Oct 21 ’11
The CAPEX to OPEX Trend: Should It Be OPEF?
CAPEX and OPEX. These are terms we often hear from corporate managers, Wall Street analysts, and others. “CAPEX is bad, OPEX is better” seems to be the current thinking. Why own when you can rent, right?
I’m not sure how much the sub-prime mortgage crisis added to this thinking, but getting out of the “owning” business and into the “renting” or OPEX business is all the rage these days. Having the freedom to put those “buy” dollars to better use driving growth, retiring bad debt, etc. is desired by business leaders today, and being agile enough to change your mind and direction quickly is even more desirable.
But what about OPEF? Good old “operational efficiency.” It’s clearly not as trendy as OPEX and the term OPEF isn’t likely to become as catchy either, but isn’t OPEF really a more valid goal in today’s IT world?
Let’s look at the three choices:
Capital Expenditures (CAPEX) are expenditures that create future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year. CAPEX is used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings.
Operational Expenditures (OPEX) are ongoing costs for running a product, business, or system.
Operational Efficiency (OPEF) deals with minimization of waste and maximization of resource capabilities to deliver quality products and services to customers.
Operational efficiency is concerned with identifying wasteful processes and resources that drain the organization's profits and designing new work processes that improve quality and productivity.
You can see where I’m going with this. The great CAPEX to OPEX shift feels more like a movement than a strategy sometimes with the way it’s referred to in the press (and the increasing frequency of mentions). What’s the real driver behind the rush to cloud? “Cloud transforms CAPEX to OPEX” is as good an answer as any. But, by definition, you could also argue that cloud computing is first and foremost about OPEF.
And since OPEF is all about “the improvement of organizational, financial and operational performance,” isn’t OPEF applicable either to a CAPEX or OPEX-based IT strategy? If so, what does it really mean and how can you improve OPEF? Shorter bathroom breaks for IT staff? More free caffeine in the break room? Maybe, but to avoid ratcheting up the crankiness of your valuable staff, let’s examine a few OPEF options readily available today:
Specialty Engines such as System z Integrated Information Processor (zIIP), System z Application Assist Processor (zAAP) and Integrated Facility for Linux (IFL). We all know that we can reduce hardware and capacity-based software costs by offloading work to specialty engines. Why not save dollars by running as many workloads as possible on the low-toll, high-occupancy lanes? You may already own products that exploit these low-cost specialty engines and not even know it, giving you even more value with each specialty engine offload.
Automate the tedious. Wherever possible, automate tedious manual tasks such as installs and updates. Think about all the man-hours your team spends on these tasks today and look for automated options. People mired in inefficient tasks become bored and sloppy; help them achieve more while feeling better about their jobs.
Consolidate. Count the number of vendors you manage and how much time it takes to manage all of them, and consider consolidating to a more manageable but competitive group. “Doing more with less” can ring true with vendors, as well.
Eliminate “blamestorming.” Where possible, reduce or eliminate the costly meetings where finger-pointing takes place across IT teams because applications that cross mainframe and distributed systems suffer from poor performance. Cross-enterprise APM solutions can help you put an end to those unpleasant (and unnecessary) emergency application performance meetings.
Skills assessment. Do a thorough skills assessment of your IT team, verify that you have your people where they can have the highest impact, and identify gaps that can be quickly addressed through training and mentoring. Your best people may be pigeonholed in jobs they do just “adequately,” so find out where they can best help you with the big challenges you’re facing now and in the future. Look for the integration point between expertise and passion and watch your people soar.
These are just a few ideas that can make a real difference this year whether you’re in a CAPEX to OPEX migration or not. Either way, you can save your organization time and money and perhaps re-introduce a goal that should always be trendy: OPEF (or if you prefer, just plain old operational efficiency).