During economic uncertainty, should businesses cut costs or invest wisely in new technology? We spoke with Akeneo CFO Nadine Pichelot to gain her insights on making savvy tech investments when budgets are constrained. Learn how smart tech choices today can fuel tomorrow’s success.
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Investing in technology during tough economic times can be a daunting decision for many companies. When budgets are tight, businesses are often more focused on cutting costs and maximizing the potential of existing resources rather than venturing into new expenditures.
But what happens when a team proposes an investment into new technology during an economic downturn? Should companies tighten their belts, or could this be the right moment to spend strategically?
We recently sat down with the CFO here at Akeneo, Nadine Pichelot, and spoke about how to make decisions around investing in tech when companies are trying to not spend as much money and make use of what they currently have. Below, we’ve outlined a few steps that can guide financial leaders in making informed, strategic choices about their tech stack.
The first step in evaluating a new technology investment is to talk with the business users requesting it. According to Pichelot, making a smart tech investment decision hinges on understanding both the financial and non-financial return on investment (ROI). She suggests leaders ask two key questions: “What are the risks if we don’t invest?” and “What are the consequences of delaying this investment?” Recognizing the impact of not investing can uncover hidden costs; while delaying might ease short-term cash flow, it could also hinder long-term growth and innovation. Missed opportunities for efficiency gains or competitive advantages often don’t show up directly on a balance sheet.
Sustainability metrics are becoming increasingly essential to the ROI equation with legislation such as the Corporate Sustainability Reporting Directive (CSRD) mandating more transparency in sustainability efforts.
It's tempting to think about saving by not investing, but assessing the software provider, the product's value, and the potential impact of non-investment can guide better decisions. Setting both short-term and long-term KPIs to measure the effects can also be beneficial.
Before making a new purchase, Pichelot recommends that companies carefully assess their existing tech stack. "Often," she notes, "there are already tools available that can meet the needs without incurring extra costs. It’s essential to ask: Do we already have a solution that could do the job?
This can mean reviewing current tools that may be underutilized or have features that could be expanded upon. Sometimes, the proposed investment is a replacement for outdated software, which can be easier to justify, but in cases where it’s an entirely new addition to the tech ecosystem, extra diligence is sometimes required to understand why the current solutions aren’t sufficient and whether the problem lies in the tools themselves or in how they are being used.
Teams should not only understand the limitations of their current tech stack but also thoroughly investigate whether the new software genuinely offers a significant advantage. Are the problems truly caused by the limitations of the current system, or is there a more efficient way to use what’s already in place?
Every company should maintain a comprehensive inventory of all the software they use. In many cases, software management is decentralized—departments with budget authority often make purchases independently, bypassing the CFO. Having full visibility into these obligations is crucial; you can't manage what you don't know exists.
After reviewing the business case and evaluating the current tech stack, the next step is a closer examination of the proposed software. Pichelot emphasizes the importance of future-proofing by ensuring any new software integrates well with the existing tech ecosystem.
"Many tech stacks accumulate ad hoc tools," Pichelot explained, "but when integration is challenging or impossible, it often leads to further complications." A tool that doesn’t work in harmony with other systems may not deliver its full value, especially as a business scales or adds new solutions.
To gain a realistic perspective on a software’s potential, Pichelot suggests speaking directly with its users. "It’s essential to talk with those who have firsthand experience with the tool," she advised. "Get their candid insights on the benefits they’ve realized and the challenges it’s resolved."
This feedback provides valuable information beyond sales pitches, giving insight into real-world use cases and helping you determine if the software effectively addresses the issues it claims to solve.
Deciding whether to invest in technology during an economic downturn is rarely straightforward. Sometimes, investing for long-term benefits is the right choice; other times, it’s better to optimize the value of existing resources.
As Pichelot recommends, a balanced approach includes assessing the ROI of potential investments, considering the opportunity cost of holding back, and thoroughly understanding your current tech stack to ensure any new software integrates well with existing tools. In uncertain times, it may be tempting to avoid new expenses altogether, but strategic, well-informed tech investments can be crucial to emerging stronger. By aligning investments with business needs, evaluating the risks of delay, and ensuring compatibility with current tools, companies can make smart decisions that set them up for both immediate and future success.
Understand your current situation and establish a solid procurement process that avoids excessive centralization. While there may be some challenging work ahead, thorough budgeting and preparation will make it worthwhile in the long run.
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