Daily Post 1296


The process of cutting down the cost can broadly be called costing. The capability to bring down cost of the product or service because with the decrease in cost of items in bill of materials, labour etc or deliberately bringing down cost in case of natural exigency like the one we are in, speaks volumes of the resilience and the robustness of the business model the company has created for itself. The cost and profit is the function of how frugally the assembly line and supply chain have been created and operated without affecting the quality and the scale at which the sales happen. Suffice to say that scale at wafer thin per unit profit should be the order of the day.

If it has not happened to so far pre corona and now after 21 days of lockdown and its extension as well, this is not going to happen. While this wafer thin model needs to happen in every sector I presume, I would restrict myself to the IT industry only. The big data revolution, the drastic decrease in the cost of storage and also of computational power courtesy Moore’s law and mass level usage of coding libraries, machine learning and artificial intelligence quite surprisingly did not bring down the per unit of cost of either IT products or IT services. This was the business model the IT industry had created for itself and the customer too had passively believed in it.

As long as the cash registers keep ringing the businesses are supposed to be fine notwithstanding the weak foundations on which they are based. The customers were also having a cushy life, few bucks extra they were able to digest and also some small compromise in quality they were also able be bear with. All that dramatically changed in last month of so. The world has come to a grinding halt, it has to start, timing unknown. World would have been changed by then with hardly any money to invest and very little to operate.

From the current indications cost cutting for the company means retrenching its employees and not of working on a per unit cost reduction model. Their heart and minds can’t take up this challenge, they have never done this ever in their lives. The out of the box, creativity and innovation parroted story has long outlived it’s utility. Incapability to provide world class IT products and services when businesses need to run at the most frugal operational costs is a sad commentary on legends we build only for fair weather days. Hope the direction changes.


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