Chief Financial Officers (CFOs) work with two distinct budget planning methods in mind:   capital expenditures (CapEx) and operating expenses (OpEx).     A study by Gartner and the Financial Executives Research Foundation reports that “The CFO is increasingly becoming the top technology investment decision-maker in many organizations.”   In nearly 500 enterprises surveyed, 42 percent of all CIOs report to the CFO, and in three out of four companies, the CFO has a major hand in all IT spending.

While the CFO and the financial organization ensure the business health of a corporation, the CIO and IT organization understand the technological needs and challenges and, in turn, devise solutions to address those challenges.  More often than not, those solutions include resources in the form of people, time or money.  Working in conjunction with one another, the CFO and CIO must oftentimes find ways to do more with less.  They’re being asked to support more devises and more applications on a network that can support more users.  When we as IT organizations are recommending a capital outlay, we will likely receive pushback because of the divot in a balance sheet.

While it is common to stretch budget by shifting capital expenses to operating expenses, it is beneficial to first understand the differences between the two.  Capital expenses are long-term investments, while OpEx financing models allow many organizations to leverage all the benefits of predictable monthly payments traditionally found in hosted solutions in an on-premises solution. For many, this can be the best of both worlds: a service-oriented model found with a hosted solution with none of the concerns some organizations may have with security and availability of a hosted service. What’s more, a $25,000 on-premises collaboration and audio conferencing solution may be a difficult solution to get approved, however, an on-premises solution with all of the capabilities of hosted for less than $400.00 per month can be a powerful internal conversation. Are you more comfortable paying out a lump sum or breaking payments down into a monthly scale? Regardless of where your preference lies, there is a financing option for you.

However, if we can shift thinking from all solutions being a capital expenditure to the integration of operating expenditures, we can realize efficiencies not only within the organization, but also perhaps a better response from finance. Operating expenses for solutions not only spread out costs on a monthly basis, but they also realize value each month as opposed to the depreciation of a capital expense. In addition to justifying costs, you must calculate the opportunity cost – the cost of doing nothing – to your organization. Are you losing things that provide value – employees, satisfaction or even customers?

Have you switched to an opex model? What are other ways your IT organization works in harmony with finance?  Watch the video “NEC Capex vs. Opex”, as Mark Hebner, senior business development manager, discusses costs vs. the cost of doing nothing and how switching from CapEx to OpEx actually helps you realize value month-to-month.