Another lucrative reason for companies to move to a SaaS model is the switch from IT capital expenditures (CapEx) to IT operational expenses (OpEx). IT CapEx is money a company typically spends on buying physical assets to run the business i.e. servers, laptops, networking equipment and enterprise software licenses. By contrast, OpEx is the budget a company allocates for the business operations i.e. telephone service, leased network lines and monthly fees for internet hosting or offsite backup. OpEx is:
- Less expensive
- More fluid and flexible
- Easy to forecast
- Represents a real cost of doing business
- Allows to manage from your or your department's Operational Budgets
- No lengthy process of Capital Budget approval required
- Helps strengthen cash flow
- Offers possible benefits in tax savings
IT CapEx is less fluid, extremely expensive, difficult to forecast and often involves a lengthy and cumbersome approval process, compared to routine IT OpEx, and can be subject to refusal if the budget is not available for the current year, which can have severe impact on the growth of an organisation. SaaS implies that your functional leaders and power users of various departments like Human Resource, Sales and Manufacturing can take this initiative on their own without the need to go through lengthy approval processes.
In most countries OpEx helps customers save tax depending on the accounting practices and taxation policies. The number one advantage of using OpEx to fund the SaaS service is that it represents a real cost of doing business and you only pay for what you use through monthly, quarterly or yearly subscription fees. All the burden of capital expenditures will be shifted to your SaaS provider and it would be their responsibility to deal with purchasing server equipment, maintaining data centres, networking equipment and internet hosting fees.