Case for the Cloud: Capex vs. Opex

Traditionally, when purchasing ERP software, it was common to spend $100,000 or more up front to purchase necessary hardware, software licenses and all the implementation and training costs that came with such a costly enterprise investment.

Before looking at how ERP was purchased in the past, let’s understand the difference between capex (capital expenditure) and opex (operating expenditure).  Capex is used by companies to purchase or upgrade assets such as property and equipment.  Using capex is typically a major financial decision for a company because it is a major, one time investment that must be maintained for a period of time using opex.  Opex, on the other hand, is an ongoing cost used for running or maintaining a fixed asset including products and systems.  Costs are spread out over a period of time and financial decision makers are able to justify using money from their monthly operating budget more easily than using capex.  We can apply these principles to ERP software which was traditionally a capital expenditure; however, with new technology and Cloud Computing, businesses now have the choice to upgrade systems using capex or opex.  Yet, as we will see, the changing economic forces are determining more now than ever, how businesses spend money.

That was then, this is now 

Back when the economy was robust, companies were not content to save every penny they have while limping along on outdated ERP software.  Today, very few companies even have the reserve capital for such a large upfront investment and if they do, they certainly will not spend it updating software when there is so much economic uncertainty.  Their reasons are understandable in wanting to wait for better days before making such a costly investment; however, it is difficult to maximize efficiency managing businesses this way.  Ultimately, the market pressures force businesses to choose between research and development or new systems.  The question becomes how can businesses streamline operations and improve outdated processes when the economy is forcing them to remain in the status quo?

Business Drivers

Many businesses are holding onto their cash with an expectation to wait for the economy to improve before releasing their cash flow for things like improving software systems.  However, with GDP expected to be an average of 2% for the next 10 years, this means that we have to find better ways to invest in infrastructure or get left behind by those who are looking ahead.  Adapting to change is a key requirement in business and successful businesses are always moving to improve and adapt.  Looking at the graph below, consider how the economic forces are driving capex down while the pressure on the market is increasing.  What does this mean for how business will move forward?

















More with Less

You can replace your ERP software without jeopardizing your company’s future on such a large capital expenditure by considering moving business applications to the Cloud.  By using opex to budget software expenses monthly, you never have to worry about updating hardware, upgrading software licenses or yearly maintenance.  CFO’s clearly recognize this as a much more effective approach in moving business forward without the heart attack that comes with using capex to upgrade business applications.  It becomes a win-win as you can focus on streamlining operations driving growth and moving forward without breaking the bank in an uncertain economy.

Next week, we will begin to explore how we effectively use Cloud Computing to deploy available applications which will streamline your businesses, maximize efficiency and drive growth in these uncertain times.

Windows 8 is coming! The impact of Cloud, Office 365 and Dynamics ERP and CRM

What do you do when you are Microsoft, the 800 pound gorilla in the marketplace when both Google and Apple are taking your customers?  In 2007, Apple released the iPhone and subsequently in 2010, the iPad mobile devices.   Apple's strategy is to have a single OS on all devices, Mac, iPhone and iPad.

Google is no different.  Taking the lead from Apple, Google's Android OS on the phone, tablet and now Chromebook is moving in that same direction.  However, Google is not as sophisticated in their marketing and positioning as Apple.  Complicating things further is that Google, unlike Apple, is not controlling the device like Apple.  

Now enter Microsoft's Windows 8 operating system.  Let's take a look at what they are up against and look historically for answers to where they go.  For many years, Microsoft has struggled with devices like phones and tablets.  I have witnessed over the years my Microsoft buddies and their endless parade of Microsoft Look Alikes for iTunes, the iPhone and other devices.  However, there has always been the point in time where Microsoft knuckles down and gets "tough" with the competition.  One only needs to look at the original Windows desktop, Windows Server, SharePoint, Office and Dynamics ERP and CRM applications for proof points.  

So, when I read this article from Reuters, I saw a vision, strategy and implementation that will fit today and tomorrow's computing needs.  What we see from the earliest public viewing of Windows 8 is that unified operating system in which users can easily switch between a PC, Tablet and Phone while having a single interface to work with.  Why is that important?

Well, consider that until today, these devices have been consumers of mostly public data:  Facebook, News and Music.  However, consider the corporate data that is yet to be delivered to these devices.  Business Intelligence, mobile CRM, mobile approvals and workflow have all been in their infancy for many years.  They have been the proverbial "idea whose time has come".  However, the form factor of the phone, the OS of the tablet and the cumbersome nature of having a laptop for every field service rep, for example, has been an issue.

I personally believe that we are seeing the dawn of new business apps which will bring true productivity, anywhere, anytime due to Cloud Computing and other technologies.  Combine the Cloud, Office 365 and Windows 8 and we will see the real productivity we have hoped for.

Please let me know if you agree or disagree with this article.  Contact me, Robert Houdeshell, at if you have an opinion or comment.


How secure is your on premise application?

Most CEO’s believe their data is more secure in house compared to the Cloud.  They fail to realize that their servers are often stored in a locked closet or other room, vulnerable to theft and natural disaster.  They also fail to realize that Cloud providers have much more expertise securing data offsite than their own internal IT department.   Below is a list of the common objections and let’s consider the source while reviewing them. 


Let’s face it, the number one objection of moving ERP to the Cloud is data security.  This objection typically comes from the IT department struggling to stay relevant in a changing industry.  Before becoming crippled by fear, consider the source of objections and take time to fully understand the Cloud.  Chances are, you will see how Cloud Computing is simplifying business operations and becoming the new standard in business application deployment.  You may also see that data storage in the Cloud is actually more secure than your current operations.  Let’s consider the source of objections and relate them back to history.

Consider how we currently consume electricity in 2012.  To turn on a light in the kitchen, you walk over to the wall, flip the switch and turn on the light, instantly.  If you need a cup of coffee in the morning before heading to work, you plug in your coffee maker, turn it on, and your coffee begins brewing, instantly.  This instant access is called “on demand.”  Today, we have the power grid which allows us to use electricity as a pooled resource, on demand and we pay only for what we use.  Sounds a lot like the advantages of the Cloud, doesn’t it?

Back in the early 1800’s when AC power was created by Robert Tesla, there were a lot of objections coming from those whose jobs and livelihoods were threatened by it.  Back then, it took teams of technicians to maintain the power generators in the basements of companies whose operations were completely dependent on up time.  Every company had their own generators and their own technicians whose sole role was maintaining the generators. 

Those threatened often spoke of the dangers of AC power, the grid and how it would never replace DC power.  As an example, Thomas Edison, determined to prove the point, tragically executed an elephant trying to instill fear in what would happen if they switched to the new, more efficient way of getting power.  This just goes to show how far some will go to try to stay relevant when facing change.   

Let’s apply these same principals from history to today.  Currently, every company using business applications has their own servers, typically running in a locked closet, on premise.  Each company also has an IT department whose responsibility is to maintain the hardware and software for optimal up time.  Sounds familiar doesn’t it?  And, like with any new technology or way of doing things, there will always be objections. 

Our job is to consider the source of objections, determine the validity of these objections, and conduct an honest comparison of current operations compared to the new way of doing things.

Shining the "Silverlight" on Dynamics GP "12"

As we draw closer to the release of Dynamics GP "12" which is slated for later this calendar year, I wanted to focus a little bit on what may be one of the most under-reported features of the new release: the new Silverlight client for Dynamics GP.

This is BIG news...especially for anyone interested in cloud and/or thin client deployments of Dynamics GP. While the thick client that customers have been using for almost 20 years will still be a deployment option, Silverlight provides a thin client, zero footprint deployment option. For our customers running Dynamics GP in the NjevityToGo cloud, the silverlight client represents a lower cost deployment option because they will not need to license Remote Desktop and Office apps as part of the cloud deployment. It also means that Dynamics GP can be running through-cloud and directly on the client's desktop...interacting directly with their local printers, drives and office apps.

Not only will this be lower cost, but it should also run in any browser that supports Silverlight...can anyone say Safari? Now we don't have any 'official' word from Microsoft yet on this, but you can bet we will be testing the use of Dynamics GP on a Mac running Safari as soon as start getting code drops. More on this in a later post!

What is most amazing about this release is that Microsoft has figured out how to bring all dexterity based apps along for the ride. So, every third party product written for Dynamics GP in dexterity (and there are THOUSANDS), will work in Silverlight right out of the gate. What this means is that Dynamics GP will be a true web-based, thin client, zero footprint application, but will retain all of the functionality that it has accrued over the past 20 years. How can a new player to the web app space like NetSuite possibly compete against this?

It seems that sometimes you really CAN have your cake and eat it too. Way to go Microsoft on figuring out how to turn Dynamics GP into a web application AND keeping all the funcationality we have come to love. I can't wait to get my hands on this and unpack it a bit more. But as it looks right now, Dynamics GP "12" is going to deliver TONS of value.

For more information on why Silverlight was such a great choice for Dynamics GP, click here.

The Cloud is for large companies with a full time IT staff, too


I met with a very large Financial Services firm today to talk about helping them move from a tier 1 ERP product to Dynamics GP. You might think that odd...going backwards and all...but it happens much more than you migth think. After all, most companies can buy and implement Dynamics GP for a fraction of one year's annual maintenence with their Tier 1 publisher. And these guys said that they "needed a hammer but bought a jack hammer" their Tier 1 product is really much more than they need.

Anyhow, these guys are a pretty good sized company and they have a full time, dedicated IT staff to support their user community. They had attended our webinar series on The Cloud and are very interested in evaluating our cloud solution for Dynamics GP as well as the traditional On Premise option. Now, what is a company with plenty of financial resources and a healthy IT staff doing looking at The Cloud, you might ask.

Well, these guys are being asked to do more with the same IT resources, and they are getting stretched. So, the idea of letting someone else (us) manage the infrastructure for the ERP systems is pretty attractive. Plus, they not only don't have to support the new Dynamics GP system, but they also no longer need to support the old Tier 1 system. So, their IT team will free up some bandwidth (or maybe just stop working EVERY Saturday).

But in addition to using The Cloud to free up their IT resources, they are also quite interested because going through cloud means that they don't have to worry about the infrastructure for their ERP system. They don't have to worry about backups. They don't have to worry about maintenance, service packs, hot fixes. They just don't have to worry about any of it. They just plug in, turn on and get to work. Pretty simple. And who doesn't like simple?


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