Cost optimization protects value drivers even while reducing costs
A March 2025 Gartner poll of 500+ executives revealed 49% expected their budgets and spending to face cuts in the second quarter. That was even before new U.S. tariff policies sounded alarms about higher inflation and slower growth.
In today’s uncertain economic conditions, and with margin pressure mounting, business leaders need proven processes to reduce costs without jeopardizing value and growth drivers. Gartner has long advocated structured cost optimization as a way to do that, but now more than ever, business leaders must view their cost decisions as distinct actions to reduce spend, optimize performance and still increase investments in future growth.
Gartner has long analyzed what we call “efficient growth companies” — those that have achieved long-term, sustainable top-line growth across economic cycles while continuously improving their margins. Those companies take a fundamentally different approach to cost where they:
- Treat spending on differentiated capabilities as a source of competitive advantage, not an expense to be minimized
- Consistently reallocate resources toward growth-driving activities
- Maintain tight cost discipline without sacrificing innovation or agility
- Embed cost consciousness deep into decision making
In 2025, economic conditions like pricing volatility and margin compression require aggressive, systematic management of these strategies. Gartner offers personalized guidance for effective cost optimization, a taste of which you’ll find in these do’s and don’ts.
Do’s and don’ts when reducing spend
- Proactively present a cost optimization plan to your CFO so they can integrate your strategies into the overall business plan, ensuring alignment and shared accountability.
- Benchmark future complexity so your cost structure and spend are appropriate for the business model and operations you expect to drive value in the future.
- Shift generative AI initiatives to immediate and proven cost savings and away from medium-term use cases where cost savings may be tough to achieve.
- Avoid across-the-board cuts. Indiscriminate blanket cuts fail to identify what is more or less important. Prioritize cuts based on strategic value and impact.
- Surface cost-saving ideas from frontline teams by establishing clear criteria to gather insights from those closest to daily operations.
- Don’t indiscriminately freeze hiring. Reevaluate open roles and fill those aligned to your current and future shifting strategic priorities.
- Release low-performing and less productive talent and those whose skills align poorly with your future ambitions. Provide high-impact individuals with resources.
- Play offense when negotiating with vendors. Leverage market conditions to reduce costs and reevaluate whether and how outsourced roles and skills drive goals.
