Manage costs using cloud managed services
Cloud-managed services or operating a business using a cloud system offer technical and financial benefits. SaaS companies utilizing the cloud often choose to shift away from using capital expenditures (CapEx) to using the more flexible and scalable operating expense model (OpEx).
OpEx offers more flexibility and scalability as a financial model than CapEx. CapEx refers to capital investments in technology like servers, network hardware, and data operations that require long-term investments that depreciate in financial records over time. OpEx, on the other hand, is simply an operating expense, so there’s no need to manage the depreciation of assets. For fast-moving SaaS businesses in the cloud, OpEx provides improved flexibility, cost management, and a scalable budget using cloud-managed services.
This guide explores the financial benefits of using OpEx for SaaS companies using cloud-managed services to improve budget scalability, efficiency, and fuel strategic growth.
Understanding CapEx and OpEx
CapEx and OpEx are different methods of preparing business financial statements or managing business finances. OpEx covers all day-to-day operations, including expenses, while CapEx requires initial investments in business assets for long-term use.
SaaS businesses and the cloud are continually increasing due to the popularity, flexibility, and affordability of using cloud services. Cloud-based applications are easier to develop, support, and secure without the upfront investments into network servers and hardware needed to run systems on-site.
OpEx financial management makes sense for dynamic SaaS businesses using cloud-managed services for IT infrastructure needs. OpEx offers greater flexibility, scalability, and cost savings, which naturally match with cloud service models. OpEx works like the pay-as-you-go or subscription model, which is also used for cloud-managed services or SaaS application use.
OpEx helps a business manage costs, including subscription fees, usage-based charges, maintenance, and support. Businesses can adjust budgets easily by scaling cloud services up or down for more financial control.
Economic benefits of cloud management services
Using cloud-managed services helps increase business growth through improved strategic investments and improved managed costs. Getting used to the cloud may be uncomfortable initially, but over time, businesses learn to take advantage of the benefits to reach business goals.
Economic benefits of using cloud-managed services:
- Ability to leverage a variety of built-in tools and services utilizing the latest technology
- Increased efficiency through process optimization or automation
- Manage costs with scalable cloud usage and services
- Consistent budget amounts make budgeting and planning easier
- More cost-effective than having to buy and manage on-site hardware, software, security, and data.
With cloud services, there’s no longer a need to focus on IT issues, hardware management, or implementing new tools and technology. Cloud providers work with you as a business partner to provide all the tools and technology necessary to build and grow a profitable business.
Enhancing business agility with OpEx
The bottom line is that effective and successful businesses need flexibility and scalability. Bend, but don’t break, becomes the mantra for any business just starting or trying to grow and expand.
In today’s business world, many companies must support a hybrid workforce. The ability to quickly scale up access and performance on servers helps accommodate larger user loads when needed. The same goes for when businesses need to scale down and save money. Both can be done in minutes in the cloud.
68% of business leaders rate the cloud’s flexibility and scalability as the top reasons to migrate to and use cloud services. The OpEx financial model offers similar flexibility and scalability to manage finances. Match OpEx with cloud-managed services, and businesses can save money and boost profitability almost instantaneously. When deciding to migrate to the cloud, make sure to follow these best practices.
Budget management and cost predictability
Managed costs are possible because OpEx and cloud services make costs more controllable. There’s less fluctuation in amounts. Cloud services make IT costs both more transparent and defined. When business leaders match OpEx with digital strategies, it helps create more flexible budgets and finances. Many SaaS businesses may change services and contract offers weekly, depending on need.
Benefits of cost predictability include:
- Improved budget management
- Increased asset liquidity to use for other business needs
- Flexible contracts that can be right-sized or eliminated easily
- Fewer technological constraints and access to newer technology
- Scalability to match market fluctuations quickly
- Built-in tools to optimize cloud system management
Cloud-managed services enable users to optimize efficiency by quickly managing costs. Saving money means businesses have increased assets to use to innovate or invest to build growth. Cost reduction is also attainable with DevOps planning.
Strategic investments and growth opportunities
Cloud-managed services help control operational expenses by making processes and charges more transparent. When businesses can better control and manage costs, they can reinvest profits to grow or expand.
Strategic investing is vital for providing the fuel to expand and grow. Strategic investments help businesses create diversification in product offerings, expand to other markets, and reach more customers. By utilizing the tools and services within the cloud, businesses become more fiscally responsible and better managed.
More investment means more access to growth opportunities or protection from challenges in an evolving business market.
Navigating challenges and mitigating risks
Moving from CapEx to OpEx and leveraging cloud-managed services carries risk. Risks may include unpredictable costs from pay-as-you-go models. At first, businesses may not fully understand what they need and what they don’t need. Scalability requires knowledge and understanding. Be prepared for a learning curve in the first 90 days.
Some businesses moving to the cloud may not fully understand how to use the resources they are paying for. Again, be prepared for a learning curve for the first 90 days. Communicate with your cloud provider partner to fully understand charges and service levels. Ensure you work with a quality cloud provider whose goal is to build your business.
Remember to mitigate risks through strategic planning and tracking. Leverage cloud tools to track and monitor business spending and usage. Learn to adjust usage and provide scalability when needed. Work with your managed service cloud provider to ensure the cloud system is optimized for your business needs.
The same applies when switching financial models from CapEx to OpEx. First, be sure to understand the change and document the reasons through strategic planning. Ensure the financial team is aware of the change and that it fits the business’s needs. It’ll take time to make changes, so be prepared with training and support for employees to make the transition more transparent and easier to navigate.
Pairing cloud-managed services with the OpEx financial model makes business sense. By using both, businesses can gain value through improved operational flexibility and reduced costs. Leverage the advantages of cloud-managed services to fuel your business growth and profitability.
CloudHesive partners with your business. CloudHesive believes in helping your business reach the next level and beyond. We offer expertise in strategic planning and experience in managed cloud services. Let us help you optimize your business, and contact us today!
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