What to spend money on so that the company can develop? This question keeps many CFOs awake. Each department pulls the blanket over itself, and you also need to take into account many factors that affect the spending plan. And these factors often change, forcing us to revise the budget and urgently seek funds for some new direction.
Traditionally, when investing in IT CFOs, they prefer capital expenditures over operating ones. It seems simpler, because it will be possible to take into account the benefits of long-term depreciation from large one-time expenses for the purchase of equipment. However, there are more and more arguments in favor of the operating cost model, which is often more convenient than the capital model.
Why is this happening
There are many areas that require large investments and should be part of the approved budget. These costs need to be planned in advance, but predicting future needs is incredibly difficult and risky. Yes, the actual costs of approved projects can be predicted. But far from always what was planned coincides with what the business really needs in this period of time. Technology is rapidly evolving and IT infrastructure needs are becoming less and less predictable.
Market conditions change so quickly that business owners and finance departments are more likely to resort to short planning periods. Scrum with its sprints is used in management and planning systems, and IT infrastructure is transferred to the clouds. It has become inconvenient and uncompetitive to plan large expenses for updating equipment, to raise funds for launching a project.
What used to require a whole building, tons of hardware, smart specialists for maintenance and a lot of time for control and interaction, now fits on a control panel open in a regular laptop. And it requires relatively small payments. Businesses have a lot of options to grow because they can afford the latest and greatest technology without breaking the bank to pay for it. This allows you to reduce costs and direct the savings to other projects that also contribute to the growth of the company's income.
What is the disadvantage of the capital spending model?
- Large amounts of cash are required one-time, with each change / update of the IT park;
- Unpredictable problems with starting and setting up processes;
- Huge budgets need to be negotiated and approved;
- The company is forced to use those technologies for which it has already been paid.
What does the operating model offer?
The system of monthly payments only for the resources and services used is an operating cost model. It makes business more predictable, measurable and manageable. This brings stability and soothes the cranky nervous system of the CFO.
For IT developers, cloud solutions in terms of the operating model are equivalent to quick testing and launching projects, which is especially important in an aggressive competitive environment. This model allows:
- Pay for the actually consumed resources that are required here and now;
- Operate with short planning times consistent with agile scrum models;
- Use the released funds for many other important investments for the company instead of one large-scale one - for the purchase of equipment and hiring specialists;
- Significantly increase the speed of operations in the moment;
- Get a quick turnover.
The benefits of moving your business to the cloud are immediate. You no longer have to guess the need for resources months before the launch of a new project, look for space for new servers, post dozens of vacancies and interact with candidates.
Some skeptics argue that moving to an operating model could make cash flows less predictable, as costs are tied to actual use. For example, website traffic skyrocketed because your YouTube video went viral. You did not predict a sudden increase in visitors, and expenses will increase sharply this month. But on the other hand, you can increase the amount of resources consumed so that everyone can get to the site and get acquainted with the company's offer.
And what would happen with the capital model? How likely is it that the site would have collapsed under a sudden spike in traffic since you didn't factor in extra server capacity when planning your budget for the year?
Why clouds help businesses move forward
Rapid changes in the technical field of any business immediately imply an operating model. Companies do not spend money on unused infrastructure capacity, working hours of extra employees. Clouds keep "live" money.
- No investment in rapidly aging hardware;
- No headaches with the budget, everything is predictable and manageable;
- Infrastructure updates - at the expense of the cloud provider;
- There are no overpayments, as hourly billing is often used;
- There are no bills for the electricity required for the normal functioning of the server room.
If a business needs growth, a company recommends considering moving infrastructure or individual tasks to the cloud. You can forget about server hardware conflicts, expanding racks, finding and maintaining qualified technical staff to maintain infrastructure, etc. A simple monthly payment allows you to invest more in other areas that help your business grow.
Source: habr.com