Shifting to More Agile IT Investments: From CapEx to OpEx with Network-as-a-Service

Making informed technology decisions that also align with business goals can be a daunting task for finance teams. This presents more than a few hurdles, from budgeting challenges, lengthy approval and provisioning processes to timing the launch of major technology projects.

• Agile IT: One of the most important financial considerations is deciding whether to lock up capital and resources through a traditional multi-year networking vendors and leasing models. These deals not only restrict flexibility for IT teams to fixed-term hardware, software, and technology, but it also restrict cash flow to other mission critical areas of the investment, greatly impacting a company’s agility.

• Realistic Budgets: Setting a realistic budget is crucial, as financial limits can greatly impact the scope and success of technology implementations. Budgets that are too ambitious might not be sustainable, while underfunded projects can result in solutions that fail to meet business objectives.

• Defining Outcomes: Any project that does not have clear business goals will fail. To realize the value of their investments, companies must define expected business outcomes. Getting the timing right is just as important – if projects don't start when needed, it can lead to wasted resources and missed opportunities.

It's no wonder that many businesses are looking for innovative ways to manage IT spending. Many companies are adopting Network-as-a-Service (NaaS) as one way to shift IT expenses from Capital Expenditure (CapEx) to Operational Expenditure (OpEx). While usually relegated to the territory of IT organizations, this service model is particularly relevant for CFOs, who need to find cost-effective solutions that also offer agility, efficiency, flexibility, and scalability.

The Traditional CapEx Model and its Challenges

Traditionally, capital spending on technology has come with inherent difficulties, including the significant upfront costs required to purchase hardware and software, which require careful budgeting and planning. Predicting future infrastructure capacity needs can be challenging, often leading to either overprovisioning or underutilization.

Even in leasing models, purchases are merely amortized over a fixed time period, locking your organization into infrastructure and technology potentially past its obsolescence.

After careful planning, businesses still often face challenges in justifying these expenses, as the rapidly evolving technology landscape can make investments feel risky or quickly outdated. Additionally, integrating new technology into existing systems can be complex and time-consuming. This requires dedicated resources and expertise to ensure a smooth transition and alignment with strategic goals. According to Gartner, enterprises are increasingly adopting OpEx models to mitigate these challenges, with the ratio of OpEx in overall IT budgets rising from 70% in 2014 to 77% in 2020.

CapEx vs. OpEx

The budget approval processes for CapEx and OpEx differ significantly, impacting organizational financial strategies. CapEx often requires a comprehensive approval process due to the substantial upfront financial commitment. This can take a lengthy amount of time dedicated to developing a project plan outlining scope, costs, expected benefits, and ROI, followed by detailed vendor assessments. For many organizations, plans typically undergo a series of reviews, discussions, and approvals because of the impact on the business's financial position for the fiscal year. This extensive process can delay project start dates and limit the ability to adapt to market changes.

In contrast, OpEx expenditures typically have a more streamlined approval process. Funds are generally allocated in the annual budget for ongoing programs and services, bypassing the need for lengthy proposals, especially because of the all-inclusive nature of NaaS and future upgrades. Expenses are monitored continuously, allowing for adjustments based on business needs and resources. This flexibility enables businesses to quickly reallocate funds to new initiatives as needed, enhancing agility and responsiveness to changing conditions.

Moving Away from Technology as a "Cost Center"

The emergence of As-a-Service cloud models has significantly transformed the budgeting process. By converting large, upfront investments into predictable monthly or annual subscription payments, cloud offerings align with the OpEx model, which emphasizes flexibility, operational efficiency, and ease of budget management. This shift reduces the complexity of budget approvals as businesses can integrate these expenses into their operational budgets with minimal disruptions. It also allows for faster deployment of services, enabling businesses to pivot with greater agility in response to emerging needs without the logistical hurdles of traditional CapEx investments. As a result, CFOs can leverage this model to enhance financial control and strategic resource allocation.

The Rise of Network-as-a-Service (NaaS)

With the increasing reliance on cloud services and digital transformation, businesses are also rethinking their approach to network investments. Traditional networking models, which often involve significant upfront costs for fixed-term hardware, are being replaced by more flexible, subscription-based NaaS solutions.

NaaS is a cloud-based networking service model that allows businesses to consume network resources on a subscription basis. This model includes everything from hardware and software to management tools and lifecycle services – even hardware and software upgrades. NaaS providers like Join offer truly future-proof, comprehensive solutions that encompass architecture, design, deployment, testing, maintenance, and support, ensuring a seamless and reliable network experience, scalable with business growth.

NaaS is the best alternative to the usual network management models. By subscribing to network services, you can leave behind the hassle of maintenance and hardware upgrades. This shift lets organizations move their network expenses from CapEx to OpEx, bringing plenty of perks along the way:

• Predictable Costs: NaaS provides predictable, recurring costs, eliminating the need for large upfront investments. This aligns with the OpEx model, where expenses are spread out over time, allowing for easier budgeting and financial planning.
• Scalability and Flexibility: NaaS allows organizations to scale their network infrastructure up or down based on needs, without the constraints of physical hardware. This flexibility is crucial in today’s dynamic business environment, where demands can change rapidly.
• Enhanced Security and Compliance: Join’s NaaS integrates advanced security features, including Zero Trust Network Access and micro-segmentation. These measures ensure comprehensive protection and compliance with industry regulations.
• Simplified, Automated Management: With NaaS, the burden of network management and maintenance shifts to the service provider. This allows internal IT teams to focus on strategic initiatives rather than routine network operations. Join’s AI-driven platform, for example, continuously monitors network performance, ensuring proactive issue resolution with network uptime guarantees.

NaaS is Transforming Network Expenses

For CFOs, switching to NaaS offers some great strategic advantages. This shift not only allows for more flexible budgeting through a more agile OpEx model, but it also enables companies to scale their network infrastructure efficiently. Additionally, NaaS provides enhanced security features and streamlined management, which can lead to improved operational efficiencies and reduced costs over time. With these benefits, CFOs can better manage operating expenses, streamline network operations, and open new chances for cost savings and revenue growth.

Strategic Financial Control

NaaS enables CFOs to allocate resources more effectively by converting large capital expenses into manageable operating expenses. This transition not only improves cash flow but also allows for greater financial agility. With predictable monthly costs, CFOs can make informed decisions about where to allocate funds, making sure investments match the company’s goals.

Mitigating Risks and Enhancing Agility

Traditional CapEx investments are often risky due to the uncertainties involved in predicting future needs. NaaS mitigates these risks by providing the flexibility to adjust network capacity as required. Whether scaling up during peak times or down during slower periods, NaaS ensures that the network infrastructure remains aligned with business outcomes without locking up capital and resources that restrict technology adoption. This kind of agility is key in today's fast-paced, competitive market.

Facilitating Innovation

By letting the service provider handle routine network management tasks, NaaS gives internal IT teams the freedom to focus on innovation and strategic projects. This shift can drive business growth and enhance competitiveness. For example, developers can concentrate on creating new technologies or pursuing other technological improvements for the business, while the network infrastructure is managed seamlessly in the background.

The Solution for the Future

The shift from CapEx to OpEx with NaaS represents a paradigm shift in how organizations support agile IT investments. By moving to a NaaS model, CFOs can lead their organizations into the future, leveraging the benefits of OpEx to drive efficiency, innovation, and growth. The time to relook at network purchases is now, and NaaS offers the pathway to a more agile and financially sound approach to network management.

Explore how Join can transform your business's network infrastructure, providing the scalability, security, and simplicity you need to thrive. Schedule a time to talk with our experts and take the first step towards a more agile and cost-effective network solution.