Decoding The Impact Of Cost Trends On Businesses On The Rise

In the wake of recovering from a crippling pandemic and navigating the murky waters of economic uncertainty, many mid-sized businesses are searching for creative solutions to improve their bottom line. From fluctuating interest rates to raising supply chain costs, businesses are combing through their operations to make them more budget-friendly.

Here are three major cost trends that leaders should consider as their business models evolve: dealing with rising prices, hidden costs and customer-centric pricing. Understanding these trends and leveraging key capabilities, such as those offered by Lumen, can help businesses navigate these challenges effectively.

Rising prices

The meticulous rise of the U.S. economy in the post-pandemic era has been spurred by rising inflation and interest rates that affect every aspect of a business’s operations. Whether it’s the cost of raw materials, labor or logistics, businesses are grappling with how to manage these rising costs and identify potential savings in their operations. Resources freed up by those savings can then go to activities that focus on driving business continuity, growth, innovation or investment.

While most people will consider investing an additional expense, investing in technology has been shown to positively affect most cost- driven metrics. A recent Gartner survey of more than 200 CFOs found that 69% plan to increase their spend on digital technologies. Leaders are investing in technology primarily to improve their revenue stream, create additional products and services, reduce costs and make their companies more resilient to economic turbulence. The use of modern technology will increase the efficiency of your operations and help lower operating costs in the long run.

Hidden costs

Modernizing operations for the future has become a significant cost trend among mid-sized businesses. This involves strategies such as cost-cutting, diversification and investment in technology to improve efficiency. Leaders have created strategies leaning on a heavy investment in digital transformation with the hopes of achieving profitable growth through increased efficiency and streamlining costs. The cost optimization options with the greatest potential benefit often require additional investment, take more time and carry more risk. Hidden costs associated with large-scale digital transformation can:

• Inflate IT implementation budgets
• Defer project timelines
• Result in not utilizing the full capabilities of the new technology
• Distract internal resources from other critical work functions

Talent gaps in the workforce can interfere with the integration of new technology with legacy systems. It can be prolonged and costly to configure your internal IT talent to be able to learn how to use both systems. Unclear implementation strategy can delay projects, as phases may need to be realigned with the project’s objective.

With our robust digital transformation capabilities, Lumen can play a pivotal role in this preparation. Our managed services teams can provide expertise to your team in implementation and deployment, allowing your project to be completed on time, on task and within your budget. Managed services are especially valuable for the 53% of organizations using or considering more complex, hybrid on-premises and cloud-based deployments, which can place greater strain on IT teams. By helping businesses transition to more efficient digital processes, Lumen can help businesses reduce costs and improve resilience in the face of economic downturns.

Hybrid pricing models

Another major rising cost trend since customers have become more price-sensitive is the shift from product-centric pricing to hybrid pricing models. This involves understanding the value that different customers derive from a product or service and pricing accordingly. With a range of subscription models to those based on consumption, businesses and their customers have been forced to reshape how they charge for products and services. Business leaders value pricing transparency, mitigating the impact of price increases and managing their costs versus being locked into long contracts.

The implementation of modern technology opens the door for businesses to leverage consumption-based pricing models, which can help with the growing pains of scaling a business. From labor costs to elevating supply chain expenses, mid-sized businesses desire an appropriate cost structure for their size. Lumen’s consumption-based pricing can help businesses of any size manage their costs. For example, with our cloud solutions, businesses can leverage the power of the cloud without the need for significant upfront investment in infrastructure. This allows for cost savings and increases operational efficiency. By providing flexible, consumption-based services, Lumen allows businesses to pay for only what they use, enabling them to offer more competitive, customer-centric pricing.

Understanding these cost-centric trends and leveraging key Lumen capabilities can help midsized businesses navigate the challenges they face. Whether it is managing rising prices, dealing with hidden costs in their business or utilizing more customer-centric pricing, we offer solutions that can help businesses navigate trends effectively and succeed in today’s challenging business environment.

Learn more about how Lumen solutions and capabilities can benefit your business today.

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¹IDC, Lumen Voice/UC&C Study, March 2022.