Staff Cuts and More Cloud Spend: CFO Responses to COVID-19

In BICSI Blog, BICSI Bytes, Featured, Newsby

A Gartner survey of 161 finance executives on 3 May 2020 revealed that in May and June the number of companies furloughing staff, as well as cutting salaries and workforce will have more than doubled since the end of March, where 11% of respondents reduced staff in March, and 25% plan to reduce staff in May and June.

“CFOs are unsure what reopening will look like and have little visibility into when revenue will start to normalise,” said Alexander Bant, practice vice president, research, for the Gartner Finance Practice. “This is driving CFOs to look for the next round of structural cost-cuts to preserve cash for the coming months. Companies are conducting robust analysis about which of their business lines and products sets they will rescale, reinvest, return, reduce and retire. As they do this, they are determining which sets of staff they need to succeed in the short-and-long-term.

“CFOs want to optimise costs, but still be able to come out fighting when restrictions are loosened. Companies are being deliberate about rapidly reducing headcount in areas of the company they do not believe will return to normalised revenues anytime soon. They are protecting roles in parts of the organisation that will be necessary to meet a return of demand across the coming two quarters.”

An interesting anomaly to this picture of broad-based cuts was around specific technologies which CFOs believed may drive cost optimisation. Some 24% of finance executives anticipate more spending on robotic process automation (RPA), 20% anticipate more spending on cloud-based ERP technologies, and 19% anticipate more spending on advanced analytics.

“COVID-19 shifted the way work is done by most organisations overnight,” explained Bant. “Companies are now operating in remote environments, with less staff to run key processes, and under immense cost-pressure. This has resulted in companies moving more quickly to the Cloud, applying more robotics to their processes, and exposing the need for advanced analytic technologies to plan effectively in this environment. Gartner research has shown well-implemented RPA, cloud ERP and data analytics have driven extensive cost benefits.

“Of the areas that had been cut back the most, there were three clear favourites among CFOs to reintroduce once revenues return. Open hiring (49%) T&E (46%) and capex investments (41%) were the most common costs that CFOs indicated they intend to reintroduce. Conversely, CFOs tell us they will not bring back spend right away – real-estate spend, sales-reward trips, social-media marketing and service-provider contracts. These do not look like they will be making a rapid return to previous expenditure levels.”