Cloud Services Use OPEX To Reduce CAPEX Cloud computing services allow you to trade capital expenses for operating expenses.
By: John Shepler
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.
Capital Is Our Legacy
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.
Operating Costs, Too
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.
The New Financial Reality
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.
A Cloudy Solution
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.
It's About Agility vs Capital
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.
The Staff You Can't Afford
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.
An Unlimited Pool of Resources
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 usingthe same infrastructure as those who do.
Plenty Available For Any Enterprise
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.
Pay as You Go
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.
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