Using Operating Expenses to Cost Reduction in the Public Sector

When looking to purchase new technology or modernize your operations, one of your top concerns is most likely securing the budget to make it happen. The federal government has created a number of funding opportunities for the public sector like the American Rescue Plan and the Infrastructure Investment and Jobs Act; however, getting funding for your technology project is not guaranteed.

Despite these challenges, your agency still needs the best technology to meet citizen demands and provide services to the community, while managing the budget to do so.

Shifting from large, one-time capital expenditures to recurring, subscription-based technology purchases can be an effective approach by utilizing operating expenses, or OpEx. Many public sector organizations are seeing the benefit of being able to invest in new technology without paying high upfront costs.

This article explores:

• What is OpEx?
• Overcoming Limited Budgets
• Benefits of Cost Control

What is OpEx?

OpEx involves expenditures used for the day-to-day costs of running your business. These are usually shorter-term purchases, as opposed to longer term investments from capital expenditure.

From a technology perspective, OpEx can include costs for cloud computing subscriptions, software maintenance, or even equipment leases. This also includes costs for Software as a Service (SaaS) licenses.

Overcoming Limited Budgets

One of the inherent difficulties with relying on capital expenditures for technology purchases is the red tape involved with large amounts of funding. Decision-makers can be reluctant to make costly investments if there are competing priorities for the budget. There are also issues with long approval processes that have to go through different chains of command.

As you look at an effective approach to cost reduction, investing in technology from operating expenses helps you to invest quicker and overcome limited budgeting issues. Generally, these investments don’t require large upfront costs and can be paid for over time.

Additionally, this technology is delivered through a cloud provider, eliminating the costs of purchasing hardware and maintenance fees down the line.

The cloud gives you the benefit of increased performance and security. With cloud technology, you no longer need manual updates to hardware and legacy systems.  You have access to the latest updates so that your software remains modern.

Cloud providers also have dedicated teams to focus on the security of your digital assets. Cloud computing security not only monitors and identifies potential threats, but it also works to prevent and mitigate the effects of a data breach.

Cost Control

Technology is constantly changing with new innovations. Likewise, your needs and processes also fluctuate. A more agile, subscription-based approach backed by OpEx funds offers the scalability you need to handle changes as they come – helping you to control costs by only paying for what you need.

Capital expenditures are based on long-term projections. However, what happens if you need more users to access your new software? Or what if you’ve overcalculated, and made too large of an investment? Purchases from capital expenditure can result in underutilized hardware, costly upgrades as new features are released and eventually antiquated systems.

By shifting to an OpEx model, you can control the cost of business with the flexibility to pivot by scaling up or reducing services. Not only do you benefit from cost reduction, but there are also implications for increasing ROI.

When scalability is an option, managing budgets becomes less guesswork, and you’re able to make better forecasts and projections.

Freeing Up Budget to Do More

In any organization, making the decision about where to spend and how to spend is always a difficult task. By considering OpEx to invest in new technology, you’re able to get the tools you need quickly while avoiding costly, long-term purchases.

This frees up budget to be invested in other projects and technology that can potentially boost growth in revenue.

If you’re considering new technology for your organization, or simply exploring options, connect with one of our experts to learn how CentralSquare can assist you in your next modernization project.