Before the cloud, organizations only had one way to pay for their IT infrastructure, which was upfront and as a capital expense (CapEx). IT managers would have to research everything from servers to racks to everything involved in the storage, and then procure them before they could start to think about implementation. So, before they even turned it on, they incurred tens of thousands of dollars in CapEx that would hopefully last a few years before the next refresh cycle.
It was because of this, IT had earned the reputation of being a cost center of most companies because it was a necessary cost but didn’t add much value to the business. In addition to the capital expenses, IT also had to factor in the added expense of maintenance, which accounts for most of their operational budget. As a result, it leaves IT departments in a position where they can’t innovate or improve, which ultimately holds the entire company back.
Here are 3 benefits of moving IT from CapEX and OpEx and what that could mean for your business.
1. Changing How You Pay
Cloud computing has changed how IT handles spending with the pay-as-you-go model. This seemingly small change has actually shifted IT spending from a capital expense to an operational expense, meaning the large upfront investment is removed and replaced by a predictable monthly fee.
By shifting the cost to a third party, IT managers can start to focus on new technology and innovative solutions to help the business not only save money but allow it to grow. This can give the company the opportunity to gain a competitive advantage over their competitors or even enter new markets. In the long run, changing how a company pays for IT can drastically impact the entire company.
2. Being Agile
This was hinted at a little bit in the first benefit, but another benefit of moving IT from CapEx to OpEx is becoming more agile. The best example of this is being able to scale a company’s infrastructure as needed. A company who needs to do this just a few days a year would see the benefits of being able to scale up when needed and then back down for the rest of the year. They would only have to pay for what they use versus having to buy on-prem equipment for their maximum workload that is only used a few days and then would sit idle the rest of the year.
3. Getting on the Same Page as Finance
While the issue of CapEx and OpEx may seem to be something the accounting department would handle, by having IT managers and CIOs understand the benefits, they are able to be on the same page as the finance or accounting department. Understanding how technology investments are seen as operational expenses versus capital expenses and being able to articulate the differences to the CFO, can benefit both departments.
In conclusion, moving CapEx to the OpEx model can help your company become more agile, allow you to save more money, and help IT and Finance get on the same page, which will ultimately benefit everyone.