Cloud Computing: Shift from CapEx to OpEx

Cloud Computing: Shift from CapEx to OpEx

According to Gartner, while 42% of CIOs report to CFOs, 75% of CFOs are actively involved in making IT decisions for their companies. Successful selling then requires understanding how CFOs think about making business and financial decisions. Cloud computing is accelerating this need based on the shift from capital expense to operating expenses. Capital expenses (CapEx) are for assets with a useful life greater than one year. Operating expenses (OpEx) are incurred in the ordinary course of running the business on a monthly or yearly basis.

Why does the shift from CapEx to OpEx matter? Companies want to preserve cash. CapEx requires an upfront investment. OpEx allows you to pay on a monthly or years basis. For example, instead of making an upfront investment based on peak capacity for physical infrastructure, customers can leverage AWS to match capacity to need, as well as pay as they go (monthly) for only the services that they use. Cloud providers have also proven that tasks that were once do-it-yourself can now be successfully outsourced, freeing up IT for higher value activities.

The following is a summary of the key differences between CapEx and OpEx:

Cloud Computing: Shift from CapEx to OpEx
All contents copyright © 2013, Josh Lowry. All rights reserved.

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One Response to Cloud Computing: Shift from CapEx to OpEx

  1. Mark Louisuk says:

    First time on the site. Good post. Helped to resolve some of the mystery of CapEx and OpEx.

    Like

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