The Benefit of Shifting from CapEx to OpEx

In most businesses, trying to find a starting point in the world of digital transformation can be quite difficult. 

There are numerous ways to approach transformation, but with prying peddlers of on-prem and sneaky salesmen with “sophisticated” servers, it can quickly become murky.  

Our opinion?

One great way to approach it is to start where the money is. 

The Hidden CapEx Sitting in Dying Infrastructure

First of all, how do you free up existing budget to enable you to invest it back into your business? 

Indeed, we’re in times where there is no spare cash readily available. It’s also not easy, for any business, to pick up where they left off pre-COVID.

So you’ve got to pretty much create spare cash.

And there’s plenty of hidden CapEx sitting right under our noses: In the investment of infrastructure.

It doesn’t take a data scientist or world-class mathematician to see the major costs around managing that infrastructure. Whether it’s electricity, maintenance, or the teams trying to ensure the network is stable, it’s all very costly.

And while those costs rack up, your hardware depreciates, leaving you trapped in an endless cycle.

Then, to keep up with global transformation efforts, you build everything on site and you’re essentially left to manage your own cloud.

The big question is: Are you a cloud hyperscaler?

Didn’t think so.

So then, why make things difficult for yourself when there are experts? Experts that are equipped to make these platforms better, more secure, more scalable.

Why not opt for a platform and provider that you can pay for exactly what you want and when you want it?

Imagine paying the same exorbitant costs when there is low, to no, traffic. Most of the time the infrastructure sits idle. Losing value. And incurring costs. 

So you want to start converting that. And the way you’re going to do that is by moving it all to the cloud.

Start By Moving it ALL to the Cloud

By moving it onto the cloud, you need to be working with your finance teams, because what you’re doing is you’re taking CapEx investments that you plan for refreshes, fixing networks, buying storage devices, etc. and you’re converting it to OpEx, where you subscribe to a monthly pay-as-you-use fee to cloud operators. 

The trick is, you’re going to hear lots of people saying it’s far more expensive.

If you go like for like, yes, it’s probably 10%-15% cheaper, which really doesn’t impact your bottom line.

But the reality is in the performance of these machines. You have open access to brand new state-of-the-art machines with limitless compute on-tap.

In comparison, your infrastructure is equivalent to that of a 10 to 15 year old dying  legacy kit that pays no heed to Moore’s Law or Accelerating Change.

So you can never do it like-for-like. You need to be matching the new cloud requirements to the actual requirements of the applications. 

What you do see, then, is up to a 60% reduction in your infrastructure investments as it gets shifted to an OpEx model, so that you’re paying it on a monthly basis. 

And the next question that you’re going to get is around bill burn from Cloud use.

Because what happens if suddenly a whole lot of people fire up compute and it’s burning away at resources?

Well, that’s why you need governance. You need to have Cloud Operations (CloudOps) in place. 

Similar to the team that probably manages your existing environments, CloudOps works to manage these hyperscale environments, but they do it with scripts and automatic code, because the infrastructure is now completely run by code for granular control.

So you can monitor, you can ensure you’re not breaking any thresholds. You can control your spend. In fact, what we see, if this is managed well every quarter, even though your footprint might be growing, you can be reducing your overall total spend effectively as you transform digitally.

So what does that mean?

You’re now freeing up budget to start taking into consideration the next phases of your digital transformation. 

Because Now It’s Very Clear. 

The first phase is to migrate to the cloud. Now you’re freeing up this budget. Don’t just go write it off. Keep that budget in your back pocket so that you can start modernising. 

In order to modernise, you need to rewrite code and some of your core functions. You need to put in place API management platforms. You need to rebuild from the ground, up.

Avoid outsourcing to a white label solution. These days code or applications can be built from scratch in a matter of weeks. If not, a couple of months.

So take advantage of that: Do not buy white labeled pre-coded environments.

You essentially want an organisation capable of responding to market change within days. When you want to shift a business model, you can do it within days, because your code is flexible. Your code is quickly deployable. 

Code means change.

It means business process change. If your data’s flexible, it can change quickly. If your reporting systems are flexible, they can change quickly. 

The ultimate advantage of having a highly scalable business that’s been digitally transformed is the ability to respond to change on a whim.

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Our Co-founder and Chief Evangelist Officer is an ex-Google, ex-Barclays Executive with enough personality to make AI work all by himself. With over 16 years of experience doing international keynotes, making digital transformation work across Africa and spreading laughter, he sells AI like beer.

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