Increased Capex Spending Ups Operational Strain

In recent customer discussions, I have heard one theme repeated over and over again: “Our opex budget is being cut, but I can spend capex.” Companies have money to spend, but the “flavor” of the available money is shifting.

Let’s examine what this simple statement tells us about management’s priorities, how our customers’ operating environments are about to change, and how Packet Design is prepared to help.

Impact to management priorities:

• Stay lean – After surviving the global recession, companies realize that they can operate on a leaner cost model.
• Do more with less – A leaner model means they must find ways to continue cutting operating expenses, while simultaneously developing ways to adapt to a rapidly changing competitive landscape. We expect management to push this notion up to (and perhaps beyond) the breaking point.
• Improve financial strength – Shifting from opex to capex improves a company’s financial position as P&L statements are fortified. If the economy demands belt tightening, companies will want this added strength to cope with new challenges.
• Tell a story – Showing customers and investors that their future as well as their current needs are being considered is critical. A shift in spending “flavor” is a sign that companies are making innovation investments.

Changes to operating environments:

• Stress to back office – Boardrooms learned that companies could get by with less on the backs of front-line employees who bore (and still bear) the brunt of that reality. It seems reasonable to expect that as opex funding dwindles, an already strained back office will become even more strained.
• And more stress – When companies shift to capex spending, they also impose an added stress to the company in the form of implementing uncharted technologies, such as SDN. This stress ripples outward to a company’s products, services, and ultimately its customers. We expect this to become additive at least, multiplicative at worst.

How Packet Design is helping:

At Packet Design one of our chief goals is to help companies meet current operational challenges (e.g., remain cost effective) while simultaneously innovating.

• Force multiplier – We’re simplifying our powerful suite of products by moving them to the web, increasing the number of people in an enterprise or service provider who can use them to make business-level and IT decisions. For example, front-line engineers and operators can identify and solve network problems quickly. Management teams can better understand how traffic traverses their networks, determine the level of service they are delivering to customers, and accelerate the delivery of new revenue-generating services.
• Drive deeper cost efficiencies – The same change – putting better tools into the hands of more people – pushes value closer to problems and gives companies the ability to adapt their cost structures to evolving operational environments.
• Respond quickly to market demands – SDN innovation in our upcoming Explorer Suite v15.2 allows customers to provision and de-provision services on the fly in response to changes in the marketplace while maintaining a high level of service delivery – automating time-consuming and complex processes.

Ultimately, the shift from opex to capex is merely a sign that companies are comfortable with near-term stability and feel compelled to invest in future innovation. Whether those transformations manifest themselves as cost efficiencies or greater flexibility in delivering customer services, Packet Design is well positioned to help them.