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An Investment into the Cloud is Different Than an Investment in On-Prem

An Investment into the Cloud is Different Than an Investment in On-Prem

Cloud technology has shifted the way that many businesses operate in their day-to-day, offering advantages that were once a business owner’s pipe dream. Of course, there are now different ways that businesses can embrace these advantages. Let’s compare your options to determine which one better matches up to your needs.

To really highlight the advantages that cloud services offer to businesses, let’s examine how your investment takes shape.

Money Isn’t All the Same

When it comes to your business’ finances, there is more than one way to spend them. Let’s break them down briefly:

  • Capital expenditures - A capital expenditure is characterized by a relatively high, one-time investment into something meant to be used for many years, but that wasn’t really planned for or even predicted.
  • Fixed-expense expenditures - These expenses are predictable sums that are spent towards something that ultimately expires in the short-term. Some examples would be advertising or Software as a Service. With a price that is independent of your sales, the intent of a fixed-expense expenditure is to result in a sale down the line.
  • Cost of goods sold (COGS) expenditure - This kind of expense is usually directly proportional to the revenue your business generates, the higher your COGS the more revenue you’ve brought in. This is, of course, assuming that your ratios between COGS and revenue are nice and low.

How These Expenses Relate to the Cloud

Let’s assume for a moment that you were in need of a data center. One of your options could be to build one on-premises, although this will incur some significant capital expenditures and fixed expenses in its construction and maintenance.

This is particularly important to keep in mind, as revenue doesn’t come in until after the data center is completed. On the other hand, cloud services allow you to scale your solutions (and in that way, optimize your spending) based on your usage of them.

Taking these considerations into account may help shape your strategy for moving to the cloud. Whatever your decision, SMG Business Solutions Ltd is here to assist you. Give us a call at 020 7898 3500 to find out how else we can benefit your business.

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