CapEx vs. OpEx

CapEx to OpEx shift benefits businesses to maximize the investment potential.

More and more IT organizations are pushing up their Cloud envelope, though Cloud Computing still takes time to get matured and it doesn't necessarily equate to faster software development or better quality of software, still, there are some significant advantages such as the ability to scale up or down as demand waxes and wanes, global availability and transforming from CapEx. To Opex., etc.

 Unleashing investment potential: Shifting CapEx to OpEx can save on capital expenditures, and use your limited budget to its fullest. While your budget may be thin, a cloud solution can maximize it and get your organization the updated technology you need. You’ll have a system that’s more affordable to implement and maintain than traditional on-premise technology. Shifting IT spending from Capex to Opex might be a good strategy for organizations that have already solved the riddle of delivering excellence in IT operations. It provides the opportunity for any CIO worth his/her weight to shift the resources and focus on strategic projects that will benefit the business's long-term goals. This in itself might incur additional capital expenses to deliver on initiatives that would add to the value of the company. Also, as you identify areas in IT portfolio that have become commoditized, they should be prime candidates to move to the cloud.

In pursuit of business agility: Often Business Agility is the more common goal driving enterprises to the cloud. Cloud Computing by itself is not the answer. It comes down to the organization to rethink how it offers IT services (both hardware and software). If your IT organization has very defined and rigid operational silos, moving to the cloud won’t improve such reality. All the problems and frustrations you have today (speed to deployment) will now be in the cloud. But if your organization wants to figure out how it can improve your customer's experience and is willing to "change", Cloud computing with the proper management can be a possible enabler. And the appropriately designed cloud environment can bring speed and efficiency to organizations with long procurement and deployment cycles. 

 • Expand your workforce to any location - employ the best, regardless of where they live. 
• Scale capacity quickly (up or down) and cost-effectively with the Cloud. 
• Only pay for what you use – nothing more. 
• Connect multiple systems and customize to your specifications - integrate systems and share data between them. 

Benefit-cost alignment: CapEx to OpEx shift can well align the business benefit with the cost. A move from Capex to Opex does, at least, help align the business benefit (that should come from the service being offered) with the cost. So it means that large CapEx projects are more likely to be strategic investments in things that are not commoditized services. Indeed, there is a definite time and place for cloud services to both large and small business. Small business can leverage cloud services versus building the infrastructure needed. Medium and large customers can scale forward and back their infrastructure with just in time IT resources so that things are done more efficiently and quickly. If you have the correct perspective and the right methodology, the cloud can be a win-win situation. You just need to figure out what the right moves are for your organization. Sometimes cloud makes sense and sometimes it does not.

Enforcing finance discipline: Cloud can be seen as a consumption model, you pay for what you actually consume, and this can force some disciplines on the company in general, that otherwise might not even have been adopted. In reality, Cloud alone won't change a lick of the speed of provisioning unless the rest of the process is modified as well. And the elastic nature of the cloud is a good fit if your I.T. demand is very dynamic, expanding or contracting in significant ways that need to be addressed and provisioned quickly.

Cloud Computing doesn't suddenly make IT organizations faster and more efficient, but it does provide an elastic scale and CapEx to OpEx shift that benefits businesses to maximize the investment potential from the limited budget, and achieve business agility.

Posted in: Cloud Computing,Connecting Dots,KPIs