Financial crisis. Cost cutting measures. Cheaper vendors. Saving money.

Does that sound familiar? Effective?

Think again.

Here are a few counter examples:

• a US company let go their expensive $50/h local resources in favor of $20/h [put-a-country-over 6,000 miles away] resources… and encurs heavier expenses. Needed a new local project manager, needed a remote project manager (language problems with the team), needed to add more remote resources -more junior resources-, missed their key deadlines by months
• a company switched their first tier CDN for a smaller CDN, at 20% discount per Gb… and encurs heavier expenses. Smaller CDN has lower cache rate, creates more traffic to origin servers -with expense bandwidth; smaller CDN hardware creates higher packet loss ration, also increasing traffic.
• a company cut on good coffeehouse quality coffee… and encurs heavier expenses. Employees leave the office and walk to the neerest [put-a-popular-coffee-place-name], wasting half an hour every day.

and on and and on

Should companies cut unecessary cost in the downtime. Definitively.

Yet, doing it without a deep understanding of the impact on the whole value chain, and hidden consequences can turn disastrous.

The mistake is to confuse rate and cost.

Rather than spending a lot of time on cutting rates, kill your low value / resource intense projects, and focus  on your top products: increase quality, accelerate your delivery cycle and wow your customers.