As your customer’s expectations increase, making sure your team has the right technology to ensure efficiency and accuracy can prove to be a make it or break it for your business. In the connected world, requirements are always expanding and changing and many businesses find it challenging to stay ahead of the curve.
While “bleeding edge” technology isn’t the answer for most businesses, there is a lot of value in ensuring that your employees are working with current tools. This extends to software and hardware across your business from your in-house phone system and computers and software.
At first glance, many folks raise the white flag . . . “We can’t afford new technology?!” I’d assert that in many cases you can’t afford not to. When considering any item or project it’s important to not only consider the cost of the item but also the return on your investment (ROI.) How much will this new investment save you in operational costs and/or gains in efficiency?
Coming up with the capital for new technology and ensuring that your able to upgrade when needed requires that you have the strategy to help plan in advance rather than simply putting out fires. Here are some alternatives to the typical capital expenditures for new technology:
- Leasing – By leasing hardware rather than purchasing outright, you can convert outright ownership to a monthly payment for use of the item. This helps with planned technology obsolescence and ensuring that you can upgrade your hardware at the end of the agreed upon term, without dipping into capital and paying for the entire cost of the item.
- Managed Services – Outsourcing the day to day management of your technology can be used as strategic method for improving your operations and cutting expenses. As businesses deploy more and more technology, they could exponentially increase their IT staff OR contract support of the new systems and hardware that you’re deploying with specialists in that field.
- Cloud Computing
- Software as a Service (SaaS) – Rather than investing in on premise software solutions that will require servers, installation and licensing onsite plus maintenance fees and future upgrades, the SaaS Model allows businesses to pay a monthly license fee for the software that is maintained offsite (in the cloud) through shared resources.
- Managed Voice vs. Purchasing Hardware – Hosted voice is cloud-based, so you don’t need to worry about purchasing, implementing, or maintaining complex PBX systems on premise.
Basically, these options take the pressure off the organization and capital budget by allowing you take advantage of shared resources, and plan for obsolescence and upgrades. Also, these options and allow these initiatives to fall in line with your operating budget.
What’s the difference between a capital expense (Capex) and operating expense (Opex)? A CapEx is incurred when a business spends money to buy fixed assets with the intention of creating future benefits for the business and those assets a useful life that extends beyond the tax year (depreciated accordingly.) OpEx, on the other hand, can be fully deducted. (“Deducted” means subtracted from the revenue when calculating the profit/loss of your business. Most companies are taxed on the profit that they make; so what expenses you deduct impacts your tax bill.) OpEx refers to expenses incurred in the course of day to day business.
Of course, this is just provided as an overview of these concepts, for specific information on how this will impact your P&L and tax burden please talk w/ your accounting team.
Why is this important when considering the lifecycle of your technology purchase? First, getting capital budget approval can be a lengthy process – many times having to plan a year in advance. Also, since capital expenses are used to acquire assets that have a useful life beyond the current tax year, these expenses cannot be fully deducted in the year in which they are incurred. Instead, they are either amortized or depreciated over the life of the asset. Depending on your company policy these can be set up to depreciate over 3 or 5 years. But what if your intention is to roll out new technology in a shorter cadence than that? Example, providing sales reps with tablets and replacing them every 2 years. You’ll be depreciating assets long after they have been retired.
By planning for your businesses growing technology needs and taking advantage of alternative sourcing and payment options, you can ensure your employees have the right tools at the tight time for your business.
Have questions or need assistance in creating your overall technology strategy? Or, perhaps you’d like to discuss a specific project or upcoming challenge? The folks at Teltek can help, give us a call !
Teltek is a Certified Avaya Business Partner, NEC Dealer, and Microsoft Partner with two locations in the Baltimore Metropolitan area. We specialize in providing one call technology support for small to mid-sized businesses and nonprofits in Maryland, Washington, DC, Virginia and Pennsylvania.