When it comes to moving to the cloud, a lot of emphases is placed on the benefits of the “pay-as-you-go” delivery model. Instead of building, managing and maintaining your own data centre, today the cloud means you now only pay for the computing power you need when you need it.
There are many, well-publicized benefits to the pay-as-you-go cloud approach. For example, IT no longer needs to make large up-front investments in technology that will quickly age, nor do they need to purchase supporting infrastructure that may be infrequently used, such as backup power generators.
When it comes to physical IT operations, it is clear that cloud computing brings numerous benefits. But the impact of the cloud does not end there. Many aspects of a business are affected by a move to the cloud—including how accounting manages their balance sheet.
The implications of cloud on IT spend: CapEx vs OpEx
IT professionals have two options when it comes to purchasing new equipment and technology: they can make the purchase as a capital expense (CapEx) or as an operating expense (OpEx).
The majority of the time cloud computing is considered an operational expenditure, and for many IT teams this is desirable. For example, obtaining approval for OpEx spend may be easier, and the lack of a large up-front investment can free up the budget for other IT projects.
However, purchasing IT equipment as an OpEx is not beneficial for everyone. There are many cases where IT teams just don’t have access to large OpEx budgets, particularly within the public sector. Unfortunately, in these cases the perception of the cloud as an operational expense can be the defining feature that holds their organization back from cloud services altogether.
Moving cloud spend to CapEx
Despite the emphasis on cloud computing as an operational expenditure, there are ways your cloud spend can be capitalized. Having helped numerous public sector clients move to the cloud, FuseForward is experienced navigating the issues surrounding CapEx vs OpEx cloud spend.
We’ve drawn on this experience to create a free white paper that outlines the ways you can structure your cloud spend as a capital expense, including an overview of the financial requirements you need to meet, and a range of practical examples.