Benefit From The Great CAPEX to OPEX Migration

There’s a great migration underway as we speak. This isn’t a physical movement of people or animals, it’s a change in the way business does business. The migration is from a CAPEX or capital expense model to an OPEX or operational expense model. If you haven’t been swept up yet, you might think that this is something pretty subtle as movements go. It’s actually a major turning point that will eventually encompass every business, including yours.

All businesses have both capital and operational expenses. The operational kind are what it takes to keep the business running day to day. Your utilities are operational expenses. So are your office supplies. So are your salaries and wages.

Capital expenses are your investments for the future. If you go out and buy a building, that’s a capital expense. So are major pieces of equipment. Your in-house PBX telephone system is a capital expense and one that may soon become an operational expense instead.

What characterizes a capital expense is that it involves a large sum of money that is plunked down to acquire the asset. You derive the benefit of that asset over the years and may wind up paying for it over the years. Another approach is to go to the bank and extract some of your savings or take out a loan so that you can pay for the asset up-front.

Either way, your money is tied up for a long period of time regardless of how well your business is doing. Your cost is the same in lean times or boom times. You can hire or lay off employees. It has no effect on your capital items unless you decide to sell some off or acquire more.

What’s more, many capital expenses have operational expenses that accompany them. That new data center requires people to run it and additional cost for electricity. There are maintenance and upgrade costs to keep your asset up to date and functioning at peak efficiency.

All of this suggests that capital expenses are something of a gamble. You do your best trade studies to make sure you are buying the right thing, sized correctly to support your current and expected level of business. If you guess wrong, you either have to buy another one or rip out the one you bought and replace it with something that suites your changed requirements.

The last decade of rampant volatility has convinced many businesses that they need to be far more agile in riding the waves of business activity. One technology that is making this more possible for all size businesses is the cloud. The “cloud” is shorthand for any service that is performed remotely by a specialized service provider and purchased on a pay as you go basis. Many cloud services are priced by the “seat” or user by the month.

There are two advantages to this cost model. First, your costs vary with your level of activity. When times are lean, you cut back and use fewer services. You pay less each month. When business picks up, you use more services and add more “seats” as you add more employees. You pay more, but the increased income from your increased business activity covers this. At no time do you run to the bank to withdraw savings or take out a loan. The cloud is the epitome of OPEX.

What kind of services are available in the cloud? Certainly your computing services, including anything you would run in a data center yourself plus security for your networks. Also, your telephone system. Remember the expensive PBX acquisition? That’s gone for good with Hosted PBX services. Your phones work the same as they always did, probably with more features, but you only pay per phone per month. Sometimes the phones themselves are included, obsoleting any need for CAPEX at all.

Should you be joining the migration from CAPEX to OPEX, at least where technology is concerned? Find out the range of cloud services and pricing available for your business needs. Then see if it still makes sense to continue with capital expenditures.

From CAPEX to OPEX In The Cloud

There’s a new cost model for Information Technology. It’s a move from high CAPital EXpense or CAPEX to OPerational EXpense or OPEX. What’s driving this change? It has to do with the uncertainty of the business climate and the availability of cloud computing services.

What’s wrong with the way we’ve always done it? The legacy practice of building on-site environmentally controlled data centers and stocking them with server racks, arrays of disk storage and network appliances works very well if you can come up with capital to implement this plan.

There are also operational costs in the form of electricity, bandwidth and staffing, not to mention the near-constant process of patching and upgrading software. Those software packages aren’t cheap, either.

Traditional Information Technology is capital intensive. That hasn’t been a problem until recently because it was accepted business practice and everybody did it. Then along came the “Great Recession” and everything changed. We’ve had a lot less certainty about the economy the last few years. Most companies have responded by hunkering down and minimizing cost of all types. For those that see opportunity and want to expand, there’s a dearth of available financing.

Any wonder why cloud services are multiplying before our eyes? The business climate provides the impetus and the cloud provides the solution. It’s a combination that’s turning a trend into a stampede.

What’s so great about moving out there to the cloud? For many companies, it’s a combination of agility and expense versus commitment and capital. There’s nothing going on in the cloud that you can’t do yourself. What cloud service providers offer is a way to offload, or outsource, the infrastructure, platform, software and staffing that isn’t proprietary to your business.

For smaller companies, buying cloud services gives them a robustness of computing that they’ve never had before. If you are too small to have a dedicated IT staff on duty around the clock, you’re pretty much flying by the seat of your pants. You expect that whatever is working today will still be working tomorrow. When a part of the network or process goes down, you troubleshoot as best you can or get on the phone to a consultant or the vendors. It’s not unusual to have long periods of unplanned downtime.

Not so if you get your computing and perhaps your telephone service from a reputable cloud provider. The core business of the cloud services company is to provide a limited number of services and execute them perfectly. They have the equipment, the redundancy and the staff to make sure things are always up and running. It’s what keeps their many customers buying from them. You may not need an extensive array of servers, storage, software or bandwidth, but you’ll benefit from using the same infrastructure as those who do.

For the larger organization, high performance is a basic expectation. What the cloud has to offer the enterprise is a way to increase and decrease infrastructure resources on demand. You need more virtualized servers? You’ve got ‘em. You need more storage? There’s plenty in the pool to draw from. More visitors creating a demand for more bandwidth? No problem. The fiber optic lines are already in place with more bandwidth than any one company can use.

You simply pay for what you need when you need it. That gives you a tremendous flexibility to pursue new business opportunities with the knowledge that if they don’t pan out, you are not committed to a huge computing investment that must be paid off regardless.

Could your small, medium or large enterprise benefit from moving from a capital intensive to a pay as you go expense model for information technology services? Find out by comparing prices and available services from cloud service providers. Then get started at the level that makes the most sense for your organization.