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.

Cut Telecom Line Expenses, Not Lines

In this recessionary business climate, keeping the enterprise afloat may mean throwing every non-critical expense overboard. Soon the obvious fat disappears from the budget and managers start questioning line items once thought sacrosanct. Do you really need 10 phone lines or could everybody get by with 5? Take turns calling if you have to. What about that Internet connection? Do we really need that T1 line when those 56K modems are still boxed up in the back room?

Good grief. Cost cutting can easily go from savvy business practice to organizational nightmare when desperation sets in. It's best to start coming up with reasonable reductions before upper management gets a whiff of blood in the water and goes nuts. Think through the justification for each budgetary line item yourself and make changes you can take credit for, or at least have proposals in your back pocket.

Now here's the good news. If you can keep a cool head at least for a little while, you may be able to get the savings your business needs while maintaining the services you need to be at your most productive. The trick isn't just to slash and burn every telecom expense you come across. It's getting the same functionality for less money. You don't necessarily want to cut your lines, and with them your livelihood. You want to cut the expenses associated with those lines.

Most companies have two types of telecom line services: voice and data. Video, such as video conferencing, can fall into either the voice or data category depending on how it's implemented.

Lets start with voice services. Most businesses of any size have a PBX telephone system that manages their telco connections. There may be some room for cost savings here because of the way the system has grown. It usually starts with a few lines, adding another and another as the company need grows. Pretty soon you've got a dozen or two individual lines. Usage reports say you need them all or customers will start getting poor service and some of your employees will be cooling their heels while waiting to place a call. But you aren't necessarily married to the configuration you have today. By consolidating all those individual phone lines into one or two T1 PRI digital trunks, you'll have the same level of service but at a discount.

If you already made the move to T1 lines years ago, you might still be able to save. Competitive prices for T1 voice lines, including long distance rates, have plummeted in the last few years. By running a competitive service check you can find out if a simple change of provider could result in significant cost savings for the very same usage.

The same logic applies to your business Internet service. A T1 dedicated Internet line might now be priced at half what you paid when you signed a multi-year lease years ago.T1 prices are very favorable right now and you can make a good deal getting into a better contract. Once again, you keep the same functionality you have now but simply pay less.

You might also want to consider some newer technologies, such as MPLS networks or Metro Ethernet to interconnect multiple business locations. SIP trunking offers a way to get high quality voice and data service delivered on a single line service. All of these services have become readily available only in the last few years. If they work for your situation, you could find very substantial cost savings available for the asking.