OPEX and the cloud

The ongoing shift in business behavior – driven by the proliferation of Software-as-a-Service platforms and other cloud-based option – has expanded to include IT purchasing as well.

Capital expenditures are shrinking, and operational expenditures are on the rise.

Now, no one is saying that eventually companies will stop buying servers and other IT hardware. But the as-a-service model makes a lot of sense for IT infrastructure.

With the CAPEX model, an IT department is forced to project what its technical needs will be three to five years down the road, and then buy all of that resource in advance. That means companies are buying hardware – and maintaining it – even though they won’t use for years.

Think about it. It’s like going out to lunch on Monday and buying all your lunches for the whole week. Sure, you don’t have to buy lunch the next four days. But by the time you get to the end of the week, that sandwich is stale, moldy, and isn’t as good as it would have been if you bought it that day. And if you decide you want pizza Friday? Too bad – unless you want to pay for two lunches.

It’s the same way with hardware. It makes sense to buy capacity as needed, so businesses don’t end up stuck with technology that’s at the end of its lifecycle. That flexibility keeps companies from being locked-in to legacy hardware.

On-premise and data center hardware has its place. But the cost savings companies can gain from cloud models represent a significant advantage in many applications.