The abrupt departure of Carlos Tavares, CEO of Stellantis, the 4th largest automaker in the world (Chrysler, Jeep, Fiat and Peugeot among other brands), announced on December 01, 2024, should be heard as an alarming wake-up to all European companies.
Tavares was often thought about being the XXIst, European version of Jack Welch (1935-2020) for his cost-cutting practices. Jack Welch was the legendary CEO of General Electric in the late XXth century. His managerial focus was on significant downsizing, cutting hundreds of businesses, and laying off thousands of employees, which earned him the nickname of “Neutron Jack”. Similarly to Jack Welch, Carlos Tavares went sharply after supply chain and people-related costs to maintain profit in an increasingly competitive business environment. But when sales became disappointing, those “XXst-esque” cost-cutting strategies proved insufficient to the Board of Stellantis.
It is time for European companies to look harder at what is more and more often the second largest expenditure on the balance sheet: Technology costs. Competitive pressure and economic uncertainty are here to stay, and, given the recent announcements by new US Administration about world trade tariffs, European companies should be looking ahead about their profitability.
Here is the total paradox about Technology costs: Those costs are, at the same time, the most difficult to grasp and the easiest and quickest to tame. Difficult to grasp because procurement teams often lack the growing expertise needed to understand technology contracts, which, by the way, change all the time. Easiest and quickest to tame because there is often a lot of margins embedded in those contracts.
As a result, Green Cabbage sees an emerging trend: American companies are “quietly” developing a new type of competitive advantage over their European counterparts by receiving market intelligence advice on their Technology costs. Such advice helps them find dozens or hundreds of millions of dollars in quick, actionable savings. Negotiating savings with a core Technology Supplier, either for a renewal or the acquisition of a new brick of technology, can often lead to a minimum of 15% in savings. Aggregated across its entire Technology stack, a large company could save up to billions of Euros within a short timeframe.
We believe that the multiple macro-economic and geopolitical conditions that are lining up for 2025 will create an increasingly competitive environment for European companies and we shall see a wave of restructuring as impactful to businesses as that of the 1980’s. The lever on Technology Costs is there and it needs to be pulled now.
If you are a European company looking to learn more about potential savings on your technology costs, contact us at EMEA-tech-savings@green-cabbage.com
Written by: Chief Operating Officer at Green Cabbage, Francois Daumard
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