Reducing Capital Expenditures with Managed Services
In a time of economic uncertainty and ongoing budget constraints, IT organizations can’t afford to make mistakes with their technology purchases. For most, accessing essential IT services and solutions through a managed services provider (MSP) offers a great deal of investment protection.
By shifting technology spending from a capital expenditure (CapEx) to an operating expense (OpEx), the subscription-based approach to technology spending offers financial flexibility. Hardware, software and service costs are combined under a single contract with one monthly payment, allowing organizations to improve cash flow, preserve capital and manage a predictable expense.
Rapid technology changes often mean that today’s leading-edge solutions become outdated faster than anticipated. A managed services approach also provides the flexibility to modify the IT environment as necessary, ensuring that the budget isn’t tied up in long-term technology investments that don’t meet changing needs.
A new Gartner survey finds that a surprising number of organizations experience buyers’ remorse over their capital IT purchases. Fifty-six percent of the executives surveyed reported they had a high degree of regret over their largest tech-related purchase over the past two years.
Working with an MSP can eliminate much of the apprehension, indecision and regret that big-ticket technology purchases can foster. In addition to reducing upfront CapEx costs, shifting to a pay-as-you-go model allows organizations to try new digital strategies before committing significant resources. Solutions or services that aren’t meeting expectations can be replaced or modified without creating a huge budget hit.
That increased flexibility creates direct bottom-line benefits by improving efficiency and productivity while eliminating unnecessary costs. Companies using managed services for their day-to-day infrastructure operations reduce their IT costs by as much as 42 percent, according to research from IDC.
A big chunk of that savings comes from eliminating overprovisioned in-house resources. Companies typically provision far more compute and storage resources than they need to ensure they can meet capacity, availability and performance requirements. Beyond the acquisition costs of these resources, they also bring additional power, cooling, licensing and management costs. In the OpEx model, you only pay for what you need at any given time with the ability to add additional capacity on demand.
Managed services can create tax advantages as well. While capital expenditures are amortized and depreciated over an extended number of years, operating expenses can be fully deducted in the year they are incurred. The deduction reduces your income tax burden for the year while also boosting the amount of cash you have on hand for other important initiatives. In addition, it eliminates the depreciation costs of aging resources.
Companies using managed services for their day-to-day infrastructure operations reduce their IT costs by as much as 42 percent.
The OpEx approach also reduces management costs. The MSP handles all infrastructure monitoring, maintenance and upgrade requirements, allowing your internal IT team to work on more strategic responsibilities. This also eliminates the need to hire more internal staff to support the environment.
Beyond cost reduction, shifting technology purchases to an OpEx model creates a variety of operational benefits. It fosters innovation by enabling organizations to implement services or solutions that would otherwise be cost prohibitive if on-premises infrastructure and software purchases were required.
A pay-as-you-go model also simplifies the process of scaling IT resources up or down to meet changing business requirements. It can take weeks to acquire, configure and deploy a dedicated in-house server, but an MSP can provision or deprovision cloud-based compute and storage resources in a matter of minutes.
Shifting to an OpEx mode with managed services offers an array of budget and operational benefits. That’s why analysts are saying the market will continue to experience double-digit growth through the end of the decade. Give us a call to explore ways you can leverage our managed services offerings to cost-effectively address your business requirements.
Benefits of Managed IT Services from Global Data Systems
- Strategic Managed IT: We help you solve your technology related business problems.
- Connectivity: We get you reliable, secure connectivity anywhere in the western hemisphere in 48 hours.
- Support: When you need help simply call our 24x7x365 support number.
- Billing: Instead of managing hundreds of vendors - get one, easy to read bill from GDS.