must be in scope

Clients often ask me where they should prioritize spend recalibration. I tell them that every category should be in scope. But of course, every organization is unique. The key is to scrutinize every category, understand how essential each one is to your business right now, where sustainable behavior changes and savings can be made and where investments in other areas are needed. 

In the next blog, the third and last in this series, one of my colleagues will be taking a look at supply chain and direct spend through the same lens.

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Stephen Broadbent

Principal Director, Procurement Services, North America

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