Most businesses recognize that modernizing their communications technologies will help them increase productivity, improve customer satisfaction and sharpen their competitive edge. But many are sticking with the technologies they have today because they don’t believe they can afford to do anything else.
The good news is funding and delivery models for communications technologies have become far more flexible in recent years. This flexibility opens the door for almost every business to start on the path to modernization.
CapEx Funding Strategies May Be Holding You Back
Traditionally, CFOs have preferred to buy IT infrastructure outright as a capital expenditure (CapEx) because they could use the associated amortization and depreciation costs as tax deductions. While these financial benefits are helpful to businesses, a CapEx purchase strategy for communications systems also comes with downsides.
- A significant cash outlay is required to initiate the purchase.
- Hardware is particularly notorious for becoming obsolete in shorter-than-expected timeframes.
- There’s a significant risk that purchased resources will remain idle or underused over the lifetime of the system.
- Purchased on-site hardware and software systems consume space, and they must be maintained, powered, and cooled.
An OpEx Strategy Increases Flexibility On Every Front
With an OpEx strategy, businesses don’t purchase the communications system hardware or software. Instead, they pay a monthly, quarterly, or yearly fee to access communications capabilities that are offered in a subscription model. All hardware and software are owned, operated, and maintained by another company, and communications costs become day-to-day business costs. When technology is an operating expense, businesses can:
- Pay only for the capacity they currently need, so capital is never tied up in under-used hardware and software
- Write off the entire subscription cost each year rather than just a percentage of the total CapEx purchase price
- Free up large amounts of capital that can be invested across the company
- Avoid the need to borrow money or divert money from other projects to pay for large, upfront technology costs
- Reduce the costs of system operation, management, and maintenance
- Streamline cash flows by eliminating large, sporadic cash outlays
- Simplify and accelerate budgeting exercises because short-term spending requirements are lower
Cloud Communications Solutions Leverage the Benefits of OpEx Funding
The limitations of CapEx strategies, combined with the availability of subscription-based, cloud-hosted communications solutions, are leading many CFOs and CIOs to choose OpEx funding models for business communications systems.
With this approach, businesses can immediately start migrating to the cloud at a pace that makes the most sense for their communications requirements, business goals, and budgets. For many businesses, a hybrid approach that combines existing on-premises solutions with cloud-based applications could be the right way to start the journey to the cloud.
TCI Is Ready To Help
Your local TCI experts are ready to discuss the benefits of an OpEx funding strategy for your communications system as well as the pros and cons of different cloud migration strategies.
Don’t let financial roadblocks be an obstacle to cloud migration. For flexible financing arrangements, contact us today at (703) 321-3030 or firstname.lastname@example.org.