Cloud Funding Model

Cloud Funding Model 1024 652 CloudGovCo

Organizations face a financial challenge in funding cloud projects: how do we get from a funding model that uses capital expenditures (CapX) to one that uses operational expenses (OpX). IT projects were always long-term capital investments, usually based on a 10-year Total Cost of Ownership (TCO) financial analysis; whereas cloud services are recurring subscriptions taxed as an operational expense. The cloud service life cycle is more like three years than 10.

Capital investments are for purchasing assets. For tax purposes, they are depreciated over a period of years. However, cloud subscriptions are taxed in the year incurred as an operational expense paid out of the annual budget. Operational expenses can be fixed, like rent, or variable. Cloud services are a variable expense based on usage. How do you manage this?

Cloud funding model describes how to transition from a CapX model for IT to a sustainable OpX model for cloud subscriptions.

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