Firms which axe their entire back office processes to reduce costs are cutting off their noses to spite their faces, according to Daniel Elkins, chief executive of recruitment software firm The SkillsMarket.

Elkins warned that companies which took drastic action in the short term could end up being less competitive than rival businesses when the market picks up.

Companies relying solely on online job advertising were stuck with the same candidates and took longer to process job applications manually, he said.

“By not having their own database of candidates, how can they say that they provide their clients with any value?”

Smarter companies, particularly those whose managers had survived a downturn before, were more prepared when the market toughened and were less likely to make a knee-jerk decision, he said.

Keeping candidate databases up-to-date could reduce short-listing time by 50%, he claimed.

Firms should implement more cost-effective solutions which provided better service at lower costs. The cost of implementing such measures ranged enormously, however, he added.

When asked why IT projects are often the first to be axed, he said: “Many firms have a backlog of IT projects that haven’t been completed when budgets are frozen. But if a company invests in an IT project that puts them at a competitive advantage, their competitors will have no choice but to follow.”