The Business of IT Part 1: IT Capex vs Opex

it capex vs opex

Cash is King. IT Capex vs Opex can help you keep more cash flowing.

Cash is king, and anyone who tells you otherwise hasn’t run out of it!  Cash flow is how much money a business produces or uses.  This should not be confused with the “bottom line” number of your Profit & Loss statement.  Plenty of businesses were generating “profits” on paper that go under because the CASH in their bank account went to zero.  You see, bankers don’t let you have a negative balance….

Many businesses are reluctant to commit to recurring monthly expenses and are comfortable making larger one-time capital investments.  This is the difference between IT capex vs opex. The issue with this is that most of those capital investments are depreciated over five years, which in technology is a lifetime! Valuable cash is tied up, and you end up with a technology platform that no longer suits your business needs and has no residual value.

When Stringfellow develops a Technology Roadmap for our Clients, we first focus on reducing capital expenses from the budget, especially for servers, software purchases, and projects.  This immediately increases the cash flow available to YOUR business.  Oftentimes, we can turn the capital expenses into operating expenses.  This alignment means a business can scale up (or down) without affecting its capital budgets and cash flow!

The IT business was built around capital-intensive hardware and projects, but this has changed due to the “cloud” and “as-a-service” shift.  Businesses that do not have a strategy to shift out of the “old” way generate less free cash flow, increase operational risk, and have less ROI in technology expenditures.

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