Digital transformation has traditionally been synonymous with improving customer experience, increasing operational efficiency, or even revamping business models and launching new product lines. However, in today’s intensely challenging business climate, this is changing.
Businesses are now turning to digital transformation for a more practical reason — cost optimisation. Although less glamorous than inventing a new product, this outcome shouldn’t be underestimated. Cost optimisation ultimately helps companies streamline spending and reallocate resources towards innovation, sharpening their competitive edge over time.
Popular approaches to achieving cost efficiencies often include outsourcing tasks to reduce manpower costs or renegotiating contracts for better terms. While viable, these options are stopgaps at best and may even lead to higher costs down the line. For instance, outsourcing can be costly due to the significant time spent managing an outsourced environment. Instead, businesses should consider longer-term solutions by reassessing their digital infrastructure.
Old is not gold
To begin with, avoid clinging to outdated systems, as they are often hidden drains on resources. While some legacy systems are retained due to compliance requirements, a strategic approach can mitigate these challenges. By identifying which features can be replaced or are available elsewhere, organisations can develop a plan for retiring obsolete systems.
This proactive approach frees up resources for innovation. In areas such as operational databases and legacy data warehouses, companies can achieve substantial savings by retiring older, legacy solutions. Additionally, consolidating vendors and streamlining skills offer soft cost savings beyond what appears on an invoice.
Take, for example, JPX Market Innovation & Research, Inc. (JPXI), the strategic data arm of Japan Exchange Group, which will migrate to a modern data platform to manage its entire data lifecycle on its new integrated data services platform, J-LAKE, by the end of 2024. The move is part of JPXI’s aim to harness the power of the cloud to enhance data management, analytics, and AI capabilities for accelerated business transformation. The migration is expected to significantly improve JPXI’s mission-critical systems, boost operational efficiency, and create new business value that accurately addresses client needs.
Get rid of the bloat
Reducing redundant data storage is another way to achieve significant cost savings. Companies often store the same information in multiple locations, straining IT maintenance budgets. By modernising data architecture and consolidating data using a hybrid data platform, organisations can access and analyse all their data across public and private clouds, as well as on-premises, to make smarter decisions.
For example, Bank Negara Indonesia (BNI) unified customer data across silos, saving 3 billion IDR (US$185,600) annually on storage costs. This also enabled new analytical models, helping the bank enhance customer offerings. This clearly demonstrates how digital transformation can both optimise costs and unlock new revenue potential.
Maximise resources
Businesses should also seek opportunities to reduce redundancy. Many organisations have found success by expanding data platforms built for specific purposes to support other business units and new use cases. This approach maximises resource utilisation. For instance, a data platform initially designed for compliance could also be used to run analytics for customer service teams, eliminating the need for additional resources and reducing overall IT costs.
OCBC, for example, built a hybrid cloud platform that integrated its data systems, creating a more resilient IT infrastructure. This allowed data scientists to work independently across various integrated applications to develop AI and machine learning applications. As a result, they created “Next Best Conversation,” a tool that uses machine learning to analyse customer data and deliver personalised recommendations. This led to a boost in campaign conversion rates by 1.5x to 2x, resulting in increased annual revenue.
Pragmatism is a winning formula
In today’s austere business environment, cost optimisation has become a priority. While digital transformation is often associated with dramatic changes and revolutionising businesses, companies should also use it as a tool to drive cost efficiencies. Streamlining data management through modern, flexible platforms can not only optimise costs but also improve organisational agility and support innovation. Ultimately, the most pragmatic decisions are often the most effective.
