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The Impact of the Cloud on IT Budgets: CapEx vs. OpEx

Posted by on January 21st, 2019 in Blog Posts, Cloud Solutions

Welcome to the era of “as-a-service.” We’ve watched as on-premise applications and services have transitioned to the cloud to provide users with a more flexible and scalable way of managing IT. The adoption of the cloud has caused businesses to look at how to leverage “as-a-service” models for everything from data centers and desktops to help desk and hardware. In doing so, the cloud has fundamentally changed how businesses operate while reshaping the way C-level execs view IT expenses and financial models. 

C-Level’s changing position on IT expenses

CFOs, CIOs, and CTOs are taking a new position on the expense models they prefer when it comes to technology purchases. Historically, capital expenditures gave businesses a way to take advantage of amortization and depreciation over time, and IT was one of the most capital-intensive departments in most organizations. The initial investment, maintenance, and upgrades of on-prem servers, computing hardware, application software, and telephony equipment were huge and could “make or break” the IT budget.

The world has changed. Today, there’s a strong case to be made that IT departments have more opportunities with an OpEx model that provides some distinct advantages over traditional CapEx model. Let’s look at a few.

  • Usage-based, easily scalable – Only pay for the capacity needed at the time with the ability to quickly scale as the business requirements change.
  • A wide range of technologies – Since the budget isn’t tied up in large upfront expenses for a handful of technologies, the business can spread the resources and leverage a variety of new solutions they may not have been able to afford previously.
  • Quick access to financial resources – Remove the time-consuming process of borrowing money for significant investments, funding expenses faster through operations
  • Remove the budgeting guesswork – Predict future spending easier, making new services easier to “sell” to IT and C-level stakeholders.

Choosing between CapEx and OpEx isn’t an all or nothing situation. Determining which IT solutions fit into each and understanding the trade-offs is essential for businesses of all sizes. At LanYap Networks, our team of cloud experts can help you evaluate your current IT situation and consider which expense model works best for you. Just give us a call!

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