Archive for January, 2010
From Fixed cost to Variable cost structure
On January 19, 2010 in Cost Structure
What is this CFO talk about variable Vs Fixed cost structure model? After witnessing the glaring success of Salesforce.com, was’nt it quite obvious that variable cost structure is the way to go in coming times? This is indeed today’s cry-
more freedom meaning more cash at disposal (in other words liquidity),
more flexibility (in other words less commitment),
more dynamism (in other words scalability),
more space (in other words more time),
less responsibility (in other words more OUTSOURCING!)…..
They say Companies are considered as separate entity; sure they want their freedom, space, change and flexibility, as we humans do! And they have also realized that they can’t keep feeding their HUGE Egos which were probably the case in old Victorian days! It is the time Companies go out and shake hands with business partners, associates, work smart by delegating non core functions and FOCUS on core ones…..
This increasing charm of “Unit Transaction Pricing Mechanism” enables companies to pay on per transaction basis. If the business volume drops, the costs to account for them drop too. This model is turning out to be quite successful and there cannot be better time than recession to prove its success. Companies need complete transparency. Why pay the same fee which was paid for probably 100 invoices a month when the volumes have dropped to 50? Why spend few hundred thousand dollars or may be million on ERP installation when the outsourcing partner is providing and running ERP software for a small fee per month?
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