Cloud technology has changed the way we do business, and it has provided countless opportunities for companies to achieve their wildest dreams. Granted, different businesses will use the cloud in different ways, but one fact remains the same: it makes financial sense to implement the cloud, no matter what type of business you are. Let’s go over some of the benefits.
Money Isn’t All the Same
When it comes to breaking down your business’ finances, there is more than one way to categorize them. Here is how you might typically look at investments for your company:
- Capital expenditures: A capital expenditure is one that is typically quite high, and it is usually a one-time investment that can be used for many years to come. That said, it’s not really planned or budgeted for (although it should be).
- Fixed-expense expenditures: These are predictable expenses for something which expires in the short term. For example, you might pay for advertisements or Software as a Service. The price will be independent of your sales, and the intent is usually to result in a sale down the line.
- Costs of goods sold (COGS) expenditures: These expenses are directed proportionally to the revenue your business generates; the higher your COGS, the more money you are bringing in. This assumes that the ratios between COGS and revenue are low.
How These Expenses Relate to the Cloud
If we assume that you need a new data center, you might look at options for building one on-premises. While doing so might incur large sums of capital expenditures, it’s a one-time expense for its construction and maintenance, along with the costs associated with its upkeep. On the other hand, if you were to outsource management of a cloud solution to a managed service provider, it would be a fixed-expense model, as you are paying for a monthly fee that can be terminated or adjusted at any time as you see fit. Basically, you have to look at it in terms of what your organization wants and needs, particularly if you think flexibility and scalability will play into your cloud solution in the future.
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