Why Migrating to the Cloud is More Affordable Than You Might Think

Why Migrating to the Cloud is More Affordable Than You Might Think

When we think about upgrading something we own and use, most of us feel a mix of emotions — especially if the item still functioning as it should and fulfilling our needs. While we may be excited about what we’ll be able to do with the new features and functions we’ll have at our disposal, we’re also worried that we can’t really afford the upgrade and maybe what we already have is good enough. That concern often causes us to delay upgrades, hoping to squeeze more from our current investment.

Businesses are no different. 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, chief financial officers (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. The need for cash can be budgeted in advance, but it has become increasingly difficult to accurately anticipate the long-term hardware and software requirements for communications systems. Hardware is particularly notorious for becoming obsolete in shorter-than-expected timeframes.

Once a business owns a system, it’s difficult to switch it out for a more appropriate solution if technology advances in unexpected ways, new business requirements or opportunities emerge or the company grows faster than forecasted. If businesses over-purchase communications technologies in an attempt to proactively address potential scenarios down the road, there’s a significant risk those resources will remain idle or underused over the lifetime of the system.

The problem? The speed of technology evolution doesn’t fit well with a CapEx strategy. At a minimum, it’s time-consuming and arduous to get an additional CapEx budget approved. In many cases, it’s impossible because most businesses simply don’t have the cash reserves required to change course or purchase a more advanced communications system before the pre-defined upgrade or replacement timeframe.

A CapEx approach to communications systems also affects operational costs (OpEx) because the 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.

While some CFOs are still reluctant to move IT spending away from traditional CapEx models, most realize that an OpEx model for IT systems delivers an important set of financial benefits. When technology is an operating expense, businesses can:

  • Pay only for the capacity they need at that time, 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

CFOs also increasingly recognize that the business agility gained with an OpEx strategy outweighs the gains from capital write-offs. According to Deloitte’s 2019 guide to the cloud for CFOs, some companies are achieving returns of more than 10 times on their cloud investments when they account for all the costs and benefits.

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 chief information officers (CIOs) to choose OpEx funding models for business communications systems.

With this approach, businesses can immediately start migrating to the cloud at the pace that makes the most sense for their communications requirements, business goals and budgets. They have the freedom to choose the features and functions that match their needs today, and to add, change or drop capabilities as their business evolves — whether the business is growing in size locally, expanding into new territories, adopting to seasonality or new ways of working or changing focus to take advantage of new opportunities.

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. For example, Mitel MiVoice Business users can add cloud-based apps such as Mitel MiCollabMiTeam Meetings, and MiContact Center Business.

With fast and easy access to these apps, businesses can almost instantly do more without making massive CapEx investments. They can introduce new communications, collaboration and customer experience technologies that are crucial to support modern business requirements and remote staff while still leveraging their investment in their current system.

Businesses can also use a gradual cloud migration strategy to evaluate the business and financial benefits of their newly adopted OpEx strategy over time. And they can make their assessment while benefiting from maximum business agility with almost no financial risks.

4Sight, Mitel Certified Partner, Is Ready To Help

Adopting a new funding model and service delivery strategy is a significant change for many businesses. At 4Sight we 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 when you’re ready.

This blog post was first published by Mitel.

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