Why ‘cost avoidance’ became an AI buzzword for holding down headcount

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Subscribe to enjoy similar stories. Businesses are starting to link their artificial intelligence initiatives with paring back hiring plans, or so-called cost avoidance, in an effort to justify investing in the technology. Questions have loomed over whether AI can generate returns for businesses, leading corporate technology leaders to search for ways to show its value.

Sixty-eight percent of business leaders said investor pressure to demonstrate returns on generative AI investments was “important" or “very important," according to a December survey by global audit and consulting firm KPMG. The term also resonates at a time when companies continue to pare back spending—and when there is still broad skepticism AI can generate big returns. Wider adoption of a job reduction mindset could have ripple effects across the economy and exacerbate unemployment for white-collar workers, which has been highest in tech, law and media.

In tech, at least, there are signs the unemployment rate is improving. It stood at 2% in December, the lowest level since November 2023, according to the IT trade group CompTIA, citing Labor Department data. Cost avoidance is an appropriate term, according to Thomas Bodenski, chief operating officer of financial software company TS Imagine, because “we have this mindset: doing more with the same." Rather than hiring more knowledge workers for repetitive tasks such as filtering emails, Bodenski said, implementing a new AI-based sorting process has allowed TS Imagine to hold headcount at existing levels.