The Cloud: CapEx to OpEx and Creating Agility

CapEx to OpEx Trends in Healthcare

Over the last several years, healthcare organizations have been working to shift much their IT spending from capital expense (CapEx) and operational expense (OpEx). These changes allow IT departments to stabilize spending, reduce their capital budget, and more quickly and easily grow.

In the days before Infrastructure-as-a-Service, when one server ran out of capacity, for example, a business or organization had to come up with more money for a new server. When a data center ran out of capacity, the business or organization had a spend a great deal of money to build a new one. In addition to being time-consuming and distracting, CapEx investments were very hard on cash flow.

Unlike CapEx which has to be amortized and deducted over several years, OpEx is expensed in the same year. The organization is not expecting to derive value from those expenditures for years. Furthermore, for new businesses or businesses planning for high growth, it may make more sense to pay-as-you-go as opposed to spending all at once, so that the infrastructure can ramp up with growth as opposed to preceding it. This has proven to be particularly true in healthcare, where budgets are tight and technology is newly burgeoning and changing.

Agility of OpEx in the Cloud

By utilizing a cloud model, much of your computing expenses can be converted into OpEx. Not only is this potentially beneficial from an accounting perspective, but also it provides agility in your technology.

Cloud computing allows you to limit your tech debt. When you own all of your computing resources, it can be expensive and cumbersome to keep them all up-to-date. However, outdated technology can pose several security threats and increase chances of clinical downtime. The cloud, allows you to limit that tech debt, because you will own less and your cloud provider takes the responsibility of maintaining and improving your equipment.

Applications have proven to be the future of computing. By moving to the cloud, you are able to more quickly use and change applications. Particularly in healthcare, this is important for new and evolving application use.

Finally, utilizing the cloud and an OpEx model allows you to more easily integrate, store, and secure your data. It is easier to share information among practitioners and patients, protect the data and retrieve it in the case of a hacking or other incident.

What steps are you taking to reduce your CapEx budget? Are you in the cloud?

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