Reducing Costs In Difficult Times – Ulf Lilja, CFO of Sony Ericsson

Ulf Lilja – CFO, Sony Ericsson

Transcript:

In light of the dramatic circumstances in the year 2009, with the financial crisis and the impact of the industry where Sony Ericsson is active, we had to face very tough trading conditions and, as a consequence of that, a definite need to quickly adjust our cost structure. As our finance leader, I felt it important to take a lead there and show what could be done in areas under my direct responsibility.

I’m happy to say that we have successfully managed to reduce our administrative costs dramatically in a very short period of time. Specifically, by outsourcing our IT activities, as well as our key accounting activities, and grouping them into shared service centers, we are expecting to have significant cost reductions. We are talking up to 40% in the IT area over two years and the same amount in the selective accounting areas over an even lesser time period. So we expect to make a significant contribution to the company in reducing our administrative costs.

Particularly in very difficult times, I think, you perhaps have to take more risks for the rewards than under normal circumstances. It’s easy to be challenged with, as usual, all the problems; all what could go wrong, why this is not possible. But I think waiting is not an option. Speed is so important, as is taking the initiative. And so far we have been able to manage the difficulties fairly well. So that would be one recommendation from my side; dare a little bit more against a quicker reward in difficult times.

Secondly, I think it’s very important to trust your partners; for example, if you go for an outsourcing alternative, don’t try to do both. Trying to manage your outsourcing partner the same way you managed when you had the activity in house I don’t think is the right way to come all the way through. Take a trusted partner and let them do what they are the best at doing.

Thirdly, you need to be very transparent with your own people when you try to reduce costs dramatically because it will impact your head count typically and people are, as we often say, not stupid. They are very smart and they realize that reductions could impact them. Face that up front. Be frank with your people. Ask for their understanding and flexibility for the sake of the company in difficult times. That would be the third recommendation out of my own experience.