Color guide
Key Levers to Reduct Costs & Gain Efficiencies
We have assessed P&L and business functions against industry spend benchmarks to identify key levers that impact gross margin and operating margin. Click below to find out more.
Our Team
HUBERT SELVANATHAN
Partner, High Tech
& Software
San Francisco, CA
CHRIS
STAFFORD
Partner, Mergers
& Acquisitions
Chicago, IL
We have partnered with leading software companies and private equity sponsors to
in diligence and throughout the hold period.
Our secret? Our bias for execution. Our deep bench of software industry technical, functional and operational experts take a practical lens to identifying and realizing margin acceleration opportunities.
Margin Expansion in
High-Tech & Software
We have deep expertise across the P&L to enable margin expansion in the high-tech and software space. And three distinct phases of work guide our approach.
An operational and technical review across the P&L (Revenue, COGS, R&D, S&M, G&A) with the access, depth, and precision needed to validate, prioritize, and quantify opportunities.
We partner with management teams to execute against identified value creation opportunities that drive margin impact and create scalable efficiencies.
Identification
Capture
Transaction, Hold Period, & Exit Readiness
Hold Period
Product Re-Architecture
Cloud Cost Optimization
Service Delivery Engineering
Gross Margin Key Levers
Operating Margin Key Levers
Pricing & Packaging Optimization
Discounting Practices/T&Cs Policy Improvement
Churn Mitigation & Upsell/Cross-sell
Marketing Effectiveness
IT Costs
Finance, HR & Legal
Labor Optimization
SDLC Optimization
Product Consolidation
Sales Coverage & Effectiveness
Reduce cost structure of services required to deliver and support products by scaling the delivery team and leveraging automation
Service Delivery Engineering
Optimize platform footprints and vendor relationships
Infrastructure Hosting Cost Management
Enhance cloud policies/processes and infrastructure architecture to drive efficiency of labor and consumption
Cloud Cost Optimization
Modernize technical architectures to reduce hosting, implementation, and support burdens
Product Re-Architecture
COGS
Cost of Goods Sold
Research & Development
R&D
Sales & Marketing
S&M
General & Administrative
G&A
Revenue Improvement
Revenue
15-20%
(% of Revenue)
Typical Spend :
Margin
improvement:
5-15%
Update contract terms, initiate proactive customer engagement, and refine go-to-market approach
Churn Mitigation & Upsell/Cross-sell
Set optimal discounting policies and update payment terms, while streamlining processes to drive fast time-to-revenue
Discounting Practices/T&Cs Policy Improvement
Refine pricing strategies and packaging options to ensure value capture is in alignment with market dynamics
Pricing & Packaging Optimization
Cost of Goods Sold
COGS
Optimize vendor spend, assess process automation across Finance (quote to cash, forecasting, budgeting) and HR processes via spans and layers analysis
Finance, HR & Legal
Review nearshore and offshore mix for contract labor, as well as optimize telecom/infrastructure spend
IT Costs
Optimize third-party spend and ensure channel effectiveness for lead generation
Marketing Effectiveness
Ensure sales enablement tools and resources, as well as compensation alignment, to increase effectiveness and efficiency
Sales Coverage & Effectiveness
Rationalize product portfolio (market feature fit, customer and product profitability, etc.)
Product Consolidation
Optimize software development process for velocity, backlog management, streamlined releases, and QA improvements
SDLC Optimization
Evaluate labor costs by performing spans and layers analysis and build onshore/offshore strategy
Labor Optimization
Revenue Improvement
Revenue
General & Administrative
G&A
Sales & Marketing
S&M
Research & Development
R&D
Cloud & DevOps
Services
Support
Customer Success
Software Licensing
& Tools
4-8%
Margin
improvement:
Product Management
Engineering
Data & Analytics
Software Licensing & Tools
15-35%
2-3%
Margin
improvement:
Sales
Marketing
Software Licensing
& Tools
25-40%
1-2%
Margin
improvement:
IT, Finance, HR
& Legal
Software Licensing & Tools
Telecom/IT
Infrastructure
10-15%
1-2%
Margin
improvement:
Unit Economics
Packing & Pricing
Price Escalators
Renewal Terms
& Conditions
Margin Drivers:
$650 Million
Enterprise Software Provider
We have leveraged our suite of margin expansion capabilities to drive significant savings for tech companies across major cost categories
Company
Estimated operating expense savings across R&D and COGS for a publicly traded enterprise software company
$30-$40 million in estimated run-rate reduction
Impact
Summary
Diligence
COGS
R&D
S&M
G&A
Identification
Capture
Estimated operating expense savings across R&D and COGS for an enterprise software company, and created prioritized execution roadmap
Diligence
Identification
Capture
COGS
R&D
S&M
G&A
Summary
$175 Million
Enterprise Software Provider
Company
Impact
$28-$35 million in estimated run-rate reduction
Identified and executed on cloud usage, product re-architecture, and service delivery improvements
Diligence
Identification
Capture
COGS
R&D
S&M
G&A
Summary
$700 Million
ERP Software Provider
Company
Impact
Gross Margins increased by 14% points
Post-merger consolidation of product platform and engineering teams, as well as services automation to improve margins and accelerate time to go-live
Diligence
Identification
Capture
COGS
R&D
S&M
G&A
Summary
$550 Million
CX Software Provider
Company
Impact
$30 million in run-rate reduction
Renegotiated vendor agreements, remediated legacy technologies, and reduced costs in a global network
Diligence
Identification
Capture
COGS
R&D
S&M
G&A
Summary
Fortune 500 Global IT Services Company
Company
Impact
$150M
Improved customer contracts/profitability and MSP operations, as well as renegotiated sales and third-party contracts
Diligence
Identification
Capture
COGS
R&D
S&M
G&A
Summary
$75 Million Cloud Hosting Provider
Company
Impact
Centralized a professional services sourcing program and reduced spend via rates negotiation, contract standardization, and standard practices
Diligence
Identification
Capture
COGS
R&D
S&M
G&A
Summary
Global Technology Platform Provider
Company
Impact
$31 million in savings (spend reduced by 15%)
initial
savings
$50M
recurring
savings
$500K
yr. 1 savings
in EBIDTA
total savings over 3 yrs.
$4.1M
The tech industry has become hyper-focused on balancing revenue growth and profitability, but many companies struggle to grow while managing their costs.
advises SaaS companies by leveraging operational expertise, a data-driven approach, and technical depth to identify and realize margin expansion across the P&L.
250
Clients in software,
tech-product &
tech-led services
65
Leading
private equity investors
deliver transformational value identification and capture work
Why West Monroe?
Got questions?
Visit our website to find out more.
www.westmonroe.com
West Monroe
Using an outside-in perspective on a company, we leverage WM proprietary benchmark dataset and third-party data points to identify cost savings and value creation hypotheses.
Diligence
Hypothesis
Hypothesis
Capture
Identification
