Financial experts are debating whether or not the US is entering a recession. While the jury is out, many companies have already started cutting down on their workforce and investments in
preparation for hard financial times.
It is important to highlight that businesses usually start investing as soon as three months after a recession ends. However, on average, it takes more than two years to reach the pre–peak level of investment. And more recent recoveries have seen weaker investment growth post-recession. Because of this, many successful companies and investors use crises to invest and to prepare for the future, and they do this by acquiring technology, especially enterprise solutions that will help streamline your core business processes, such as lending.
Minimize expenses, maximize profits
According to the results of the 2022 KPMG U.S. Technology Survey Report, companies that invest
in technology see a “strikingly strong ROI” with 21% of respondents reporting a 11%+ increase in profitability and 36% reporting a 6-10% increase. A boost like this is compelling whether we’re in a
recession or not, but it becomes even more important during a crisis since investing in technology, especially enterprise technology can also lead to cutting costs in the workforce, redundant IT tools, and shortening sales cycles.
In addition to the profits increase that can be measured in the short to mid-term, there are other mid to long-term benefits to investing in technology during tough financial times. Among these are a stronger brand, market differentiation, and business strategy advancement. As reported in the aforementioned KPMG survey, 66% of respondents have been very or extremely effective in using technology to advance their business strategy.
Exploit the downturn to your advantage
Technology companies are not immune to financial crises, and this is good news for any organization looking to invest in technology that will enable them to be more efficient, cut costs
and provide a better customer experience. This is especially true in the lending industry where processes tend to be manual and labor intensive, and where there are many opportunities for gained efficiencies.
In lieu of a financial downturn, tech companies of all sizes and regardless of how strong their balance sheet is, are taking a series of steps to make it to the other side of a recession. This includes firing executives with borderline performance, reducing workforce, cutting low performing products or business units, and more importantly for us here, many will rectify the cost of their products and services while keeping up quality and their value proposition.
What does this all mean to you? It means that your organization could potentially get the same products and services for a significant lower investment. In fact, technology companies are likely to streamline their processes to deliver a better and more affordable product during a downturn. It is also worth noting that technology (including enterprise solutions), are driven by economies of scale so the more you buy, the cheaper it gets, especially when prices are adjusted during a recession.
Say goodbye to IT and its high cost
If you have a local system at your company, you need to have a reliable IT team to keep things running smoothly. This team is in charge of a number of essential tasks, including:
- Software installation and updates
- Managing information security and privacy
- Hardware maintenance and upgrades
- Routine backups with redundancy across locations
- Tech / user support
By acquiring a cloud-based solution you can save on costly IT resources, and often drastically reduce or even eliminate the need for an IT team. With a cloud-based platform, you simply need
an Internet connection to conduct business and you don’t need to incur in expenses related to hardware and software updates, and the issues that come along with maintaining an IT system.
Without investment there are no productivity improvements
As a result of the last few recessions, top-performing companies and organizations have realized that by halting investment in people, process improvement, and technology, no new wave of productivity improvement is possible. On top of that, they have realized that most of the technology solutions available today are mature, secure and affordable — and definitely much better than the technology it replaces. In addition, the lending industry following suit in many others, has realized that software-as-a-service (“SaaS”) solutions perform better than traditional technologies.
Improving productivity in times of financial crises cannot be accomplished by increase in workforce or by changing the way processes work. The best bet is in the use of technology to minimize manual, repetitive tasks and to maximize throughput. Furthermore, technology also improves the processes and tasks related to quality control and risk management, and in many cases eliminating human error and the need for quality checks entirely.
Treating technology as a cost is an old school concept
It may seem like the times when CEOs and CFOs treated technology investment as a cost. This viewpoint has preserved an older set of technologies that weren’t built for current times. According to the MuleSoft 2022 Connectivity Benchmark Report, an average of 70% of total customer interactions are digital and companies that are not ready will be left behind by the marketplace, especially during a downside economy where clients are looking for value, efficiency, and great customer experience.
In today’s interconnected world, adopting cloud-based solutions is not a choice but rather a requirement. A requirement to stay atop of the competition and a requirement by customers hungry for streamlined and easy experiences when interacting with any company, regardless of the product or service. According to the Connected Small Business Report by Deloitte, digitally advanced businesses experienced 4X the growth than less digitally advanced businesses. What this tells us is that, if an organization is to have better chances to go through a recession successfully, technology investment is a strong and sound decision.
In Summary: Innovate or risk falling behind
If it takes at least 2 years to recover from the lack of innovation and investment due to a recession, it makes financial sense to continue to innovate during a financial crisis, especially if there are many other benefits such as the lower costs of acquiring technology and the ensuring a great positioning of your business while most others are contracting.
The lending industry is one of the most immediately affected by a recession, and therefore it is one where competitors will either close down or halt investments. This is your time to make good use of the recession and differentiate your brand from the competition.