Organisations Outsourcing IT Capabilities to Rid the Balance Sheet of the Capex Hit

the Balance Sheet of the Capex HitThe growth and increasing availability of colocation facilities is seeing an organisational shift when it comes to IT spend and investment, moving from a capital expenditure (Capex) model, to one focused on operational expenditure (Opex), according to Greg McCulloch, the CEO of Aegis Data.

McCulloch, who is speaking as part of a panel debate at IPEXPO Europe, discussing the future of colocation, suggests we are in the midst of a significant move away from traditional IT infrastructure management. This is being driven by the rise in cloud providers seeking stable best-of-breed colocation providers to partner with, combined also with organisations, from SMEs to enterprise level, wanting to take advantage of an Opex model without relinquishing control over their physical IT estate. Evidence to support this lies in recent research carried out by the analyst firm 451 Research, which revealed that the amount of datacentre space occupied by co-location providers is up by 11 per cent on 2014, and is forecast to maintain that level of growth through to 2018 as enterprises look to outsource more of their IT.

McCulloch believes a key driver behind this change in mind set lies in the significant growth of data volumes coupled with a need from organisations to refresh existing legacy IT systems. Supported by more flexible terms provided by colocation providers, he expects more organisations from a wide variety of sectors to start embracing the Opex model and start outsourcing IT capabilities :

“The research from 451 Research goes hand in hand with what we are seeing within the colocation space, and in doing so will see more and more organisations embrace an Opex model when it comes to budgeting for future IT expenditure. Within an organisation there are plenty of hard costs which require large, upfront investments and these should be part of any approved budget. Traditionally, these are costs that can be planned for in advance, but the comfort of having spending certainty is dependent on the accuracy of the estimation of future requirements. When looking particularly at an organisation’s IT infrastructure, determining this level of accuracy is becoming increasingly more difficult.

“The growth in data volumes coupled with the need for more flexible and bespoke IT capabilities, means committing Capex expenditure over a significant lifetime is becoming increasingly more difficult to justify within the boardroom. Instead, the rise in third party outlets, such as colocation facilities, and the flexibility of terms offered by these providers now means organisations no longer have to commit huge levels of funds upfront, supported by continued Opex expenditure over the life cycle of the infrastructure.

By outsourcing their IT capabilities, the initial Capex hit associated with building and managing their own facility is taken away – the third party provider has everything already in place and in doing so you can effectively budget for your usage based on the agreed terms with the provider. In doing so, this removes the risk of fluctuation within your financial forecasting process, brought about by unexpected IT changes or failings, allowing for greater accuracy when budgeting and defining long term expenditure. McCulloch concluded: “As a result of this, organisations are free to focus on their core competencies and transition many of their Capex investments to Opex spending, freeing up cash for those investments and other projects that drive revenue and growth, across the business. In light of this colocation facilities are ideally placed to support this.”

About Aegis Data

Aegis Data provides highly resilient and optimised data centre environments for its customers’ mission critical IT. Its state of the art data centre aims to significantly reduce IT expenditure by delivering greater cooling efficiencies across all power densities as well as having the power headroom to allow for IT consolidation and growth. With increasingly more customers seeking a road map to increased IT efficiency and value for money, Aegis Data aims to provide the technology and knowledge needed to build and develop and successful colocation and data centre strategy.

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