The case for maintaining tech investment during a downturn

Colin Bohanna at Clio discusses why businesses must resist the urge to cut tech spend as the economy contracts

 

The latest Bank of England forecasts point to a recession that could last well into 2024. The natural response from businesses is to start considering where they can make cuts. Unfortunately, many businesses – especially smaller and medium-sized ones – are still very lean following the pandemic, which will make cutting costs particularly difficult.

 

There are certain areas of the business that decision makers simply cannot and should not reduce investment in. Anything that is fundamental to the business’s ability to provide goods and services should not be cut and as demonstrated during the lockdowns, technology increasingly falls into this category.

 

Here are three major reasons why businesses should consider avoiding – or significantly limiting – cuts to tech spend.

 

Technology improves efficiency and increases profitability

The most successful businesses use well-implemented tech solutions extensively and can draw a straight line between the solutions they select and their ability to serve customers or clients. For example, automation software that takes on repetitive tasks frees up employee time, increases profitability and allows teams to focus on value-add tasks and quality of service.

 

In the legal industry, research carried out for Clio’s annual Legal Trends Report in 2020 found that 85% of legal professionals were using some form of software to manage their firms. The data also reveals that tech investment is strongly correlated with profitability – Clio’s 2022 Legal Trends Report shows that firms using cloud-based legal practice management software were 11% more likely to have strong revenue streams. According to HubSpot, sales teams that use customer relationship management (CRM) software see sales increase by an average of 30%.

 

Technology can also unlock new ways of reaching customers, as demonstrated by the skyrocketing popularity of remote and delivery businesses during the pandemic. Clio data shows that 71% of law firms now prioritise remote interaction over in-person meetings for some purposes.

 

The same is true for other sectors. For example, 77 percent of accountants use software to collaborate with clients while working remotely. Similarly, letting agents have begun showing properties virtually at a faster rate than they could in person, stores are using inventory management software to maximise income and minimise waste, and marketers have long relied on technology to provide personalised communications at a scale that no human could match.

 

Meeting developing consumer expectations

Consumer expectations – driven by advancing technology and global factors like Covid – advance at a rapid pace. Businesses that can cater to these expectations will thrive, while those that can’t keep up will struggle.

 

According to McKinsey, 75% of B2B customers favour virtual meetings with salespeople over in-person meetings. Similarly, in the legal sector, 79% of consumers are enthusiastic about the option to work with a lawyer online and say that the option would increase the likelihood of selecting a firm to do business with. This is a radical change from the 2018 data, which found that just 23% of respondents considered this a priority.

 

In just four short years, technology that one in five consumers considered a priority has become an expectation. This is likely the same in all sectors where communication with an expert is a part of the offering, such as accountancy, business consultancy, and marketing. Remote technology also widens the pool of potential customers significantly, which will be a major advantage during a recession.

 

Sectors where relationships with clients are important also benefit hugely from the use of tech. Recruiters, for instance, commonly apply software behind the scenes to present a streamlined, polished front to candidates. This removes internal hurdles and enables recruiters to work with a larger number of candidates than they would if they were handling the complex admin by hand.

 

Many law firms use similar technology, legal practice management software, and those that do are 60% more likely to have positive relationships with clients.

 

The need to stay on the cutting edge of technology also applies to other types of business. Construction, for example, cannot be carried out over a video call – but customers still have a growing list of expectations. Increasingly, construction businesses are using project management software to deliver real-time progress reports to customers, ensuring that they’re up to date and feel that they are getting value for money.

 

Attracting and retaining talent

Tech also has a core role to play in hiring and improving working life for existing employees. Remote and hybrid working enable businesses to cast their net wider while hiring so the business can reach top talent beyond its immediate geography.

 

The new ways of working also offer advantages in terms of flexibility and work-life balance – according to the latest research from Clio, pay and work-life balance are now tied as a priority for changing roles for legal professionals with 37% of legal professionals citing salary increase as a reason for changing jobs, the same percentage as those who cited work-life balance as a reason for changing jobs.

 

In a challenging market, businesses often face increasing rates of employee burnout. Technologies such as automation and cloud-based management systems can help alleviate unnecessary pressure on employees – in other words, helping them work smarter rather than harder.

 

Slashing tech spend hurts the bottom line

Maintaining investment in technology as the economy cools may seem counterintuitive, but it is central to a modern business’s functioning.

 

Technology enables businesses to operate efficiently, meet rising customer expectations, and deliver the best possible employee experience – and cutting investment could harm these areas that will be essential to helping navigate challenging times ahead.

 

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Colin Bohanna is General Manager at Clio EMEA

 

Main image courtesy of iStockPhoto.com