Making the transition from CapEX to OpEX as part of deploying a virtual network

How changing your process can unlock the financial benefits of a consumption model

by AT&T Business Editorial Team

Healthcare organizations often see many financial benefits when moving to the consumption model of a virtualized network — only paying for what they need, the ability to scale quickly without requiring budgeting approval and lower cost of entry.

However, the shift to IT expenses as an operating expense is often a big change for many organizations. Here are three keys to successfully navigating the switch from a CapEX model to an OpEX model for IT costs:

1. Engage key stakeholders early

While it’s easy to assume that the switch to a virtualized network primarily involves the IT department, the shift to an OpEX model often affects multiple departments and processes. By planning with stakeholders before the company moves to the virtualized network, you can address the changes to the financial processes beforehand. Waiting until the deployment is about to happen can mean the project has to be delayed until the budgeting issue is resolved.

2. Anticipate lack of depreciating IT assets

One of the biggest shifts for many companies is no longer depreciating assets for tax purposes. With a CapEX model, the server or other hardware is depreciated over 3 to 10 years. With an OpEX model, the virtualized network is accounted for in the month the services are consumed. Some companies see a significant tax impact as well as a change in their Profit/Loss statements. By working with the accounting team in advance, you can plan ahead for the impact of the shift.

3. Address the change during the budgeting model

With the CapEX model, IT expenses are budgeted when new infrastructure is purchased. With a virtualized network, the expenses are spread into monthly costs throughout the year. While many companies find a significant cost savings when they move to a virtualized network, the change often means redesigning the budget and reallocating IT funds. By addressing the shift during the budgeting process instead of reactively, you can correctly allocate hardware purchases in the budget, saving time and frustration.

With careful planning and communication, you can seamlessly move from a CapEX model for infrastructure to an OpEX model.

It’s easy to view the change as a problem or barrier to moving to a virtualized network. But in reality, it’s simply changing a process, so your healthcare organization can have the agility it needs to provide your patients with the best care possible.