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Save-to-transform as a catalyst
for embracing digital disruption
Deloitte’s second biennial global cost survey
April 2019
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Contents
Executive summary
4
About the study
8
Key global insights
12
Other catalysts of cost reduction
26
Digital and technology solutions applied to cost management
30
Save-to-transform as a catalyst for embracing digital disruption
38
Looking ahead
50
Appendix A: Global insights from key industries
54
Appendix B: Zero-based budgeting
68
2
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Foreword
Digital technology and digital disruption have burst onto the
global scene as key levers for cost management and business
transformation. In Deloitte’s 2017 Biennial Global Cost Survey,1
digital disruption was identified as an emerging risk by respondents
in the United States but was barely visible elsewhere. Now, however,
digital risk—including digital disruption and cybersecurity—rank
among the top external risks globally.
While cost management remains a strong imperative around the world, the prevailing mindset seems to be
expanding from save-to-grow to save-to-transform. Companies in all regions continue to have very positive
expectations for revenue growth, and many are using cost reduction as a tool to help fund their required
growth investments. However, in today’s increasingly digital world, more and more businesses also recognize
the need to transform their operations and capabilities with infrastructure investments in key digital
innovations such as robotic process automation, cognitive technologies, business intelligence, and cloudbased ERP systems.
These digital technologies and innovations can deliver dramatic improvements in competitiveness,
performance, operating efficiency and, increasingly, cost savings. Equally important, they can also strengthen
a company’s positioning for adverse future events, including economic downturns and digital disruption.
In this highly dynamic environment where digital innovation is a critical enabler for both cost reduction and
business transformation, we are delighted to share the findings from our second biennial global cost survey.
The study includes responses from more than 1,200 executives and senior business leaders across all major
global regions, with strong representation from every major industry.
This report provides an up-to-date view of the cost management practices and trends shaping the future of
business globally. It also takes a detailed look at how the latest digital technologies and cost management
strategies are acting as a catalyst for transformation in a world being actively redefined by digital disruption.
We hope you find these insights useful and look forward to hearing your thoughts and feedback.
Omar Aguilar
Strategic Cost Transformation
Global Market Offering Leader
1
Jason Girzadas
Managing Principal, Consulting
Deloitte Global
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
3
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Executive summary
Key global insights
Cost
management
remains a global
imperative.
Cost targets are up.
Failure rates are also up.
Globally, more than
Globally,
2/3
81%
Cost reduction
continues to be a
standard business
practice in all regions:
of respondents are targeting
total cost reductions of
71%
are planning to
undertake cost
reduction initiatives
over the next
24 months
10%
of respondents were unable to fully meet their cost
reduction targets
(18 percentage points worse than in 2017)
or higher
(up from 55 percent of
respondents in 2017)
Nearly
2/3
of the companies that failed to meet their cost targets
fell short by 25 percent or more, achieving less
than 75 percent of their targeted cost savings
Nearly
1/3
of this year’s global
respondents have cost
targets above
4%
of global respondents exceeded their cost targets
20%
Growth expectations remain very positive.
Digital risks top the list of external risks.
Globally,
In 2017, macroeconomic concerns were the No. 1 external
risk. However, that risk has now been surpassed by two
digital-related risks:
86%
of respondents saw their revenues increase over
the past 24 months, and the same number expect
their revenues to increase over the next 24 months
cybersecurity
digital disruption
Digital disruption was barely on the radar in 2017, except in the
United States; however, it is now recognized as a top external risk
in all regions except LATAM.
Information systems are the
top internal risk.
Save-to-grow is evolving into
save-to-transform.
Growth and competition
remain the primary drivers.
Reliability and functionality of
information systems is the top
internal risk globally, particularly
in the United States and Europe. That
risk is followed closely by recruitment,
development, and retention of talent;
and by lack of controls, processes, and
systems to ensure business continuity.
Sales growth, product profitability,
and technology implementation
remain in a virtual three-way tie
as the top strategic priorities globally
over the next 24 months. The
increasing emphasis on technology
implementation—along with
digital enablement—reflects a new
transformation mindset for
cost management.
Over the next 24 months, the top three
drivers for cost management globally
are expected to be:
4
1. R
equired investment
in growth areas
2. Intensified competition
among peer group
3. Increased international
growth opportunities
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Key global insights
Technology capabilities are the
primary development focus.
In developing their capabilities, surveyed
companies have primarily been
focusing on cognitive and artificial
intelligence (AI), ERP infrastructure,
and especially automation. This focus
on technology is consistent with a saveto-transform mindset, with companies
investing more time, money, and effort
in capabilities that contribute to digital
enablement and digital transformation.
Top cost reduction actions
have been mostly tactical, but
strategic actions are expected
to gain ground.
The most common cost reduction
action over the past 24 months was
streamlined business processes,
followed by streamlined organization
structure and improved policy
compliance. However, strategic cost
actions are expected to gain ground
over the next 24 months, to a point that
the mix of tactical and strategic actions
will be more closely balanced.
Barriers and lessons learned.
Implementation challenges remain
the top barrier to successful cost
reduction initiatives, followed by lack
of effective ERP systems and infeasible
targets. The top lessons learned are:
invest in technology improvements
to enable data availability, reliability,
and decision making; design a solid
tracking and reporting process; and
assess, validate, and adjust targets
to fit the realities of implementation.
Other catalysts of cost reduction
Cost management maturity
levels have room to grow.
Impact of a new CEO on cost
reduction efforts.
Impact of M&A activity on cost
reduction efforts.
Roughly
Despite a common belief that
appointment of a new CEO makes
cost reduction more likely, our
global survey results show it only
increases the likelihood of cost
reduction by:
Similar to new CEOs, there is a common
belief that merger and acquisition
(M&A) activity increases the likelihood
of cost reduction as companies pursue
efficiencies and savings from a merger.
However, the global survey results
indicate M&A only increases the
likelihood of cost reduction by:
2/3
of companies globally do not
have highly mature cost
management practices.
1%, relatively
The United States leads the way with:
50%
(the US is the only region showing
a more positive difference, at 10%)
7%, relatively
(in the US, the likelihood increases to 11%)
of US respondents reporting a high
level of maturity where cost policies
and procedures are continually reviewed
and examined to ensure best practices
around efficiency and cost management.
5
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Digital and technology solutions
applied to cost management
Cloud leads the pack.
In general, the United States has the highest
implementation rates for all of the technologies,
while LATAM has the lowest.
Globally, cloud is the most widely implemented digital technology
covered by our survey, well ahead of business intelligence,
automation, and cognitive/AI.
49%
35%
25%
25%
Cloud
Business
intelligence
Automation
Cognitive/AI
Why cloud?
The two top reasons globally for using
cloud are:
Number 1 at:
Number 2 at:
64%
63%
Tighten data security
Reduce costs and
increase productivity
and business control
Cloud implementations are reported to
have a very high success rate in meeting
expectations globally (85 percent), with
56 percent of respondents indicating
cloud met expectations and 29 percent
indicating it exceeded expectations.
Why robotic process
automation?
Globally, and in all regions, the most
common reasons for using robotic
process automation (RPA) are:
Number 1 at:
Number 2 at:
80%
69%
Reduce costs and
increase productivity
Tighten data security
and business control
RPA implementations are reported to
have a high success rate in meeting
expectations globally (76 percent), with 41
percent of respondents indicating RPA met
expectations and 35 percent indicating RPA
exceeded expectations.
Digital leaders make a difference.
Companies with a designated digital leader report much
higher levels of technology implementation on average:
140%
higher
(across all four technologies reviewed)
6
Why cognitive and AI?
As with RPA, the two top reasons globally
for applying cognitive/AI solutions are:
Number 1 at:
Number 2 at:
76%
68%
Reduce costs and
increase productivity
Tighten data security
and business control
The overall success rate in meeting
expectations for cognitive/AI is
reported to be nearly as high as cloud’s
(83 percent), with 36 percent of global
respondents indicating cognitive/AI met
expectations and 47 percent indicating
cognitive/AI exceeded expectations.
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Save-to-transform as a catalyst for
embracing digital disruption
Digital risks zoom to
the top.
Digital disruption is now
widely recognized as a top
external risk cited by:
61%
(of this year’s global respondents)
Digital disruption and innovation are driving technology implementation
Implementation of numerous digital technologies is expected to skyrocket over the next
24 months.
All technologies
reviewed are expected
to be implemented at
a level of
up from just
47% or higher
6%
over the next 24 months
63%
62%
Cognitive/AI
Automation
The technology expected to be the most actively
implemented is cognitive (planned or in-process), followed
closely by automation.
(in 2017)
Cybersecurity received similar
recognition with:
62%
ranking it at or near the
top of the external risks list
both globally and in all regions
except LATAM.
Digital solutions are the most advanced level of cost management.
Cost management practices and approaches have grown increasingly sophisticated over time,
with digital cost solutions—although still maturing—now representing the most advanced level
of cost management. Companies that relied on more traditional cost management methods in
the past are now finding that digital solutions can open the door to a whole new level of savings,
as well as enabling new and more innovative business models.
Transformation is an emerging focus.
Our 2017 survey found many companies around the world were managing
costs with a save-to-grow mindset, pursuing cost savings to fund their
growth strategies in an improving economy. This year’s survey results show
the save-to-grow mindset expanding into a save-to-transform mindset.
With save-to-transform, technology becomes a key lever (in addition to
cost, growth, and talent). Companies in this mode continue to focus on
cost reduction as a way to fund their growth strategies; however, they also
invest in IT and innovation that can transform the business and help it
survive and thrive in a world of digital disruption.
Save-to-transform provides both growth
and defense.
This year’s survey respondents continue to have a very positive
business outlook, bolstered by one of the longest periods of
economic expansion in history. However, economies are cyclical,
and even the strongest expansion can defy gravity for only so
long. Potential warning signs are starting to emerge in the survey
data, including:
97%
20%
increase in global respondents
concerned about macroeconomic risk
over the next 24 months
increase in US respondents who expect
a significant reduction in consumer
demand over the same period
Automation and other digital
technologies take a lead role in
capabilities developed.
RPA and cognitive technologies such as AI and
machine learning (ML) have emerged over the
past 24 months as the most common digital
capabilities developed to reduce costs.
ERP infrastructure is also receiving significant
effort and attention, with many companies
making the transition to cloud-based ERP.
Digital disruption and innovation are
reshaping the business landscape
globally—and their impact is only
increasing.
Companies today need to harness the transformational
power of digital technologies to streamline their cost
structures and generate strategic cost savings that are
both significant and sustainable. These improvements
can help a company achieve its immediate growth
objectives while preparing for the inevitable ups and
downs of the economic cycle. They can also position the
company to capitalize on digital disruption—becoming
the disrupter, rather than the disrupted.
7
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
About the survey
Deloitte Consulting LLP (Deloitte or Deloitte Consulting) engaged Research Now to
conduct a global cost management survey in order to better understand business
leaders’ perspectives on current and future cost reduction initiatives within large
companies and multinationals.
Study objectives
Understand factors,
approaches, actions,
and targets related to
cost initiatives
Assess the
effectiveness of the
cost actions, including
lessons learned from
previous efforts
Understand the
drivers and scope
of past and future
cost initiatives
Provide context on
how digital disruption
and advanced
digital technologies
are affecting cost
management
Assess industry
results, and provide
insights on different
behaviors related to
cost reduction
Methodology
Data was collected through detailed online surveys conducted between November and December 2018.
January
February
March
April
May
June
July
August
September
October
November
December
Firmographics
The survey included responses from 1,219 executives directly involved in cost management in their organizations.
Respondents were from 24 countries representing all major regions, including:
Canada
(50 responses)
United States
(226 responses)
Europe
(414 responses)
Europe representation:
UK; Germany; France; Spain;
Netherlands; Italy; Belgium; Finland;
Norway; Denmark; Sweden
APAC
representation:
India; China
(incl. Hong
Kong);
Australia;
Japan; New
Zealand;
Singapore
LATAM representation:
Mexico; Brazil; Chile
Latin America (LATAM)
(167 responses)
8
South Africa
(30 responses)
Asia Pacific (APAC)
(332 responses)
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
The countries represented in the survey account for 87 percent of the world’s
economy as measured by Gross Domestic Product (GDP). Outside the United States,
respondents represented 66 percent to 82 percent of their regional economies as
measured by GDP.
Figure 1. Respondents’ coverage and representation of regions and the world economy
Survey sample coverage
% of respondent’s economic footprint by
2016 GDP
Survey sample coverage1
% of respondent’s economic footprint by 2016 GDP per region
100
13%
Survey
respondents
represent
87%
of the world’s
economy
18%
17%
66%
82%
83%
LATAM**
Europe
APAC
34%
80
60
87%
100%
40
20
0
GDP of countries surveyed
USA*
Surveyed
GDP of potential countries not surveyed
Source: The World Bank – GDP 2016
Comparison to 2017 Global
Cost Survey results2
2017 global cost report included
1,013 responses, whereas this
year 1,219 responses were
gathered, which represents a
20% increase.
Respondents to the 2017 survey
represented 85% of the world's
economy, whereas this year's
respondents represent 87%.
Not Surveyed
* US Survey is the only country-based survey
** Only two countries Brazil and Mexico represent 61% of the regional economy, and Chile represents 5%
1
This sample excludes responses from Canada and South Africa, although responses have been included
in global averages
2
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report
Only relevant executive positions with responsibility for cost management
decisions were surveyed. Almost 25 percent of responses were from presidents
or CEOs; more than 20 percent were from CFOs and COOs; the rest were from
other executive management positions.
Figure 2. Respondents’ management level
Breakdown of management level
% of respondents by level
Management level breakdown1
% of respondents by level
100
24%
24%
42%
80
Almost 25% of
responses were from
president or CEO roles,
more than 20% from
CFO & COO roles, and
the rest from other
executive management
positions
21%
60
40
20
0
27%
23%
21%
25%
14%
14%
38%
37%
Europe
APAC
12%
19%
10%
14%
14%
President, CEO
18%
60%
42%
USA
LATAM
In general, C-suite
and executive
management-level
response profiles
were maintained in
all regions
CFO, COO
Executive Management (business units)
Executive Management (enabling functions)
1
This sample includes responses from Canada and South Africa
9
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Industry-specific information was collected to provide meaningful insights for six
major industries: Consumer & Industrial Products (C&IP); Financial Services
(FS); Technology, Media & Telecommunications (TMT); Energy & Resources
(E&R); Life Sciences & Health Care (LSHC); and Public Sector (PS).
Figure 3: Industry breakdown
Industry breakdown1
% of total respondents
Industry breakdown by region
Number and percentage of responses by industry
2%
Total
7%
63
US
39
41
28
11 3 226
27%
12%
109
Europe
13%
21%
72
61
0%
Energy & Resources
37
20%
Financial Services
68
68
LATAM
Consumer & Industrial Products
100
77
APAC
18%
1
41
45
50
39
46
27
40%
20
60%
32
23
7
8
80%
Technology, Media & Telecommunications
10 414
7
7
332
167
100%
Life Sciences & Health Care
Other
Public Sector
This sample includes responses from Canada and South Africa
Among the participating US companies, 67 percent reported revenues greater than
$5 billion. Among the participating companies from APAC, LATAM, and Europe, on
average 60 percent reported revenues greater than $1 billion.
Figure 4: Respondents’ annual revenue
25
22%
20%
30
21%
20
15
23%
25
13%
15%
20
18%
15%
15
24%
16%
13%
10%
10
6%
5
0
3%
$1B $3B
$5B
to less to less to less
than than than
$3B
$5B $10B
$10B
to less
than
$20B
US
$20B
to less
than
$30B
$30B Over
to less $60B
than
$60B
7%
5%
10
17%
16%
14% 15%
13%
11%
9%
14%
8%8% 8%
6%
5
0
$200M $500M
$1B
to
to
to
less than less than less than
$500M
$1B
$3B
$3B
to
less than
$5B
LATAM
$5B
$10B
to
to
less than less than
$10B
$20B
Europe
7% 7%
4%
4%
3%
$20B
$30B
Over $60B
to
to
less than less than
$30B
$60B
APAC
Note: Europe, LATAM, and APAC Survey were conducted in local currency – for analysis purposes they have been converted to US dollars
10
3%
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
In the United States, 55 percent of respondents had more than 10,000 employees.
On average, 58 percent of respondents in LATAM, Europe, and APAC had more than
5,000 employees.
Figure 5: Respondents’ employee headcount
In the US, 55% of respondents had more than 10K employees
25
21%
23%
On average, 58% of respondents had more than 5K employees in LATAM, Europe, and APAC
30
20%
25
14%
15
22%
19%
20
15%15%
12%
15
10
17%
15%
12%
8%
10
7%
21%
19%
18%
14%
13%
12%
8%
13%
10%10%
7%
11%
5
10%
8%
6%
3%
5
0
Total respondents (%)
Total respondents (%)
20
0
Less 5,000 10,000 25,000 50,000 More
than
to
to
to
to
than
5,000 9,999 24,999 49,999 99,999 100,000
Less
than
1,000
1,000
to
2,499
US
2,500
to
4,999
5,000
to
9,999
LATAM
Europe
10,000
to
24,999
25,000
to
49,999
50,000
to
99,999
More
than
100,000
APAC
This sample excludes responses from Canada and South Africa
At the global level, revenue generated by North America and Europe is highest at
30 percent and 32 percent, respectively.
Figure 6: Revenue generation by geography
11%
8%
30%
12%
6%
7%
8%
Global
5%
17%
US
LATAM
60%
41%
18%
15%
32%
30%
5%
8%
7%
21%
11%
Europe
18%
36%
APAC
58%
16%
20%
North America
Europe
APAC
LATAM
Middle East & Africa
11
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Key global insights
Globally, more than two-thirds
of respondents (68 percent) are
targeting total cost reductions of
10 percent or higher—up from 55
percent of respondents in 2017.
12
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Cost management remains a global imperative
Cost reduction continues to be a standard business practice in
all regions, with the large majority of global survey respondents
(71 percent) planning to undertake cost reduction initiatives over
the next 24 months (see figure 7). This number is down from 86
percent in 2017, largely due to changes in LATAM where there was
a shift in the number of responses from “likely” to “neutral,” and in
Europe where there was a similar shift from “neutral” to “unlikely.”
These shifts may stem from the relatively positive economic
conditions globally, underpinned by strong economic performance
in the United States.
On average, US companies are the most likely to undertake
cost reduction actions (84 percent). The likelihood is significantly
lower for APAC (70 percent), Europe (66 percent), and LATAM
(65 percent).
Figure 7. Likelihood of cost reduction in the next 24 months
Globally, 71% of respondents plan to undertake cost reduction initiatives
Total respondents (%)
84%
71%
Likelihood
66%
65%
Global likelihood has decreased
from 86% to 71%, mainly due to
respondents shifting from “likely” to
“neutral” in LATAM, and from
“neutral” to “unlikely” in Europe
2
24%
20%
1
3
23% 22%
10%
Likely
1
Comparison to 2017 Global Cost
Survey results1
70%
9%
Neutral
Global
US
6%
10%
12%
8%
Unlikely
LATAM
APAC
Europe
“Neutral” and “unlikely” positions
both increased 7 percentage points
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
Key findings
On average, 71% of respondents plan to undertake cost reduction initiatives, with the US the highest at 84% and LATAM and Europe
the lowest at 65% and 66%, respectively
On average 2 out of 10 respondents are neutral with regard to cost reduction initiatives
Only 1 out of 10 respondents are unlikely to pursue cost reduction in the next 24 months
Cost targets are up
Globally, more than two-thirds of respondents (68 percent) are
targeting total cost reductions of 10 percent or higher—up from
55 percent of respondents in 2017. Nearly one-third of this year’s
global respondents (31 percent) have cost targets above 20
100
percent, while a slightly smaller number (30 percent) have cost
90
targets
of less than 10 percent (see figure 8).
A relatively large percentage of respondents in LATAM (37 percent)
and Europe (34 percent) have cost targets above 20 percent. This
is particularly noteworthy for Europe, where past cost targets were
significantly less aggressive than the global average. Economic
performance and challenges in the region may be driving this shift.
80
Figure 8. Cost reduction targets1
70
Total respondents (%)
60
Most respondents (68%) reported targets above 10%
50
40
30% 30% 30%
30
27%
32%
37%
Comparison to 2017 Global Cost
Survey results2
Cost targets
42%
33%
35%
40%
31%
27%
34%
3
37%
3
25%
20
2
1
1
10
0
Less than 10%
10% to 20%
Global
1
2
US
Europe
More than 20%
LATAM
APAC
Respondents that selected “no specific targets were established” were not tabulated in results
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
The number of respondents with cost
targets above 10% has increased
significantly (~15 percentage points),
mainly due to:
16% nominal increase in the US in
the 10 to 20% range
21% nominal increase in Europe
in the more than 20% range
Key findings
On average, 68% of respondents plan to pursue cost reduction targets above 10%
Only 27% to 32% of companies across regions reported cost reduction targets of less than 10%
Within cost targets of more than 20%, LATAM and European respondents are pursuing targets above the average, with
37% and 34% respectively
13
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Failure rates are also up
Globally, 81 percent of respondents were unable to fully meet their
cost reduction targets (18 percentage points worse than in 2017).
Only 4 percent of global respondents exceeded their cost targets
(see figure 9).
Respondents from Europe had the highest overall failure rate (83
percent), perhaps at least partly due to the fact that they recently
established higher targets. LATAM had the lowest overall failure
rate (77 percent); however, the percentage of LATAM respondents
that exceeded their goals also declined sharply, from 16 percent in
2017 to only 1 percent in this year’s survey.
Figure 9. Success in meeting cost targets
81% of respondents globally are unable to fully meet their cost reduction target
Success in meeting targets
81%
Total respondents (%)
80
1
82% 83%
Comparison to 2017 Global
Cost Survey results1
80%
72%
Failure rates increased 18
percentage points2 on average.
Some of the main reasons are:
70
60
• Significant decrease in
meeting goals in Europe (21
percentage points) and the
US (15 percentage points)
50
40
3
22%
30
15% 13%
20
12%
14%
4%
10
5%
5%
1%
6%
0
Did not meet goals
Met goals
Global
1
2
US
Europe
Exceeded goals
LATAM
APAC
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
This year, a new range in not meeting goals was considered (75-99%); please see next graph for further details
Key findings
Failure rate is 81% globally; Europe has the highest failure rate (83%) and LATAM the lowest (72%)
Only 4% of respondents across regions reported exceeding targets
LATAM is the region with highest success in meeting targets (22%)
14
• Significant decline in
exceeding goals in LATAM
(16% to 1%)
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Falling far short of targeted savings
This year’s survey included an additional question to help
determine the extent to which respondents partially succeeded in
meeting their cost targets. The results show that nearly two-thirds
(65 percent) of the companies that failed to meet their cost targets
fell short by 25 percent or more, achieving less than 75 percent of
their targeted cost savings (see figure 10).
Figure 10. A closer look at failure rates
1%
10%
30%
1%
US
11%
40%
3
30%
1
32%
45%
2
77%
20%
2%
2%
9%
13%
34%
16%
LATAM
69%
Global
16%
22%
29%
31%
34%
1%-74% of
savings
1%
1%-49%
of savings
33%
Europe 19%
32%
41%
APAC
15%
24%
1
65%
Realized 0% of savings
Realized 50%-74% of savings
33%
33%
2
65%
57%
Realized 1%-24% of savings
3
2
Realized 25%-49% of savings
Realized 75%-99% of savings
Key findings
APAC is the region with the highest proportion of companies (41%) realizing 75%-99% of targets; LATAM is lowest at 22%
77% of respondents in LATAM met 1%-74% of goals, the highest percentage across regions; APAC was lowest at 57%
US has 40% of respondents with savings realization of 1%-49%, the highest result, in contrast to APAC at 24%
15
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Growth expectations remain very positive
Globally, 86 percent of respondents saw their revenues increase
over the past 24 months, and the same number expect their
revenues to increase over the next 24 months. In all regions, this
year’s numbers for past revenue performance and future revenue
expectations are virtually identical to the numbers from 2017
(see figure 11).
Figure 11. Revenue performance and expectations
100
90
86% 86%
90%
84%
87%
Revenue change over past 24 months
Comparison to 2017
Global Cost Survey
results1
Total respondents (%)
80
70
Results from prior survey
were virtually the same,
showing only 1%-2%
difference across regions
60
50
40
1
3
30
20
7%
10
7%
8%
7%
3%
7%
7%
8%
7%
6%
0
Increased
Remained the same
Decreased
Most respondents continue to foresee a positive revenue outlook in the next 24 months
100
90
86% 86%
91%
83%
87%
Revenue change over next 24 months
Total respondents (%)
80
Global
US
LATAM
APAC
Europe
70
60
50
40
1
2
30
3
20
8%
10
9%
10%
5%
6%
6%
4%
6%
4%
6%
0
Increased
1
Remainded the same
Decreased
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
Key findings
Global respondents reported similar increases (86%) for both past and expected future revenue growth
LATAM reports a slightly more positive outlook (91%) compared to the global average (86%)
In all regions, the number of respondents who expect future revenue to decline is slightly lower than the number who experienced a
decline in the past
16
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Digital risks top the list of external risks
In 2017, macroeconomic concerns were the No. 1 external risk.
However, that risk has now been surpassed by two digital-related
risks: cybersecurity (62 percent) and digital disruption (61 percent),
with macroeconomic concerns falling to third place (59 percent)
in a three-way tie with political climate and commodity price
fluctuations (see figure 12).
Digital disruption was barely on respondents’ radar in 2017,
except in the United States where it was identified as a rapidly
emerging issue. However, digital disruption is now recognized as a
top external risk in all regions except LATAM, which is lagging a
bit behind.
Figure 12. External risks
Top external risks
1
69%
70.000000
66%
1
65.833333
Total responses (%)
59%
63%
62%
61%
61%
59% 59%
59%
58%
57%
58%
57%
1
57.500000
69%
55%
55%
53%
53%
52%
53.333333
59%
55%
64% 64%
54%
3
66%
2
64%
63%
62%
49.166667
55%
51% 51% 51%
1
65.833333
63%
58%
57%
57%
56%
62%
62%
60%
Top external risks
56%
54%
70.000000
Total responses (%)
62%
61.666667
59% 59%
2
64%
62%
61%
61%
62%
62%
63%
64% 64%
60%
61.666667
59% 59%
45.000000
59% 59%
59%
58%
Global
57%
Political climate
Credit risks
53.333333
58%
US
57%
57.500000
55%
Macroeconimic
concerns
54%
Cybersecurity concerns
52%
LATAM
56%
56%
55%
Currency fluctuations
53%
53%
New market entrants
57%
57%
58%
Europe
APAC
55%
55%
Commodity price fluctuations
54%
3 Digital disruption
51% 51% 51%
Comparison to 2017 Global Cost Survey results1
Key findings
“Macroeconomic concerns” was rated the highest external risk globally in the previous survey
Cybersecurity
is was
nownot
the
top riskasglobally,
particularly
in the
United
Stateshighest risk globally
Digital disruption
recognized
a major risk
previously, but
it is now
the second
49.166667
On average,
risks in all areas than
other regions
Global APAC reports higher external
US
LATAM
45.000000
1
Europe
APAC
Thriving
in disruption
uncertainty in is
therecognized
age of digital disruption:
Deloitte’s
first biennial
global
cost survey report, December 2017
Digital
as a top
risk globally
except
in LATAM
Macroeconimic
concerns
Currency
fluctuations
Commodity price fluctuations
Political
climate
Credit risks
Cybersecurity concerns
New market entrants
Digital disruption
Comparison to 2017 Global Cost Survey results1
“Macroeconomic concerns” was rated the highest external risk globally in the previous survey
Digital disruption was not recognized as a major risk previously, but it is now the second highest risk globally
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
17
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Information systems are the top internal risk
To supplement our findings on external risk, we added a new
question this year focused on internal risks. According to the
survey results, reliability and functionality of information systems
is the No. 1 internal risk globally (26 percent), particularly in the
United States (34 percent) and Europe (27 percent). That top risk
is followed closely by recruitment, development, and retention of
talent (25 percent) and lack of controls, processes, and systems to
ensure business continuity (24 percent) (see figure 13).
Internal risk rankings in LATAM vary significantly from other
regions, with lack of strategic plans/execution at the top of the
list (23 percent), followed by liquidity and financial position
(22 percent).
In APAC, ratings for the top six internal risks are much more tightly
clustered than elsewhere, ranging from 22 percent to 26 percent,
with talent being the biggest concern.
Figure 13. Internal risks1
34% 2
25%
27%
26%
23% 23%
24%
23%
22%
23%
27%
4
23%
25%
22%
21%
Total responses (%)
19%
US
LATAM
26%
25%
23%23%
22%
23%
24%
22%
20%
19%
16% 16%
Global
1
3
29%
1
16%
Europe
Lack of stategic plans or execution
to provide clear direction
Liquidity and financial position to
support business plans
Recruitment, development and retention of
required talent to support business initiatives
Reliability and functionality of
information systems to support
business processes and decisions
Lack of controls, processes and
systems to ensure business continuity
Lack of regulatory, legal and/or
management controls
APAC
Responses based on risks identified as having the highest impact for respondents' companies
Key findings
Top three internal risks globally are: reliability and functionality of information systems to support business processes and decisions; recruitment, development and retention of required talent to support business initiatives; and lack of controls, processes
and systems to ensure business continuity
The United States reported on average higher percentage of risk for reliability and functionality of information systems in comparison
to other regions; LATAM reported the opposite behavior
Reliability and functionality of information systems is a major concern in Europe and even more so in the United States
4 LATAM reports different risks compared to other regions, centered around lack of strategic plans and liquidity; respondents in APAC
reported human resources-related issues, which also remained a key internal risk across all regions, except for LATAM
18
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Save-to-grow is evolving into save-to-transform
Sales growth, product profitability, and technology implementation
remain in a virtual three-way tie as the top strategic priorities
globally over the next 24 months. However, technology
implementation is rising as a priority in Europe, APAC, and
especially LATAM (see figure 14).
This increasing emphasis on technology implementation and
digital enablement globally reflects a new cost management
mindset. Deloitte’s 2017 survey highlighted an overall save-togrow mindset, with many companies around the world using cost
reduction to help fund their growth initiatives in an improving
economy. Now, we are seeing “save-to-grow” evolve into a mindset
we call “save-to-transform,” in which companies continue to pursue
growth while specifically investing in transformative technologies
and infrastructure that can help them operate more efficiently
and compete more effectively in an increasingly digital
business environment.
In the United States, which tends to be a leading indicator for digital
business trends, digital enablement is the fastest-rising priority,
climbing from 65 percent over the past 24 months to 71 percent
over the next 24 months.
Figure 14. Strategic priorities
Total responses (%)
Past 24 months
73%
74%
72% 68%
69%
66%
59%
79%
77%
73%
78%76%
65%
65%
Global
Total responses (%)
1
70%
72%
56%
US
Next 24 months
1
73%
65%
62%
56%
69%
68% 67%
62%
54%
66%66%
LATAM
+9%
+7%
2
77%
76%
73%
70%
68%
68%
59%
Europe
+5% +8%
APAC
+11%
1
3
B
A 3
A
A
78% 76% 76%
75%
73%
73%
73%
71%
70%
69%
69%
69%
64%
61%
Global
C
77%
76%
69%70%
68%
65%
60%
US
2
B
70%
67% 65% 69%
67%
60% 64%
LATAM
Sales growth
Cost reduction
Balance sheet management
Organization and talent
Technology implementation
Digital enablement
73%
76%
73%
71%
70%
67%
61%
Europe
APAC
Product profitability
Key findings
Product profitability, technology implementation, and sales growth are the top three global priorities over the next 24 months, with
similar reported levels (73%)
Europe and APAC were the only regions that reported technology implementation as the No. 1 priority over the next 24 months
Cost reduction is a top-4 priority globally and a top-3 priority in the United States over the next 24 months
Comparing strategic priorities from the past 24 months with those projected for the next 24 months
A. The top three priorities remain the same globally
B. Digital enablement has grown significantly in the United States, as has balance sheet management in Europe (+9% and +11%, respectively)
C. Technology implementation has shown a similar behavior in LATAM (+8%)
19
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Growth and competition are the main drivers, with
emerging concerns about declining demand
Drivers of cost management initiatives, both past and future,
continue to revolve around growth and competition. Over the
next 24 months, the top three drivers globally are expected to
be: required investment in growth areas (67 percent), intensified
competition among peer group (66 percent), and increased
international growth opportunities (65 percent). Those same cost
management drivers occupy the top three spots for all regions,
except in LATAM where unfavorable cost position relative to peer
group (62 percent) edges out increased international growth
opportunities (61 percent) for third place (see figure 15).
in consumer demand (55 percent), higher than over the past
24 months (46 percent). In LATAM, the expectation of reduced
consumer demand is directionally similar (54 percent expect to
see a significant reduction in the future, up from 48 percent in the
past). This may be an early warning sign of an economic slowdown.
That being said, in all regions, liquidity/credit concerns currently
rank as the least common driver for pursuing cost management.
This suggests relatively few companies are currently in distress
and there is relatively little need for companies to pursue cost
reduction with a primary focus on liquidity and working capital.
According to US respondents, cost initiatives over the next 24
months will be increasingly driven by a significant reduction
Figure 15. Drivers of cost management initiatives
Total responses (%)
Past 24 months
52% 52%
56%
59%
66% 65%
70% 67%
66%
63%
46%
50%
54%
Global
57%
48% 47% 49%
US
54%
57%
51% 51%
52% 51%
LATAM
54%
58%
65% 63%
62%
56% 56%
Europe
62%64%
67%
70% 69%
APAC
Next 24 months
A
3
1
2
A
67% 66%
65%
57% 61%
+7%
B
67%
60%
55%
51%
54%
+13%
2
62%63%
54%
~18%
+6%
C
C
62%61%
62% 63%
C
67% 66%
61%
52% 52%
51%
55%
59%
70% 70% 72%
61%
58%
58% 64%
55%
Total responses (%)
55% 53%
A
+20%
A
Global
Significant
reduction in
consumer demand
US
Decrease in liquidity
and tighter credit
LATAM
Unfavorable cost
position relative to
peer group
Changed regulatory
structure
Europe
APAC
Required
investment in
Intensified
competition
Increased
international growth
growth areas
among peer group
opportunities
Key findings
Investment in growth areas, competition among peer group, and international growth opportunities are top drivers globally over the
next 24 months
The top three global drivers are in most cases also the top three drivers in each major region – except for LATAM
Liquidity has become the driver with the least impact on triggering cost management initiatives (53%), followed by reduction in consumer demand (55%)
Comparison to past 24 months
A. The top four drivers remain exactly the same
B. Reduction in consumer demand has increased in the United States (+20%)
C. Similarly, unfavorable cost position (+27%), competition among peer group (+24%) and growth opportunities (+20%) have increased in LATAM as well
20
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Technology capabilities are the primary development focus
In developing their capabilities, surveyed companies have primarily
been focusing on automation (48 percent), cognitive/AI (42 percent),
and ERP infrastructure (41 percent), with automation far above the
rest (see figure 16).
Zero-based budgeting (ZBB) capabilities may be receiving more
attention than in the past, particularly in Europe and LATAM.
However, ZBB continues to be the least developed of all the
capabilities covered by our survey, with only 12 percent of global
respondents having implemented a ZBB system or process (refer to
Appendix B for an analysis on global ZBB status and trends).
This focus on technology—especially automation—is consistent
with a save-to-transform mindset, with companies investing more
time, money, and effort in capability areas that contribute to digital
enablement, digital disruption, and digital transformation.
Figure 16. Developed capabilities over past 24 months
48%
Total responses (%)
41%
42%
50%
45%
45%
40%
41%
40%
34%
34%
31%
38%
35%
31%
29%
3
49%
48%
40%
40%
35%
28%
26%
23%
16%
12%
Global
2
54%
49%
42% 41%
34%
2
53%
1
16%
11%
US
10%
LATAM
Created a new executive position
and/or full time positions to drive
cost management
Set-up or improved
ERP infrastructure
Implemented new policies and
procedures, and strengthened the
compliance mechanisms
Improved processes for forecasting,
budgeting and reporting to enable
effective cost management
Europe
Developed or implemented
Automation technologies
APAC
Developed or implemented
cognitive and artificial intelligence
technologies
Implemented zero-based
budgeting, system or process
Key findings
Cognitive/automation solutions and ERP, along with new policy implementation, are the top developed capabilities
The US and APAC have, on average, higher levels of developed capabilities than Europe and LATAM
ZBB continues to be the least developed capability (12% of respondents on average)
A. Comparison to 2017 Global Cost Survey results1
• Implementation of ZBB increased globally, but especially in Europe and LATAM – up 8 percentage points in both cases
• Set-up or improved ERP infrastructure has decreased globally (down 8 percentage points), with a significant decrease in LATAM
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
21
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Top cost reduction actions globally were mostly tactical
The most common cost reduction action over the past 24 months
was streamlined business processes (38 percent), followed by
streamlined organization structure (36 percent) and improved
policy compliance (36 percent) (see figure 17).
In the United States and LATAM, two of the top cost reduction
actions were strategic in nature: (1) increased centralization, and (2)
changed business configuration. Globally, increased centralization
was the most commonly implemented strategic cost action
(35 percent).
Figure 17. Cost reduction actions over the past 24 months1
100
90
Global
1
3
40
30
20
35%
32%
29%
10
36%
LATAM
Strategic Tactical
38%
39%
38%
36%
32%
29%
31%
43%
41%
2
31%
46%
Europe
Strategic Tactical
32%
29%
APAC
Strategic Tactical
31%
33%
Strategic Tactical
28%
33%
1
45%
39%
34%
41%
21%
37%
34%
25%
31%
37%
30%
26%
22%
26%
30%
Act .1
60
50
Total responses (%)
US
Strategic Tactical
34%
32%
Act .9
80
70
30%
33%
33%
36%
36%
33%
34%
28%
31%
24%
29%
34%
33%
38%
30%
30%
32%
1
Responses based on implemented actions for respondents’ companies
Action 1
Increased centralization—Integrated business units and functions into the corporate center
Action 2
Changed business configuration—Divested underperforming assets, adjusted number of products/services,
geographies, customers, etc.
Action 3
Outsourced/Off-shored business processes to low cost service providers
Action 4
Streamlined organization structure—increase spans of control, and modified reporting relationships
Action 5
Streamlined business processes
Action 6
Improved policy compliance
Action 7
Reduced external spend by leveraging scale to source purchased materials/services and reduced demand for materials
and services
Action 8
Implementation of specific automation or cognitive technologies
Action 9
Aligned incentives of executives or employees to cost reduction objectives
Strategic
Tactical
Key findings
LATAM and the United States had some of their top actions oriented toward the strategic side, particularly increased centralization
On average, the United States shows a higher percentage across all actions relative to other regions
Increased centralization was the most implemented strategic action globally over the past 24 months
22
Act .9
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .1
Act .9
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .1
Act .9
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .1
Act .9
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .1
0
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Tactical and strategic actions are expected to balance out
Over the next 24 months, strategic cost actions are expected to
gain ground to a point that the mix of tactical and strategic actions
will be closely balanced. In many cases, the expected actions are
already underway; in other cases, they are planned but not yet being
implemented (see figure 18).
Globally, but particularly in the United States, the most common
cost action over the next 24 months is expected to be changed
business configuration, which is strategic. In APAC, implementation
of advanced technologies tops the list.
Figure 18. Cost reduction actions over the next 24 months1
Global
100
US
Strategic Tactical
61%
62%
90
80
Total responses (%)
60
19%
50
21%
16% 18%
16%
19% 18% 22%
44%
43%
42%
46%
40%
43%
10%
41%
40%
Act .1
42%
20
19%
Act .8
40
30
Europe
Strategic Tactical
69%
64%
APAC
Strategic Tactical
61%
63%
Strategic Tactical
61%
64%
3
2
1
70
LATAM
Strategic Tactical
56%
55%
15%
48%
35%
13%
42%
26%
15%
48%
17%
25%
11%
35%
19%
35%
25%
16%
22%
26%
22%
22% 22%
17%
38%
45%
20%
33%
47%
41%
51%
39%
44%
39%
49%
38%
38%
20%
42%
18%
43%
22%
41%
20%
39%
23%
40%
20%
44%
18%
47%
15%
45%
16% 14%
47%
17%
47%
44%
18%
18%
47%
51%
10
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .1
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .1
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .1
Act .8
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .7
Act .6
Act .5
Act .4
Act .3
Act .2
Act .1
0
Not implemented but planned
In process of implementation
1
Respondents who had planned to implement those actions or were in process of implementation are represented in this tabulation
Comparison to past 24 months
• Strategic actions have gained slightly more emphasis over tactical actions
Action 1
Increase centralization—Integrate business units and functions into the corporate center
Action 2
Change business configuration—Divest underperforming assets, adjusted number of products/services, geographies,
customers, etc.
Action 3
Outsource/Offshore business processes to low cost service providers
Action 4
Streamline organization structure—Increase spans of control, and modified reporting relationships
Action 5
Streamline business processes
Action 6
Improve policy compliance
Action 7
Reduce external spend by leveraging scale to source purchased materials/services and reduce demand for materials
and services
Action 8
Implementation of specific automation or cognitive technologies
Strategic
Tactical
Key findings
Aggregating respondents in the process of implementation and those planning to implement as a single group, “change
business configuration” is the top action globally over next 24 months (65%)
The United States shows a preference for changing the business configuration
APAC is the region in which implementation of advanced technologies is higher
23
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Barriers to successful cost reduction
As was the case in 20171, implementation challenges are the
top barrier to successful cost reduction initiatives (65 percent),
followed by lack of effective ERP systems (62 percent), and
infeasible targets (61 percent). Lack of understanding was a top-3
barrier in 2017, but has fallen to No. 5 globally (see figure 19).
Figure 19. Top barriers to successful cost reduction
2
57%
Total responses (%)
57%
62%
58% 61%
2
1
65%
51%
Global
55%
56%
58% 60%
64%
62% 64%
53%
55%
US
3
59%
65%
60% 59% 61%
55%
54%
LATAM
64%
Europe
Weak/unclear business case for
cost improvement
Lack of understanding/acceptance
of the solution by the audience
Poorly designed reporting and tracking
Erosion of savings due to infeasible
target setting
Lack of an effective ERP system
Management challenges in implementing initiatives
Lack of an effective ERP and erosion of savings due to infeasible target setting are the second and third barriers
globally, with the latter having higher relevance in LATAM
APAC generally reports higher levels of challenges than other regions
Comparison to 2017 Global Cost Survey results1
•• Implementation challenges remain the top barrier
•• Lack of understanding is no longer a top-3 barrier in any region
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
24
63% 62%
55%
Key findings
Management challenges in implementing initiatives is higher than all other barriers (65% average globally)
1
60%
APAC
67%
71%
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Lessons learned
The top three lessons learned globally are: (1) invest in technology
improvements to enable data availability, reliability, and decision
making (72 percent); (2) design a solid tracking and reporting
process (70 percent); and (3) assess, validate, and adjust targets to
fit the realities of implementation (69 percent). These are also the
top three lessons learned for each individual region, although the
specific order and ratings vary (see figure 20).
Designating a full-time position to drive efficiency and cost
improvement is the least common lesson learned globally, except
in APAC where it almost makes the top three.
Figure 20. Lessons learned
2
Total responses (%)
1
61%
65%
66%
70%
69%
72%
69%
69%
75% 73%
2
76%
69%
62%
57%
72%
59%
55%
Global
US
LATAM
59%
63%
65%
67%
65%
2
3
2
70%
68%
68%
66% 66%
Europe
69% 70%
75%
APAC
Designate a full-time position to drive
efficiency and cost improvement initiatives
Develop, validate, and sponsor a clear
business case for cost improvement
Deploy change management activities to raise
awareness, acceptance, and benefits of initiatives
Design a solid tracking and
reporting process
Assess, validate, and adjust targets
reasonably according to the reality
throughout the implementation phase
Invest in technology improvements to enable data
availability, reliability, and decision-making process
Key findings
Invest in technology improvements, design a solid tracking and reporting process, and adjust targets reasonably are the three top
lessons learned
The top three lessons learned are consistent globally and for each region
APAC is the region that emphasizes designating a full-time position to drive efficiency and cost improvement initiatives
25
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Other catalysts of
cost reduction
26
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Cost management maturity levels have room to grow
Looking at cost management maturity levels, roughly two-thirds
of companies globally (65 percent) do not have highly mature cost
management practices. The United States leads the way, with
50 percent of US respondents reporting a high level of maturity
where cost policies and procedures are continually reviewed and
examined to ensure best practices around efficiency and cost
management. Overall, LATAM has the lowest maturity levels. APAC
and Europe fall in the middle, with APAC being noticeably ahead—
particularly in terms of respondents that report a high maturity
level (39 percent) (see figure 21).
Figure 21. Cost management maturity level
Lowest
High
% of respondents
15%
20%
2
23%
6%
9%
4%
19%
12%
High
Intermediate
Low
Lowest
24%
Global
50%
35%
56%
28%
35%
31%
1
17%
2
25%
24%
2
US
LATAM
29%
3
39%
Europe
3
APAC
Cost policies and procedures are continually reviewed and examined to ensure best practices around efficiency and cost management
Relevant cost policies and procedures are typically well known, and personnel are trained and generally comply
There may be written cost policies and procedures documented but not readily available and essentially not followed
Few or no formal cost policies or procedures are employed or documented, or they are significantly fragmented
Key findings
On average, roughly two-thirds of companies globally do not have a high level of maturity in cost management
The United States is the region with the largest proportion of companies with high maturity in cost management and the smallest
proportion of low mature companies; LATAM is the opposite
Europe and APAC results are similar, although APAC has a larger proportion of high maturity companies
27
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Impact of a new CEO on cost reduction efforts
There is a common belief that new CEOs make cost reduction more
likely, presumably because they need to “right the ship” or want to
put their mark on the organization quickly. Yet the survey results
show appointment of a new CEO has surprisingly little impact on
the likelihood a company will pursue cost reduction.
Globally, the impact of a new CEO on cost reduction is negligible
(only 1 percent); however, the impact varies significantly by region,
with the likelihood of cost reduction being higher in the United
States (10 percent), LATAM (5 percent), and APAC (3 percent), but
lower in Europe (-6 percent) (see figure 22).
Figure 22. Impact of a new CEO on cost reduction initiatives
Likelihood to undertake cost improvement initiatives
(did not appoint a new CEO)
Likelihood to undertake cost improvement initiatives
(appointed a new CEO)
100
88%
80%
80
71%
2
% of total respondents
64%
68%
2
72%
69%
67%
71%
64%
60
10% increase
40
1
1
20
0
Likely
Likely
Global
US
LATAM
Europe
APAC
Key findings
Globally, there is negligible difference in the likelihood of undertaking cost improvement initiatives after a new CEO is appointed
(only a 1% relative increase)
The likelihood relatively increases in the United States (by 10%), LATAM (by 5%), and APAC (by 3%) but relatively decreases in Europe
(by -6%)
28
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Impact of M&A activity on cost reduction efforts
Similar to new CEOs, there is a common belief that M&A activity
also increases the likelihood of cost reduction as companies
pursue efficiencies and savings from a merger. Yet the survey
results indicate M&A has a surprisingly small impact on the pursuit
of cost reduction—although not as small as the impact of a
new CEO.
Globally, M&A increases the likelihood of cost reduction by 7
percent. The United States, Europe, and APAC all show a positive
correlation between M&A activity and cost reduction; however,
the impact is relatively insignificant except in the United States
(11 percent). In LATAM, there appears to be a small negative
correlation, with M&A activity slightly reducing the likelihood of
cost reduction (see figure 23).
Figure 23. Impact of M&A activity on cost reduction initiatives
Likelihood to undertake cost improvement initiatives
(have not acquired or been acquired)
Likelihood to undertake cost improvement initiatives
(have acquired or been acquired)
100
88%
79%
80
74%
% of total respondents
69%
66%
73%
68%
64%
64%
67%
60
1
40
7% increase
20
11% increase
0
Likely
Global
US
LATAM
Likely
Europe
APAC
Key findings
The likelihood of pursuing cost improvement initiatives after M&A activity is only moderately higher in the United States (by 11%) and
globally (by 7%) relatively
LATAM, Europe, and APAC show similar levels of cost reduction activity regardless of whether an acquisition has occurred
29
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Digital and technology solutions
applied to cost management
In developing their capabilities, surveyed
companies have primarily been focusing
on cognitive and artificial intelligence
(AI), ERP infrastructure, and especially
automation. This focus on technology
is consistent with a save-to-transform
mindset, with companies investing more
time, money, and effort in capabilities
that contribute to digital enablement
and digital transformation.
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Cloud leads the pack
Globally, cloud is the most widely implemented digital technology
covered by the survey (49 percent), well ahead of business
intelligence (35 percent), automation (25 percent), and cognitive/
AI (25 percent). In general, the United States has the highest
implementation rates for all of the technologies, while LATAM has
the lowest. Specific numbers vary by region; however, all regions
exhibit a similar pattern—except for relatively higher rates of
implementation for cognitive technologies in Europe (see figure 24).
Figure 24. Implementation of technologies (past 24 months)
Total responses (%)
100
80
3
1
60
62%
49%
40
25% 25%
50%
49%
2
35%
3
30% 27%
2
17% 17%
20
0
Global
US
Automation: Robotic process automation
41%
2
25%
23%
LATAM
27%
43%
2
32%
26% 24%
Europe
32%
APAC
Business intelligence (not including cognitive or AI)
Cognitive technologies: AI and machine learning
Cloud solutions
Key findings
Of the implemented technologies, cloud was widely cited by respondents (almost 50%) across all the regions, followed by
business intelligence
Technology implementation levels follow a similar pattern across regions, with automation and cognitive the least implemented
The United States is the region with the highest level of implementation across technologies, especially cloud and business intelligence; on the opposite end, LATAM shows the lowest level of implementation
Why cloud?
The two top reasons globally for using cloud are to tighten data
security and business control (64 percent) and to reduce costs and
increase productivity (63 percent). In LATAM, the order of those
two reasons is reversed, with a significantly greater emphasis on
cost reduction and productivity (71 percent vs. 60 percent for
security and control) (see figure 25).
Enhancing product/service capabilities (48 percent) and increasing
revenue (43 percent) are less common reasons for applying cloud;
however, they are still significant and likely to grow.
Figure 25. Reasons for applying cloud (past 24 months)
Total responses (%)
100
60
2
1
80
64%
63%
43%
48%
63%
57%
40
37%
40%
71%
60%
40%
47%
63%
58%
43%
48%
68%
67%
46%
54%
20
0
Global
Reduce costs and increase productivity
US
Increase revenue
LATAM
Enhance product/service capabilities
Europe
APAC
Tighten data security and improve business control
Key findings
Tighten data security and improve business control are the top reasons globally and in all regions, except in LATAM
Reducing costs and increasing productivity are the top reasons in LATAM
31
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Cloud success is reported as very high
Cloud implementations are reported to have a very high success
rate in meeting expectations globally (85 percent), with 56 percent
of respondents indicating cloud met expectations and 29 percent
indicating it exceeded expectations (see figure 26).
Figure 26. Results of implementing cloud
2%
4%
13%
2%
1%
7%
12%
27%
29%
Global
32%
US
56%
16%
13%
27%
LATAM
33%
Europe
59%
57%
Results above expectations
2
2%
APAC
52%
56%
Results according to expectations
1
Results below expectations
Unable to assess results at this point
Key findings
APAC had the highest levels of results above expectations
Europe had the highest levels of results below expectations
Why RPA?
Globally, and in all regions, the most common reason for using
RPA is to reduce costs and increase productivity (80 percent), with
Europe and APAC both above the global average at 83 percent.
The second most common reason for implementing RPA is
to tighten data security and business control (69 percent)
(see figure 27).
Figure 27. Reasons for applying RPA1 (past 24 months)
Total responses (%)
100
80
60
1
80%
1
69%
57% 53%
79%
70%
51% 51%
71%
58%
36%
40
2
2
83%
83%
63%
46%
74%
71%
56%
60%
48%
20
0
Global
Reduce costs and increase productivity
US
LATAM
Increase revenue
Europe
Enhance product/service capabilities
Tighten data security and improve business control
1
Respondents who had implemented RPA were selected for this question
Key findings
Reducing costs and increasing productivity is the top reason globally and in all regions, followed by tightening data
security and improving business control
Europe and APAC show the highest levels for reducing costs and increasing productivity
32
APAC
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
RPA success is reported as high
RPA implementations are reported to have a high success rate
in meeting expectations globally (76 percent), with 41 percent
of respondents indicating RPA met expectations and 35 percent
indicating RPA exceeded expectations. The United States had the
most success, with 40 percent exceeding expectations. At the other
end of the spectrum, Europe had the highest failure rate, with 29
percent falling short of expectations (see figure 28).
Figure 28. Results of implementing RPA
1%
2%
0%
13%
23%
Global
35%
32%
40%
LATAM
2
21%
30%
Europe
APAC
36%
1
45%
47%
Results above expectations
2%
29%
21%
US
41%
1%
41%
40%
Results according to expectations
Results below expectations
Unable to assess results at this point
Key findings
The United States had the highest levels of results above expectations
Europe had the highest levels of results below expectations
Why cognitive and AI?
As with cloud and RPA, the two top reasons globally for applying
cognitive/AI solutions are to reduce costs and increase productivity
(76 percent) and to tighten data security and improve business
control (68 percent). All regions followed that same pattern except
the United States, where the order of the top two was reversed.
APAC showed a strong emphasis on reducing costs and increasing
productivity (84 percent), well ahead of the global average and far
above the response rates for the other reasons (see figure 29).
Figure 29. Reasons for applying cognitive & AI (past 24 months)
100
Total responses (%)
80
60
1
76%
56% 59%
68%
2
3
1
71%
66%
71%
68%
55%
44%
43%
40
84%
75%
62%
58% 62%
46%
54%
58%
67%
20
0
Global
Reduce costs and increase productivity
US
LATAM
Increase revenue
Europe
APAC
Enhance product/service capabilities
Tighten data security and improve business control
Key findings
Reducing costs and increasing productivity is the top reason globally and in all regions—except the United States—followed by tightening data security and improving business control
Reducing costs and increasing productivity are especially high in APAC (84%)
Tightening data security and improving business control is the top reason in the United States
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Cognitive/AI success is reported as very high
The overall success rate in meeting expectations for cognitive/
AI (83 percent) is reported as nearly as high as cloud’s, with
36 percent of global respondents indicating cognitive/AI met
expectations and 47 percent indicating cognitive/AI exceeded
expectations. APAC had the most success, with 44 percent
exceeding expectations. Europe had the highest failure rate, with
21 percent falling short of expectations (see figure 30).
Figure 30. Results of implementing cognitive & AI
1%
2%
1%
11%
16%
Global
36%
LATEM
30%
Europe
APAC
57%
44%
1
42%
53%
Results above expectations
14%
21%
29%
34%
US
47%
2
14%
48%
Results according to expectations
Results below expectations
Unable to assess results at this point
Key findings
APAC had the highest levels of results above expectations
Europe had the highest levels of results below expectations
Implementation of technologies is expected to continue
at a high level
All technologies reviewed are expected to be implemented at
a level of 47 percent or higher over the next 24 months. The
technology expected to be the most actively implemented is
cognitive (63 percent, planned or in-process), followed closely by
automation (62 percent) and business intelligence (59 percent)
(see figure 31).
Regionally, expected implementation levels in APAC and Europe
for all of the technologies are similar to the global average, while
LATAM trends higher than average and the United States
trends lower.
Figure
31. Implementation of technologies (next 24 months)
100
90
Total responses
(%)
70
3
1
80
62%
73%
63%
60
50
24%
24%
59%
20%
40
30
20
58%
47%
15%
14%
38%
39%
39%
33%
43%
64%
57%
35%
50%
21%
15%
36%
35%
26%
22%
54%
17%
60%
26%
60%
24%
9%
62%
58%
23%
47%
23%
65%
63%
26%
20%
53%
12%
16%
33%
38%
45%
42%
37%
10
2
2
71%
34%
36%
39%
35%
39%
43%
41%
31%
24%
0
Global
In process of
implementation
US
LATAM
Automation: Robotic
process automation
Cognitive technologies: AI
and machine learning
Europe
Business intelligence (not
including cognitive or AI)
APAC
Cloud solutions
Not implemented
but planned
Key findings
Automation and cognitive are expected to be the most actively implemented technologies over the next 24 months—both for companies that plan to implement, and those that are already in the process of implementation
Technology implementation patterns are similar across Europe and APAC over the next 24 months; however, on average, LATAM shows
higher levels of implementation and the US shows lower levels
35% of respondents in LATAM plan to implement Automation over the next 24 months—significantly more than in the other regions
34
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Digital leaders make a difference
Companies with a designated digital leader report much higher
levels of technology implementation (on average, 140 percent
higher across all four technologies). The impact is greatest for
automation (222 percent), followed by cognitive/AI (190 percent)
and business intelligence (129 percent). Cloud is the least affected
(77 percent), likely because the reported implementation levels
for cloud are already higher than for the other technologies,
regardless of whether a digital leader is designated and perhaps
because cloud may be more directly affected by chief information
officers (see figure 32).
Figure 32. Impact of a designated digital leader on implementation levels
Level of technology implementation (no designated leader)
100
% of total respondents
80
2
60
39%
40
20
34%
30%
21%
9%
5%
10
6%
10%
7%
17%
16%
9%
9%
21%
16% 16%
28%
18%
12%
2%
+140%
Level of technology implementation (designated leader)
100
222%
3
190%
129%
77%
2
% of total respondents
80
67%
60
40
54%
53%
45%
39%
29% 31%
23%
31%
29% 30%
28% 29%
21%
30%
27%
53% 54%
36% 35%
20
0
Automation: Robotic
Process Automation
Global
US
Business intelligence
(not including Cognitive or AI)
Cognitive technologies: AI
and machine learning
LATAM
Europe
Cloud solutions
APAC
Key findings
The impact of a digital leader on the level of technology implementation varies across technologies, but on average is 140% higher
Cloud is the technology with the highest level of implementation, regardless of whether a digital leader was designated (30% vs 53%); it
is also the least affected by having a designated leader, although the impact is still very positive (+77%)
RPA is the most affected by designating a digital leader (+222%)
35
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Case study: Reducing application costs through
cloud migration
Financial Impact on TCO and Cost Structure
To reduce cost pressure and provide relief to the countries using
the application, the company wanted to explore the idea of moving
the application from on-premise data centers to the public cloud.
The main objective of the effort was to reduce application TCO
while aligning with the company’s overall IT strategy, which relied
on cloud as a critical enabler to help the business respond to
changing needs.
Indirect Expense
The total cost of ownership (TCO) for the application was having a
significant negative impact on the P&Ls of the countries using it.
Although the application was originally built for multiple countries,
it was only deployed to a few of those countries. Yet, costly onpremise infrastructure assets had been commissioned to support
all the planned countries.
100%
Data Center (DC)
Infrastucture
DC Service
Allocations
DC Labor Alloc.
Depreciation
Direct Expense
A US-based Fortune Global 100 insurance company was on a
multi-year cost reduction journey, with a significant portion of the
targeted savings expected to come from moving a key mainframe
application to cloud.
~65%
Cloud
DC Service
Allocations
DC Labor Alloc.
Software Licenses
Software Licenses
Software Licenses
Labor
Before Cloud
Migration
Labor
After Cloud
Migration
Overall impact
The company’s cloud transformation journey had the following
overall business objectives:
•• Reduced TCO, rightsizing the infrastructure for the application
by moving to cloud.
•• Optimized infrastructure footprint by moving the application
from the current over-provisioned and under-utilized mainframe
infrastructure.
•• Improved flexibility to scale the application to dynamic
business requirements, fluctuating bandwidth demands,
and future needs. Migrating to a consumption-based model.
•• Architecture modernization by introducing design patterns
that could transform the application architecture and make it
more suitable for cloud.
•• Better alignment to the overall IT strategic direction.
•• Reliable application performance by making the solution
architecture scalable to shifting performance demands.
•• Reduction in application costs by assessing and implementing
opportunities targeted at reducing expenses.
As a part of the effort, a cloud migration strategy was developed
and executed. Activities included:
•• Review historical TCO data and future cost structure
associated with the application.
•• Assess, analyze and recommend options to upgrade the
technology platform and lower TCO by moving to cloud.
•• Need for upfront detailed target state architecture
diagrams and migration plans to drive smoother execution and
avoid delays during implementation.
•• Reduced future infrastructure CapEx and general
operating expenses.
•• Enhanced performance to meet business requirements.
Key Lessons Learned
•• Successful cloud migration requires rigorous planning, close
partnership and shared ownership between business, IT, and
affected functions in order to manage risks, resolve issues quickly
and align expectations.
•• Cloud migration impacts the culture of the technology group as
roles, methods and processes change to realize the full benefits
of cloud.
•• Understanding system and application dependencies is
the biggest challenge, followed by navigating a complex
enterprise environment.
•• Leverage techniques such as software-defined infrastructure
solutions to enable standardization, efficiency and effectiveness
versus simply using as a cost efficiency play.
•• Determine key success factors at the start of the program and
monitor them throughout the entire cloud migration.
36
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Case study: Digital transformation enabled by cloud
A US regional insurance company was struggling to scale rapidly
and remain competitive in the marketplace due to growing
technology debt, high capital expenses and a traditional IT
operating model. To address the problem, the company needed
to proactively transform its IT infrastructure from in-house data
center to cloud-leveraging the capabilities of a public cloud vendor
to drive business agility and scalability at a lower
cost structure.
The company started its cloud adoption journey by modernizing
its core business platforms, turning the IT function into a modern
“as a service” organization. Based on an assessment of business
needs and the current IT landscape, a holistic cloud transformation
program was undertaken. The multi-year program encompassed
people, process and technology, with the following business
objectives:
Financial impact on TCO and cost structure
-27%
100%
73%
Capex
61%
•• Undertake a cloud-first strategy
57%
•• Rightsize infrastructure
•• Transform and scale the DevOps operating model
•• Implement automation
Opex
39%
•• Unlock digital capabilities
16%
Overall impact
•• Consistent experience for agents and insured through an
agile, fault-tolerant platform that advances brand and
customer retention
•• Faster time-to-market for new products/features/state
rollouts due to improved speed, quality, operational efficiency
and productivity
•• Significant shift from CapEx to OpEx (~40% expenses shifted
to OpEx) and ~30% savings on TCO over five years
TCO Before
TCO After
The cloud transformation enabled the company to leapfrog
technology debt and shift the cost structure from CapEx to
OpEx. Also, it established a digital backbone to help the company
implement next-generation capabilities such as data and analytics,
artificial intelligence, machine learning and IoT.
37
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Save-to-transform as a catalyst
for embracing digital disruption
Cost management practices and
approaches have grown increasingly
sophisticated over time with digital
solutions, although still maturing,
now representing the most advanced
level of cost management. This year’s
survey results show the save-to-grow
mindset from 2017 expanding into a
save-to-transform mindset.
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Digital risks zoom to the top
Digital disruption is now widely recognized as a top external risk, cited by 61 percent of this year’s global respondents—up from just 6 percent
in 2017. Cybersecurity received similar recognition (62 percent), ranking at or near the top of the external risks list both globally and in all regions
except LATAM (see figure 33).
Figure 33. Digital disruption and cybersecurity risks
Digital disruption’s evolution as an external risk
70
+917%
61%
Digital disruption is
recognized as a risk by 61% of
companies in 2019, compared
to only 6% in 2017
64%
62%
66%
62%
58%
51%
51%
50
40
40
30
30
1
B
20
2
20
15%
6%
Global
10
6%
2%
1%
0
Cyber security is now a
top external risk,
particularly in the US
60
50
10
69%
70
58%
60 A
% of total respondents
Cybersecurity2 perceived as an external risk in 2019
US
LATAM
Digital disruption 20171
Europe
APAC
0
Global
US
LATAM
Europe
APAC
Digital disruption 20192
1
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
2
Cybersecurity was included for the first time in the 2019 report
A. The vast majority of companies were starting to recognize
the potentially disruptive impact of digital technologies in
2017 but it exploded over the next 24 months, with a
917% increase
B. In 2017, digital disruption was mostly recognized in the
United States
1. Cybersecurity is now a top external risk globally
2. Cybersecurity is not yet perceived as a top external risk
in LATAM, as compared to other global regions
39
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Digital disruption and innovation are driving technology implementation
Implementation of numerous digital technologies is expected to skyrocket over the next 24 months. Globally, implementation of cognitive
technologies such as AI and ML is expected to more than double, from 25 percent over the past two years to 63 percent over the next two
years. The same is true for implementation of automation, which is expected to increase from 25 percent to 62 percent. Business intelligence
implementation is also expected to rise sharply, from 35 percent to 59 percent globally (see figure 34).
Figure 34. Technology implementation (past and future)
Implementation of technologies (past 24 months)
Implementation of technologies (next 24 months)
100
100
80
80
2
73%
62%
60
1
62% of respondents have
implemented cloud in the US
62% 63%
60
A
49%
B
40
60% 60%
57%
62%
65%
63%
58%
54%
54%
47%
47%
43%
41%
40
32%
30%
27%
20
25%
27%
23%
33%
32%
26%
24%
17% 17%
20
0
0
Global
US
LATAM
Automotation: robotic process automation
Europe
APAC
Global
Cognitive technologies: AI and machine learning
A. Cloud is the technology with the highest level of
implementation over the past 24 months (49%)
B. Business intelligence is the second most implemented
technology (35%)
40
59%
50%
35%
25% 25%
64%
59%
50%
49%
1
71%
US
LATAM
Europe
Business intelligence (not including cognitive or AI)
APAC
Cloud solutions
1. Automation and cognitive are expected to be the most
actively implemented technologies over the next 24 months
2. 73% of respondents in LATAM expect to implement
automation over the next 24 months, significantly more
than in other regions
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Digital solutions are the most advanced level of cost management
Cost management practices and approaches have grown increasingly sophisticated over time with digital solutions, although still maturing, now
representing the most advanced level of cost management. Companies that relied on more traditional cost management methods in the past
are now finding that digital solutions can open the door to a whole new level of savings—as well as enable new and more innovative business
models. It is important to note that companies do not have to work through the entire evolutionary sequence in order to reap the benefits of
digital cost solutions. Rather, they can implement digital technologies immediately as stand-alone cost solutions, or they can mix and match
traditional and digital cost management solutions in whatever way makes the most sense from a business perspective (see figure 35).
Figure 35. The evolution of cost management1
1980s–Present
2008–2017
Traditional cost management:
Cost categories and processes
Maximizing traditional cost levers
•• Focus on cost categories
•• Continuous improvement
•• Process reengineering
Traditional external spend
reduction levers
•• Indirect and direct sourcing
•• More effective supply
chain integration
•• Introduction of CPO
Structural cost management:
Operating models and
governance
Alternative operating models
•• Separation of G&A and ops/
commercial models
•• Globalized operating model
•• Globalized governance
Alternative service delivery models
and demand management
•• Global/regional/local delivery
•• GBS/alternative-sourcing
•• Demand management and policies
as cost levers
2017+
Advanced cost management:
Digital cost solutions
Analytics and cognitive solutions
•• Cognitive solutions to
increase effectiveness
•• Cognitive technologies to
supplement labor
Automation
•• RCA to increase efficiency and
eliminate/supplement labor
Cloud
•• Cloud capabilities to increase
flexibility and competitiveness
Maturity: Low
1
High
Source: Deloitte Consulting LLP
41
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Save-to-grow was the dominant mindset in 2017
The 2017 survey found many companies around the world were managing costs with a save-to-grow mindset, pursuing cost savings to fund their
growth strategies in an improving economy. Revenue growth and cost were the primary strategic levers, with a secondary but still significant
focus on talent—a key enabler for growth (see figure 36).
Figure 36. Four approaches to cost management1
Turnaround
Save-to-turnaround. Focus on immediate
actions to reduce costs, maximize liquidity,
achieve stability, and capture savings to
avoid further deterioration of the business.
Turnaround
Fund
Grow
Transform
Fund
Save-to-fund. Focus on actions that help
improve cost and competitive position;
avoid cuts that might inhibit future growth
rebalance costs to fund investment in
business strategy enablers.
Grow
Save-to-grow. Enable or develop a
scalable cost/business platform to fuel
growth and investment in core capabilities
while supporting a differentiated business
strategy.
Cost levers
-
1
Source: Deloitte Consulting LLP
42
Liquidity
Cost
Growth
Growth
Cost
Growth
Cost
Cost
Talent
Talent
Talent
Talent
Growth
Liquidity
Liquidity
Liquidity
+
Priority
Transform
Save-to-transform. Invest in digital
technologies and technology infrastructure
to make operations more efficient and
effective, enabling new and more agile
business models to prosper in a digitally
disrupted market.
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Transformation is an emerging focus
This year’s survey results show the save-to-grow mindset from 2017 expanding into a save-to-transform mindset. Over the next 24 months, the
top strategic priorities globally are sales growth (73 percent), product profitability (73 percent), and technology implementation (73 percent),
followed closely by cost reduction (69 percent), organization and talent (69 percent), and digital enablement (69 percent) (see figure 37).
Technology implementation and digital enablement are new focus areas that signal a strategic expansion from growth to transformation.
Figure 37. Strategic priorities1 (past and future)
Past 24 months
100
1
Total responses (%)
80
1
73%
1
1
74%
69%
79%
78% 76%
72%
66%
68%
73%
65%
77%
73%
77%
65%
65%
59%
60
72%
70%
56%
62%
69%
68% 67%
62%
66%66%
56%
76%
68%
73%
70%
68%
59%
54%
40
20
0
Next 24 months
+9%
+8%
100
Total responses (%)
80
60
2
73%
A
A
2
2
73%
73%
69%
69%
2
69%
B
78%
61%
76%
76%
70%
75%
71%
64%
77%
76%
69% 70%
68%
60%
65%
67%
65%
70%
69%
60%
64%
73%
67%
73%
67%
61%
76%
70%
71%
40
20
0
Global
Sales growth
Organization and talent
US
Europe
LATAM
Cost reduction
Technology implementation
Key findings
Product profitability, sales growth, technology
implementation, and cost reduction were the top four
global priorities over the past 24 months
Over the next 24 months, product profitability, sales
growth, technology implementation, along with cost
reduction, digital enablement and organization, and
talent are the highest priorities globally
Balance sheet management
APAC
Product profitability
Digital enablement
Comparison to past 24 months
A. Top three priorities remain the same globally
B. Growth and cost continue to be the main strategic priorities in
the United States over the next 24 months
43
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
The save-to-transform playbook and key levers
Shifting into save-to-transform mode means in addition to cost, growth, and talent, technology is a key lever. Companies in this mode
continue to focus on cost reduction as a way to fund their growth strategies. However, they also invest in IT and innovation that can
transform the business and help it survive and thrive in a world of digital disruption (see figure 38).
Figure 38. Evolving from growth to transformation1
1. Save to turnaround
Scope
Narrow
Competitive
situation
••
••
••
••
Playbook
2. Save to fund
3. Save to grow
4. Save to transform
Broad
••
••
••
••
••
Losing market share
Structural operating flaws
Liquidity concerns
Flat profit growth
Adjusting to demand levels
Growth concerns
Healthy balance sheet
Excess cash flow/reserves
High growth potential
Defense-oriented playbook
Growth-oriented playbook
•• Short-term tactics to improve balance sheet
•• Cash flows
•• Stabilize business through any cost and/or liquidity
improvements
•• Compensate sales decline
•• Achieving profitable and sustainable growth through
structural cost efficiencies and improvements
•• IT investments
•• Innovation
•• Actions to strengthen performance and competitive position
New
Technology
Cost levers
priority
Growth Talent
Cost
Liquidity
Growth Talent Liquidity Cost
Save-to-turnaround
Low
1
Source: Deloitte Consulting LLP
44
Liquidity
Save-to-fund
High Low
Talent
Cost
Growth
Save-to-transform levers
High
Low
High
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Automation and other digital technologies take a lead role in cost reduction
RPA and cognitive technologies such as AI and ML have emerged over the past 24 months as the most common digital
capabilities developed to reduce costs. ERP infrastructure is also receiving significant effort and attention, with many
companies making the transition to cloud-based ERP (see figure 39). Cloud is being widely applied because it can
provide tighter data security and improved business control, along with enhanced product/service capabilities and
increased revenue. A robust, cloud-based ERP infrastructure provides a solid foundation of reliable and usable data that
advanced digital technologies such as AI and RPA can draw from.
Figure 39. Capabilities developed to reduce costs
Capabilities developed over past 24 months
Reasons for applying cloud (past 24 months)
48%
71%
42%
41%
41%
A
A
63%
64%
63%
60%
57%
34%
34%
68%
67%
63%
58%
54%
B
48%
47%
48%
46%
43%
43%
40%
40%
37%
12%
2
1
2
2
Global
Global
Created a new executive
position and/or full-time
positions to drive cost management
Set-up or improved ERP infrastructure
Developed or implemented
automation technologies
Developed or implemented cognitive
and artificial intelligence technologies
Implemented new policies and
procedures, and strengthened
the compliance mechanisms
Improved processes for forecasting,
budgeting and reporting to enable
effective cost management
US
LATAM
Europe
APAC
Reduce costs and increase productivity
Increase revenue
Enhance product/service capabilities
Tighten data security and improve business control
Implemented zero-based budgeting,
system or process
Key findings
Automation is the most developed capability, globally,
over the past 24 months
Cognitive solutions and ERP, along with new policy
implementation, are the second and third highest
developed capabilities
Key findings
A Tighten data security and improve business control
is the top reason globally and in all regions, except
in LATAM, and reduce cost and improve business
controls is the second top reason globally
B
Enhance product/service capabilities along with
increase revenue show moderately high numbers,
at 48% and 43%, respectively
45
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Save-to-transform provides both growth and defense
This year’s survey respondents continue to have a very positive business outlook, bolstered by one of the longest periods of economic
expansion in history. However, economies are cyclical, and even the strongest expansion can defy gravity for only so long. Potential warning signs
are starting to emerge in the survey data, including a 97 percent increase in global respondents concerned about macroeconomic risk over the
next 24 months, and a 20 percent increase in US respondents who expect a significant reduction in consumer demand over the same period
(see figure 40).
Although no one knows exactly when the next downturn will occur, it is only a matter of time. Companies today would be well-advised to
continue capitalizing on current economic strength while being vigilant and prepared for future economic weakness through a
save-to-transform mindset.
Figure 44. Business cycle analysis and trends
Figure 40. Business cycle analysis and trends
Period of US economic expansion1
Survey macroeconomic factors
Longest
120
2nd Longest
Concern about macroeconomic risk
+118
Expect a significant reduction in
consumer demand
3rd Longest
106
1
92
A
+97%
B
+20%
73
2 Average: 58 months
59%
58
55%
46%
45
37
39
36
30%
24
12
1945– 1949– 1954– 1958– 1961– 1970– 1975– 1980– 1982– 1991– 2001– 2009–
1948 1953 1957 1960 1969 1973 1980 1981 1990 2001 2007 Ongoing
Past 24 months
Next 24 months
Past 24 months
Next 24 months
Source: National Bureau of Economic Research (NBER)
1
As of April 2019
Key findings
The current period of US economic expansion is
the second longest in history at 118 months
(as of April 2019)
The average length of US economic expansions since
1945 is ~60 months (the length has been increasing in
more recent decades)
46
Key findings
A Macroeconomic concerns globally almost doubled over
the past 24 months
B Reduction
in consumer demand has increased 20% as a
driver of cost reduction initiatives in the United States
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
The save-to-transform playbook includes investment in digital technologies and innovations that can improve every aspect of a business, from
business and operating models to market reach, service quality, operating efficiency, use of talent, and the overall customer experience. In
addition to fueling both cost savings and revenue growth, these improvements can make a business more resistant to digital disruption and
economic downturns by providing a stronger foundation for defense-oriented cost management activities—activities that are sure to be needed
at some point in the future (see figure 41).
Figure 41. Cost management playbooks in a downturn
1. Save to turnaround
Scope
Narrow
Competitive
situation
••
••
••
••
Playbook
2. Save to fund
3. Save to grow
4. Save to transform
Broad
••
••
••
••
••
Losing market share
Structural operating flaws
Liquidity concerns
Flat profit growth
Adjusting to demand levels
Growth concerns
Healthy balance sheet
Excess cash flow/reserves
High growth potential
Defense-oriented playbook
Growth-oriented playbook
•• Short-term tactics to improve balance sheet
•• Cash flows
•• Stabilize business through any cost and/or liquidity
improvements
•• Compensate sales decline
•• Achieving profitable and sustainable growth through
structural cost efficiencies and improvements
•• IT investments
•• Innovation
•• Actions to strengthen performance and competitive position
New
Cost levers
priority
Technology
Growth Talent
Cost
Liquidity
Growth Talent Liquidity Cost
Save-to-turnaround
Low
High
Save-to-fund
Low
Liquidity
Talent
Cost
Growth
Save-to-transform levers
High Low
High
47
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Case study: Using digital transformation to further
improve margins and extend best-in-class status
A Fortune Global 100 biopharma company was a best-in-class leader in many areas—operational efficiency, staffing
efficiency, cost structure and compliance/control performance. However, after a decade of extensive cost reduction
using traditional efficiency levers—and facing continued cost pressures—the company wanted to explore the next
frontier of digital cost solutions.
Aligned with the overall organizational transformation the company was going through, the key objective of the new
cost reduction effort was “save to transform,” further improving margins while maintaining best-in-class leadership.
The margin improvement strategy included transformation of the overall operating model, enabled by digital.
The strategy consisted of the following elements:
•• Develop a practical global digital strategy touching both the front office and back office—starting from Finance and
expanding to R&D (e.g., clinical development activities).
•• Establish a scalable enterprise governance model.
•• Develop and execute an ambitious transformation roadmap.
•• Build an enterprise hub (AI/Cognitive center of excellence) to translate business owners’ use cases into prototypes
and production-ready solutions.
As a part of the solution, 300+ senior leaders were educated on all aspects of digital—realities, myths and everything
in between. Currently, the team is executing one of the largest digital finance programs in the world, featuring
300+ automations with 100+ automations already in production. The company also executed successful pilots for
blockchain, cognitive, predictive analytics and other emerging solutions to understand their functionality, maturity
and relevance and potentially build them into a future transformation roadmap for the company.
To achieve and sustain a large-scale digital transformation, the company built and scaled a functional center
of excellence (CoE) within Finance, as well as a broader enterprise-wide AI / Cognitive CoE in IT.
Overall impact
•• Real margin improvement—transformational OpEx and tax savings; 10-15% savings on baseline cost; realization
on track
•• RPA at global scale—300+ RPA automations in-flight, with 100+ automations in production today
•• Emerging solutions incubated—successful pilots completed for emerging digital solutions (e.g., natural language
generation, blockchain)
•• Capability building—developed the company’s internal capabilities, including CoEs for Robotics and AI/Cognitive,
both jointly operated with Deloitte
•• Controls and compliance—developed a framework to assess the impact of RPA on existing controls and internal/
external audit
•• Digital integration—infused digital into day-to-day operations through “future of work” activities, which included
increasing adoption of digital in the workplace and defining innovative acquisition and development programs for
digital talent
•• Digital M&A—integrating digital into all future M&A transactions
48
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
15+
Internal resources hired
for Enterprise Hub
(Cognitive/AI CoE)
10%
1
Savings on baseline cost
Comprehensive Finance
RPA deployment
methodology created
300+
150+
Unique automations
planned over 2 years
Bot licenses
2
Functions started the digital
journey–Finance, R&D;
expanded to enterprise-wide
within a year
Key Lessons Learned
•• Large-scale RPA deployment is different than other operating model transformation work. In particular, there is considerable
complexity surrounding the degree of standardization required to deliver RPA effectively at scale, which in turn requires significant
resources and longer timelines to execute.
•• Results are generated through scale. There are no “home runs” but a lot of “singles” that collectively drive impact.
•• Enterprise automation solutions are not just a cost efficiency play; they enable efficiency and effectiveness and
improved controls.
•• Successful deployment of automation requires close partnership and shared ownership between business, IT, and compliance in
order to manage risks, resolve issues quickly and align expectations.
•• Enterprise automation solutions are transformational to talent models. New skillsets and capabilities will be required in addition
to “traditional” business skillsets.
49
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Looking ahead
Digital disruption, technology, and
innovation are among the most
powerful forces shaping the global
marketplace and competitive
landscape. And their impact is only
increasing. Companies today need
to harness those forces to their own
advantage, using digital technologies
such as cloud, automation, business
intelligence, and cognitive to
transform how they operate—
streamlining their cost structures and
generating strategic cost savings that
are both significant and sustainable.
These improvements can help a
company achieve its immediate
growth objectives while preparing
itself to survive and thrive when the
economic cycle inevitably reverses
course. They can also position the
company to capitalize on digital
disruption, becoming the disrupter
rather than the disrupted.
50
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
51
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Authors
Omar Aguilar
Principal
Deloitte Consulting LLP
Strategic Cost Transformation
Global Market Offering Leader
[email protected]
USA +1 215 870 0464
International +1 267 226 8956
Contributors
Fernando Jiménez Barría
Manager | Monitor Deloitte
Deloitte Consulting, SLU
[email protected]
David Izquierdo Sánchez
Senior Consultant | Monitor Deloitte
Deloitte Consulting, SLU
[email protected]
Darshan Dedhia
Manager | Strategy & Operations
Deloitte Consulting India Private Limited
[email protected]
Sakshi Kastiya
Consultant | Strategy & Operations
Deloitte Consulting India Private Limited
[email protected]
52
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Contacts
Global
Omar Aguilar
Principal
Deloitte Consulting LLP
+1 267 226 8956
[email protected]
Americas
Heloisa Montes (Brazil)
Partner
Deloitte Consultores
+55 11 5186 6910
[email protected]
Stephen Cryer (Canada)
Deloitte Canada
Partner
+1 416518 3020
[email protected]
Federico Chavarria
(Latin American Country Organization)
Partner
Deloitte Consulting
+506 2246 5300
[email protected]
Eduardo Pacheco (Mexico)
Partner
Deloitte Consulting Mexico
+52 55 5080 6321
[email protected]
Omar Aguilar (US)
Principal
Deloitte Consulting LLP
+1 215 870 0464
[email protected]
Faisal Shaikh (US)
Principal
Deloitte Consulting LLP
+1 214 840 7321
[email protected]
Caleb Longenberger (US)
Principal
Deloitte Consulting LLP
+1 513 560 3407
[email protected]
Asia Pacific
Tony O’Donnell (Australia)
Partner
Deloitte Touche Tohmatsu
+613 9671 8166
[email protected]
David Wai Kit Wu (China)
Partner
Deloitte Advisory (Hong Kong) Limited
+86 21 6141 2208
[email protected]
Gaurav Gupta (India)
Partner
Deloitte Touche Tohmatsu India LLP
+91 12 4679 2328
[email protected]
Umberto Mazzucco (Italy)
Equity Partner
Deloitte Consulting SRL
+39 0283323053
[email protected]
Yusuke Kamiyama (Japan)
Partner
Deloitte Tohmatsu Consulting LLC
+81 8 04367 7943
[email protected]
Willem Christiaan van Manen (Netherlands)
Director
Deloitte Consulting B.V.
+31 882883118
[email protected]
Tetsuo Takasago (Japan)
Partner
Deloitte Tohmatsu Consulting LLC
+81 7 04506 2932
[email protected]
Joachim Gullaksen (Norway)
Partner
Deloitte AS
+47 905 34 970
[email protected]
Wendy Lai (Singapore)
Executive Director
Deloitte Consulting Pte Ltd
+65 6232 7133
[email protected]
Irina Biryukova (Russia)
Partner
Deloitte Russia
+74 957870600
[email protected]
Europe
Gorka Briones (Spain)
Partner
Deloitte Consulting, S.L.
+34 914432520
[email protected]
Marc Abels (Belgium)
Partner
Deloitte Belgium
+ 32 2 749 57 80
[email protected]
Zlatko Bazianec (Croatia)
Partner Deloitte Croatia
+385 1 2351 906
[email protected]
Ulrik Bro Muller (Denmark)
Partner
Deloitte Denmark
+45 30 93 40 13
[email protected]
Anne Gronberg (Finland)
Partner
Deloitte Finland
+35 8207555607
[email protected]
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Partner
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+33 6 87 14 17 38
[email protected]
Alexander Mogg (Germany)
Partner
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+49 151 5800 1290
[email protected]
Jonas Malmlund (Sweden)
Partner
Deloitte Sweden
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[email protected]
Lorraine Barnes (UK)
Partner
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Middle East and Africa
Ozgur Yalta (Turkey)
Partner
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[email protected]
Maher Khalil (Middle East)
Partner
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Daryl Elliott (South Africa)
Associate Director
Deloitte South Africa
+277 31955829
[email protected]
53
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Appendix A: Global insights from key industries
Summary
•• Global respondents were categorized into six major industry groupings—including Consumer & Industrial Products (C&IP),
Financial Services (FS), Technology, Media & Telecommunications (TMT), Life Sciences & Health Care (LSHC), Energy & Resources
(E&R) and Public Sector (PS)—to uncover industry-specific cost management insights.
•• Surveyed industries reported a similarly high likelihood for cost reduction (71 percent on average, ranging from 60 percent to 79
percent), with LSHC and Public Sector showing the lowest rates.
•• The majority of respondents across all industries reported cost targets of less than 20 percent, with high overall failure rates—TMT
(75 percent) and PS (73 percent) being the only two industries with failure rates below the average of 81 percent.
•• Perspectives on revenue growth are generally similar to the past with 86 percent of respondents expecting revenues to increase.
However, growth expectations vary by industry (sometimes significantly; for example, TMT expects +4 percent nominal growth;
E&R expects -5 percent nominal growth).
•• External risks are perceived differently by industry, which might be relevant to understanding the rationale and focus for cost
management programs.
•• Macroeconomic concerns and commodity price fluctuations rated first as external risks for TMT and E&R, respectively.
•• For C&IP, commodity prices (66 percent) were the most significant concern, compared to the average of 59 percent.
•• Political climate risks were rated above the average (59 percent) for E&R (63 percent), TMT (62 percent), and PS (61 percent).
•• Digital disruption is perceived as a top risk for TMT (65 percent) compared to the average of 61 percent; LSHC (53 percent) and PS
(56 percent) were well below average.
•• Cybersecurity is consistently rated as a top risk across all industries (ranging from 60–65 percent, except PS at 52 percent).
•• Concerns about currency fluctuations were above the average of 58 percent in E&R (64 percent), TMT (61 percent) and C&IP
(61 percent).
•• Cloud is the most implemented technology in all industries, especially C&IP.
54
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Six major industries analyzed
Global respondents were categorized into six major industry groupings to uncover industry-specific cost
management insights (see figure A-1).
Figure A-1. Industry presence across regions
Consumer and
industrial products
77
21
109
310
63
1
Financial services
68
37
100
39
244
2
175
27
72
68
Number of respondents
Technology, media and
telecommunications
208
41
2
39
20
Life sciences and
health care
45
145
41
2
Energy and resources
7
Public sector
8
46
23
0
50
32
11
28
74
50
LATAM
APAC
131
100
EMEA
150
200
250
300
350
USA
1. Consumer & Industrial products is the most represented industry globally, with 25% of total respondents
2. Across regions, Consumer & Industrial Products, Financial Services, and TMT are the three most represented industries—
with the exception of the United States, where LSHC ranks as the third-most represented industry
55
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Cost reduction is prevalent in all industries
All industries reported a similarly high likelihood for cost reduction, ranging from 60 percent to 79 percent,
with LSHC and PS reporting the lowest rates at 60 percent and 61 percent, respectively
(see figure A-2).
Figure A-2. Likelihood of cost reduction in next 24 months
100
On average, 71% of respondents across
industries plan to undertake cost
reduction initiatives
1
79%
78%
80
71%
Comparison to 2017
Global Cost Survey
results1
1
70%
60%
60
All industries have
decreased in
likelihood—especially
LSHC, which declined
from 86% to
60%—mainly due to a
shift in numbers from
neutral to unlikely
68%
61%
40
29%
28%
23%
20%
20
15%
15%
19%
9%
7%
7%
2
2
12%
12%
6%
2
10%
0
Likely
1
Neutral
Unlikely
Global average
Consumer & Industrial Products
Financial Services
Life Sciences & Health Care
Energy & Resources
Public Sector
Technology, Media & Telecommunications
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
Key findings
C&IP (79%) and TMT (78%) have the highest percentage of respondents likely to undertake cost reduction initiatives
LSHC (12%), E&R (12%), and Public Sector (10%) have the highest percentage of respondents unlikely to undertake cost reduction
56
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
All industries had overall failure rates of at least
73 percent
The majority of respondents across all industries reported cost targets of less than 20 percent, with high
overall failure rates—TMT (75 percent) and PS (73 percent) being the only two industries with failure rates
below the average of 81 percent (see figure A-3).
Figure A-3. Cost reduction targets
Annual cost reduction targets
Success in meeting cost targets1
100
81% of respondents reported not meeting their
goals, with all industries except TMT and Public
Sector rating above or equal to the average
2
1
81%
TMT and E&R respondents reported the
highest targets among all industries
82%
80
Comparison to 2017
Global Cost Survey
results1
86% 85%
84%
75%
Significant global
decrease
(15 points) in the
percentage
of respondents with
targets
below 10%
73%
60
LHSC is the only
industry not showing
an increase in
respondents with
targets
above 20%
50
% of total respondents
43%
40
30
37%
33%
31%
30%
29%28%
28%
24%
35%36% 35%
41%
3
37%
31% 31%33%
34%
40
3
32%
30%
27%
20
27%
25%
19% 18%
20
16%
14%
15%
10
0
0
Less than 10%
Global average
Life sciences and health care
1.
Failure rates
increased across all
industries, especially
in LSHC and E&R (+27
percentage points in
both cases)
10% to 20%
More than 20%
Consumer and industrial products
Energy and resources
Did not meet goals
Financial services
Met or exceeded goals
Technology, media and telecommunications
Public sector
Respondents that selected “no specific targets were established” were not plotted in the graph
Key findings
Respondents in all industries generally fell short of their cost reduction targets (average of 81% failure across all industries, range
from 73%-86%)
LSHC and E&R reported the highest failure rates (86% and 85% respectively)
TMT (34%) and E&R (32%) had the highest percentage of respondents with targets above 20%
57
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Detailed failure rates vary widely
Percentage of savings realized varies widely by industry, except for FS and LSHC, which show similar results
(see figure A-4).
Figure A-4. A closer look at failure rates
1%
1%
1%
11%
15%
29%
11%
C&IP
23%
31%
34%
3
35%
16%
FS
38%
37%
32%
Global
1%-74%
of savings
34%
27%
20%
64%
70%
1%-49%
of
savings
1%
1%
7%
11%
30%
65%
41%
19%
TMT
16%
36%
LSHC
28%
23%
40%
58%
63%
3%
27%
1
6%
22%
42%
E&R
Realized 0% of savings
Realized 1%-24% of savings
Realized 25%-49% of savings
35%
PS
18%
20%
45%
73%
17%
1
28%
55% 2
2
Realized 50%-74% of savings
Realized 75%-99% of savings
Key findings
At 42%, PS has the highest proportion of companies realizing 75%-99% of targets; E&R has the lowest at 27%
73% of respondents in E&R met only 1%-74% of goals, the highest percentage in this range across industries; PS had the lowest
percentage in this range (55%)
C&IP has 38% of respondents with savings realization of 1%-49%, the highest all sectors for this range
58
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Growth expectations are consistently positive
Perspectives on revenue growth are generally similar to the past, with 86 percent of respondents expecting
revenues to increase. However, growth expectations vary by industry (see figure A-5).
Figure A-5. Revenue trends and projections
Annual revenue growth over past 24 months
Annual revenue growth projections over next 24 months
On average, 86% of respondents cited
increase in revenues in the future as
well as in the past
100
100
1
87%
86% 86% 86%86%
86%
% of total respondents
86% 87% 86%
85%
81%
80%
80
2
90%
83%
80
60
60
40
40
20
20
11%
7%
7% 7% 6% 7%
5%
9%
7% 7% 7% 8% 8% 8%
0
8%
6%
10%
9%
13%
5%
3
11%
6% 7%
3
6% 5%
5% 5% 5%
0
Increase
Global average
Energy and resources
Remain the same
Consumer and industrial products
Decreased
Increase
Remain the same
Financial services
Technology, media and telecommunications
Decreased
Life sciences and health care
Public sector
Key findings
Global respondents reported similar increases (86%) for both past and expected future revenue growth
Technology, media and telecommunications reports a slightly more positive outlook (90%) compared to the global average (86%)
Life sciences and health care and Energy and resources are the only industries that project a revenue decline over the next 24
months, at 1% and 5%, respectively
59
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Perceived external risks vary significantly
External risks are perceived differently by industry, which might be relevant in understanding the rationale
and focus for cost management programs (see figure A-6).
Macroeconomic concerns and commodity price fluctuations rated first as external risks for TMT and E&R,
respectively. For C&IP, commodity prices (66 percent) were the most significant concern, compared to the
average of 59 percent. Political climate risks were rated above the average (59 percent) for E&R (63 percent),
TMT (62 percent), and PS (61 percent). Concerns about currency fluctuations were above the average of 58
percent in E&R (64 percent), TMT (61 percent), and C&IP (61 percent).
Digital disruption is perceived as a top risk for TMT (65 percent) compared to the average of 61 percent; LSHC
(53 percent) and PS (56 percent) were well below average. Cybersecurity is consistently rated as a top risk
across all industries (ranging from 60–65 percent, except PS at 52 percent).
Figure A-6. External risks
Consumer & Industrial Products
70
60
65%
66%
64%
61% 61%
60%
50
64%
Financial Services
54% 55%
62%
58%
62% 57%
60%
TMT
63%
66%
57%
63% 62%
65%
65%
61%
61% 60%
40
30
3
2
1
1
1
1
3
1
1
20
10
0
Life Sciences & Health Care
Energy & Resources
70
60
50
40
30
66%
60%
49%
47%
51% 53% 53%
58%
53%
63%
64%
59%
Public Sector
61%
61% 62% 59%
54% 54%
56%
47%
1
52%
51%
46%
1
2
44%
3
20
10
0
Macroeconomic concerns
Currency fluctuations
Commodity price fluctuations
Credit risks
Political climate
Cybersecurity concerns
Digital disruption
New market entrant
Key findings
Cybersecurity and digital disruption are some of the top risks for C&IP, Financial Services, TMT, and Life Sciences & Health Care
Commodity price fluctuations is perceived as a top risk in C&IP and Energy & Resources
Macroeconomic concerns ranks high in C&IP, TMT and Public Sector
60
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Cloud implementation dominates
Cloud is the most widely implemented technology across all industries, especially in C&IP (see figure A-7).
Figure A-7. Implementation of technologies1 (past 24 months)
1
57%
1
1
3
49%
48%
1
1
45%
43%
1
42%
39%
36%
2
35%
34%
2
2
2
2
35%
30%
30%
29%
28%
2
27%
2
25%
23%
2
19%
2
2
22%
19%
2
18%
21%
2
13%
Consumer &
Industrial Products
Financial Services
Automation: Robotic Process Automation
Technology, Media &
Telecommunications
Energy & Resources
Cognitive technologies: AI and machine learning
Life Science &
Health Care
Business intelligence (not including Cognitive or AI)
Public Sector
Cloud solutions
Key findings
Cloud is the most widely implemented technology across industries, followed by business intelligence
Level of technology implementation follows a similar pattern across sectors, with automation and cognitive the
least implemented
TMT has the highest implementation levels across all technologies except for cloud, which is implemented more in C&IP
61
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Cost management insights by individual industry
Consumer & Industrial Products (C&IP)
•• Top drivers are to gain competitive advantage over peer group,
invest in growth areas and global expansion for growth.
•• Likely cost actions of changing business configuration and
implementing automation/cognitive technologies ranked higher
than other actions, which were on par with the industry average
in most cases.
•• Risks beyond commodity prices focus on macroeconomics,
cybersecurity, and digital disruption.
•• Top strategic priority is sales growth, followed by technology
implementation, product profitability and cost reduction.
Figure A-8. Consumer & Industrial Products
Drivers of cost management
External risks
Required investment in
growth areas
70%
Intensified
competition among
peer group
66%
Increased
international growth
opportunities
65%
Changed regulatory
structure
Unfavorable cost
position relative to
peer group
Significant
reduction in
consumer demand
Decrease in liquidity
and tighter credit
61%
62%
57%
Macro economic
concerns
59%
65%
+6%
53%
59%
Currency
fluctuations
58%
61%
New market
entrants
57%
62%
Credit risks
57%
61%
Likely cost actions
73%
Product
profitability
73%
+7%
78%
78%
69%
69%
76%
69%
69%
61%
64%
% Highest differences between
global average and industry results
Change business
configuration
65%
67%
Implementation of
specific automation or
cognitive technologies
74%
62
+7%
60%
73%
Top categories
59%
66%
55%
Technology
implementation
Balance sheet
management
Commodity price
fluctuations
+8%
65%
80%
Organization
and talent
59%
60%
Political
climate
70%
Sales growth
Cost reduction
64%
61%
64%
Digital
disruption
70%
Strategic Priority
Digital enablement
62%
Cybersecurity
concerns
67%
+7%
63%
61%
Streamline business
processes
61%
59%
Reduce external
spend
61%
59%
Increase
centralization
61%
56%
Streamline
organization structure
60%
57%
Improve policy
compliance
59%
58%
Outsource/offshore
business processes
59%
55%
Global Avg
C&IP
-5%
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Financial Services (FS)
•• Gaining competitive advantage was the top driver, followed
closely by investment in growth areas and global expansion (all
close to the averages across industries).
•• Cybersecurity and digital disruption were identified as top risks,
similar to other industries.
•• Strategic priorities related to product profitability and
digital enablement ranked highest, followed by technology
implementation and sales growth. These priorities are similar to
other industries.
•• Likely actions include changing business configuration and
adopting AI or cognitive technologies.
Figure A-9. Financial Services
Drivers of cost management
External risks
Required
investment in
growth areas
67%
64%
Intensified
competition among
peer group
66%
Increased
international growth
opportunities
65%
Significant
reduction in
consumer demand
Decrease in liquidity
and tighter credit
62%
Digital
disruption
61%
62%
68%
63%
59%
58%
Political
climate
65%
Changed regulatory
structure
Unfavorable cost
position relative to
peer group
Cybersecurity
concerns
Commodity price
fluctuations
59%
55%
Macro economic
concerns
59%
54%
Currency
fluctuations
58%
57%
-5%
New market
entrants
57%
57%
-5%
Credit risks
61%
63%
57%
-5%
52%
55%
50%
53%
48%
Strategic Priority
57%
60%
Likely cost actions
Sales growth
73%
71%
Change business
configuration
65%
64%
63%
64%
Technology
implementation
73%
73%
Implementation of
specific automation or
cognitive technologies
Product
profitability
73%
Streamline business
processes
61%
60%
Reduce external
spend
61%
60%
Increase
centralization
61%
55%
Digital enablement
75%
69%
74%
Cost reduction
69%
66%
Organization
and talent
Balance sheet
management
Top categories
-5%
69%
67%
61%
61%
% Highest differences between
global average and industry results
+5%
Streamline
organization structure
60%
57%
Improve policy
compliance
59%
54%
Outsource/offshore
business processes
59%
59%
Global Avg
-6%
-5%
FS
63
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Technology, Media & Telecommunications (TMT)
•• Response levels for investment in growth areas and gaining
competitive advantage drivers significantly exceeded the
averages across industries.
•• Strategic priorities for TMT are similar to other industries, with
sales growth and technology implementation rated higher than
the average across all industries.
•• Risks beyond macroeconomic, cybersecurity, and digital
disruption are rated equally.
•• Top likely cost actions: increasing centralization and
implementing AI and cognitive technologies.
Figure A-10. Technology, Media and Telecommunications
Drivers of cost management
External risks
Required investment
in growth areas
67%
Intensified
competition among
peer group
66%
Increased
international growth
opportunities
65%
Changed regulatory
structure
Unfavorable cost
position relative to
peer group
Significant
reduction in
consumer demand
Decrease in liquidity
and tighter credit
75%
75%
+8%
Cybersecurity
concerns
+9%
Digital
disruption
70%
61%
66%
57%
60%
73%
Product
profitability
73%
79%
74%
69%
72%
69%
72%
64
Currency
fluctuations
58%
61%
New market
entrants
57%
61%
Credit risks
57%
60%
+7%
Likely cost actions
73%
Top categories
59%
66%
53%
Technology
implementation
Balance sheet
management
Macro economic
concerns
62%
+4%
59%
62%
59%
63%
55%
80%
Organization
and talent
61%
65%
Commodity price
fluctuations
64%
Sales growth
Cost reduction
65%
Political
climate
Strategic Priority
Digital enablement
62%
69%
+7%
Change business
configuration
+6%
Implementation of
specific automation or
cognitive technologies
65%
58%
63%
63%
Streamline business
processes
61%
55%
Reduce external
spend
61%
60%
61%
64%
Increase
centralization
60%
54%
Streamline
organization structure
73%
Improve policy
compliance
59%
55%
71%
Outsource/offshore
business processes
59%
56%
61%
% Highest differences between
global average and industry results
Global Avg
TMT
-7%
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Energy & Resources (E&R)
•• The top driver of cost management in E&R—required investment
for growth—was rated much higher than the cross-industry
average. Ratings for other drivers were similar to other industries.
•• Product profitability and organization and talent are the top
strategic priorities. The strategic priority of sales growth was
rated much lower than the cross-industry average.
•• Changing business configuration is the most likely action and was
rated much higher than the average for all industries.
•• Biggest perceived external risk is commodity price fluctuations.
Figure A-11. Energy and Resources
Drivers of cost management
External risks
Required
investment in
growth areas
67%
74%
Intensified
competition among
peer group
66%
Increased
international growth
opportunities
65%
Changed regulatory
structure
Unfavorable cost
position relative to
peer group
Significant
reduction in
consumer demand
Decrease in liquidity
and tighter credit
+7%
68%
61%
67%
57%
Macro economic
concerns
59%
58%
59%
53%
59%
Currency
fluctuations
58%
64%
New market
entrants
57%
59%
Credit risks
57%
61%
+7%
+6%
Likely cost actions
Change business
configuration
73%
73%
71%
73%
Product
profitability
72%
69%
62%
69%
72%
61%
63%
% Highest differences between
global average and industry results
65%
73%
Implementation of
specific automation or
cognitive technologies
63%
66%
Streamline business
processes
61%
68%
61%
Reduce external
spend
69%
70%
Top categories
59%
66%
55%
Technology
implementation
Balance sheet
management
59%
63%
Commodity price
fluctuations
59%
68%
Organization
and talent
61%
59%
Political
climate
66%
Sales growth
Cost reduction
62%
62%
Digital
disruption
Strategic Priority
Digital enablement
Cybersecurity
concerns
70%
61%
69%
Increase
centralization
-7%
Streamline
organization structure
60%
72%
Improve policy
compliance
59%
Outsource/offshore
business processes
59%
Global Avg
70%
+12%
+11%
68%
Energy and Resources
65
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Life Sciences & Health Care (LSHC)
•• Ratings for all the cost management drivers in LSHC differ
significantly from the cross-industry averages. The top driver is
international growth opportunity.
•• Sales growth was ranked as the highest strategic priority, but the
rating was significantly lower than the cross-industry average.
•• The top likely cost actions are to change business configuration,
implementation of technologies (automation/cognitive),
streamline business process, reduce external spend, and
increase centralization.
•• The top external risk is cybersecurity, followed by digital
disruption, currency fluctuations, and new market entrants
Figure A-12. Life Sciences and Healthcare
Drivers of cost management
External risks
Required
investment in
growth areas
67%
-13%
Cybersecurity
concerns
66%
-12%
Digital
disruption
54%
Intensified
competition among
peer group
54%
Increased
international growth
opportunities
56%
61%
54%
Unfavorable cost
position relative to
peer group
57%
Significant
reduction in
consumer demand
Decrease in liquidity
and tighter credit
46%
55%
44%
53%
59%
-12%
59%
49%
Currency
fluctuations
58%
53%
New market
entrants
57%
53%
57%
Credit risks
42%
47%
Likely cost actions
73%
67%
Technology
implementation
73%
61%
73%
Product
profitability
63%
69%
Digital enablement
60%
Cost reduction
69%
-12%
Change business
configuration
65%
67%
Implementation of
specific automation or
cognitive technologies
63%
67%
Streamline business
processes
61%
67%
+6%
Reduce external
spend
61%
66%
+5%
Increase
centralization
61%
67%
+6%
Streamline
organization
structure
64%
Organization
and talent
66
47%
Macro economic
concerns
Sales growth
Top categories
59%
51%
Commodity price
fluctuations
Strategic Priority
Balance sheet
management
61%
53%
Political
climate
65%
Changed regulatory
structure
62%
60%
69%
64%
61%
51%
% Highest differences between
global average and industry results
60%
64%
Improve policy
compliance
59%
62%
59%
58%
Outsource/offshore
business processes
Global Avg
LSHC
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Public Sector (PS)
•• PS ratings for most of the cost management drivers differ
significantly from the cross-industry averages. The top drivers
are investment in growth areas, global expansion and gaining
competitive advantage.
•• Given the nature of public service, sales growth and
product profitability rated much lower, making technology
implementation by intensified competition among peer group.
•• Streamline organization structure was rated as the most likely
cost action.
•• Political climate was rated as the key risk, followed by commodity
prices and macroeconomic concerns.
Figure A-13. Public Sector
Drivers of cost management
External risks
Required
investment in
growth areas
Intensified
competition among
peer group
Unfavorable cost
position relative to
peer group
Significant
reduction in
consumer demand
Decrease in liquidity
and tighter credit
Cybersecurity
concerns
66%
Digital
disruption
65%
Political
climate
56%
Increased
international growth
opportunities
Changed regulatory
structure
67%
56%
56%
61%
50%
57%
58%
51%
53%
44%
57%
-13%
57%
Credit risks
46%
Likely cost actions
73%
Technology
implementation
73%
72%
73%
59%
69%
50%
-22%
Change business
configuration
69%
63%
61%
52%
% Highest differences between
global average and industry results
61%
65%
61%
54%
Reduce external
spend
Increase
centralization
61%
65%
Streamline
organization
structure
60%
67%
59%
65%
Improve policy
compliance
59%
62%
Outsource/offshore
business processes
Global Avg
-9%
63%
57%
Streamline business
processes
56%
Organization
and talent
65%
56%
Implementation of
specific automation or
cognitive technologies
69%
Cost reduction
Top categories
Currency
fluctuations
51%
51%
Balance sheet
management
59%
54%
New market
entrants
Sales growth
Digital
enablement
Macro economic
concerns
55%
Strategic Priority
Product
profitablility
59%
61%
59%
54%
49%
-10%
61%
56%
Commodity price
fluctuations
-12%
45%
62%
52%
PS
67
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Appendix B: Zero-based budgeting
According to the survey results, zerobased budgeting (ZBB) was the least
developed capability over the past 24
months, with only 12 percent of global
respondents implementing it during
that time. Compared to 2017, the global
implementation rate for ZBB increased
(+3 percentage points).
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Zero-based budgeting continues as the least developed
capability globally
According to the survey results, zero-based budgeting (ZBB)
was the least developed capability over the past 24 months,
with only 12 percent of global respondents implementing it
during that time. APAC and LATAM were the most active, with
both reporting implementation rates of 16 percent. Europe was
the least active (10 percent), with the United States just slightly
higher (11 percent) (see Figure B-1).
Compared to 2017, the global implementation rate for ZBB
increased (+3 percentage points). Looking at individual regions,
the ZBB implementation rate increased in Europe (+8 percentage
points), LATAM (+8 percentage points), and APAC (+2 percentage
points) but held steady in the United States.
Figure B-1. ZBB implementation
80
70
60
54%
53%
Total responses (%)
40
41%
42%
41%
34%
50%
49%
48%
50
42%
34%
45%
45%
41%
40% 40%
34%
31%
38%
35%
31%
29%
30
23%
20
1
3
12%
11%
Global
US
Created a new executive position
and/or full-time positions to drive
cost management
Implemented new policies and
procedures, and strengthened
the compliance mechanisms
1
40%
35%
28%
26%
2
2
16%
16%
3
10%
LATAM
Set up or improved ERP
infrastructure
ZBB implementation globally has
gone up 3
percentage points
since our prior
survey
49%
48%
40%
10
0
Comparison to
2017 Global Cost
Survey results1
Europe
Developed or implemented
automation technologies
Improved processes for forecasting,
budgeting and reporting to enable
effective cost management
ZBB increased
across regions
except in the US
where it remained
the same (LATAM
+8 percentage
points, Europe +8
percentage points,
APAC +2
percentage
points)
APAC
Developed or implemented
cognitive and artificial
intelligence technologies
Implemented zero-based
budgeting, system or process
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
Key findings
Globally, only 12% of respondents implemented ZBB over the past 24 months
APAC and LATAM were the regions that focused the most on ZBB (16%)
Europe is the region that focused the least on ZBB (10%) followed closely by the United States (11%)
ZBB companies tend to have higher cost targets, but the gap
is closing
Although ZBB is considered a tactical cost approach, companies that use it
generally have higher cost targets. Globally, the percentage of companies
pursuing cost targets above 20 percent is eight percentage points higher for
companies that use ZBB versus those that do not. However, the gap seems to
be closing. Since 2017, the percentage of ZBB companies with targets above
20 percent has declined by two points, while the percentage of non-ZBB
companies with targets above 20 percent has increased by eight points
(see Figure B-2).
ZBB cost targets vary widely by region. In the United States, only 26 percent
of ZBB companies have targets above 20 percent, compared to 43 percent of
ZBB companies in APAC.
69
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80
Figure B-2. Annual cost reduction targets (ZBB vs. non-ZBB)
70
60 Conducting
On average, 39% of respondents conducting
ZBB had targets above 20%
ZBB
48%
50
40
28%
30
26%
31%
30%
35%
33%
31%
2
1
41%
39%
30%
27%
43%
Comparison to 2017
Global Cost Survey
results1
35%
2
26%
The proportion of
non-ZBB companies
with cost targets
above 20% has
increased (+8
percentage points),
while the
proportion of
ZBB companies
with targets above
20% has declined
(-2 percentage
points)
20
10
0
Less than 10%
10% to less than 20%
On average, 31% of respondents not
conducting ZBB had targets above 20%
Not conducting ZBB
3
50
31%
31%
30
31%
27%
44%
42%
38%
40
More than 20%
36%
33%
1
35%
31%
37%
35%
28%
Global
USA
20
LATAM
EMEA
10
APAC
23%
0
Less than 10%
1
10% to less than 20%
More than 20%
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
Key findings
Globally, the percentage of companies pursuing cost targets above 20% is 8 percentage points higher for ZBB-companies than
non-ZBB companies
Only 26% of companies in the US conducting ZBB are pursuing targets above 20%, whereas 43% of APAC companies are doing so
On average, 38% of companies not conducting ZBB set cost targets of 10% to 20%, with non-ZBB companies in APAC and the
United States setting their targets at 44% and 42%, respectively
ZBB has higher reported failure rates
Globally, the percentage of companies that achieve
75–99 percent of their targeted cost savings is similar for ZBB
companies (36 percent) and non-ZBB companies (34 percent).
However, in the next tier down, ZBB falls significantly behind
with only 27 percent of ZBB companies achieving 50–74 percent
of their targeted savings compared to 35 percent of non-ZBB
companies. Also, the rate of total failure (0 percent of savings
achieved) is much higher for ZBB companies (4 percent) than
non-ZBB companies (1 percent) (see Figure B-3).
Figure B-3. A closer look at failure rates (ZBB vs. non-ZBB)
Conducting ZBB
Not conducting ZBB
3
3
1%
4%
11%
13%
33%
30%
34%
2
36%
Global
1%-74%
of
savings
19%
20%
1-49%
of
savings
27%
60%
70
1-74% of
savings
35%
1-49%
of
savings
1
1
Realized 0% of savings
2
Global
Realized 1%-24% of savings
65%
Realized 25%-49% of savings
Realized 50%-74% of savings
Realized 75%-99% of savings
Save-to-transform as a catalyst for embracing digital disruption | Deloitte’s second biennial global cost survey
Key findings
60% of companies conducting ZBB met 1% to 74% of their savings goals, compared to 65% of non-ZBB companies
33% of ZBB companies met 1% to 49% of their savings goals, compared to 30% of non-ZBB companies
4% of companies conducting ZBB had total failures (0% of savings realized), compared to only 1% of non-ZBB companies
ZBB companies face more barriers
As was the case in the 2017 survey, companies that use
ZBB reported higher rates on all barriers to effective cost
management over the past 24 months. Management challenges
in implementing initiatives was the most common barrier for
all companies in 2017 and remains on top this year for ZBB
companies (68 percent). However, for non-ZBB companies,
that same barrier is now the least common (35 percent)
(see Figure B-4).
Figure B-4. Barriers to effective cost management (ZBB vs. non-ZBB)
Barriers to effective cost management over the past 24 months
80
70
60
Not conducting ZBB
50
51% 50%
44%
45%
40
46% 46%
44%
47%
41%
36%
45%
43%44%
41%
37%
42%
39%
40%
38%
36%
41% 42% 41%
39%
35% 36%36%
34%
38%
30%
30
1
20
10
0
+45%
+53%
+47%
+67%
+94%
78%
80
70
+54%
71%
67%
64%
65%
65%
64%
63% 63%
63%
66%
58%
60
77%
65%
60%
63%63%
60%
60%
55%
52%
67%
65%
63%
69%
Comparison to
2017 Global Cost
Survey results1
68% 67% 67%
55%
52%
Conducting ZBB
50
40
1
2
2
30
Management
challenges in
implementing
initiatives
continues to be
the top
barrier for
companies
conducting ZBB
However, for
companies not
conducting ZBB,
it shifted from top
barrier to lowest
20
10
0
Weak/unclear
business case for
cost improvement
Global
1
Poorly designed
Lack of understanding/
acceptance of the solution reporting and tracking
by the audience
USA
LATAM
EMEA
Erosion of savings
due to infeasible
target setting
Lack of an effective
ERP system
Management challenges
in implementing initiatives
APAC
Thriving in uncertainty in the age of digital disruption: Deloitte’s first biennial global cost survey report, December 2017
Key findings
Management challenges in implementing initiatives is the top barrier (68%) for companies conducting ZBB, whereas it is the
lowest barrier (35%) for companies not conducting ZBB
For companies conducting ZBB, that same barrier is rated the highest by APAC respondents (77%) and the lowest by Europe
respondents (52%)
71
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