OpEx Wins; CapEx Loses at CeBit fair in Germany

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The annual CeBit fair has always been the BIG one to kick off the European season of events with 27 halls totalling nearly 500,000 square meters of exhibitors – all aspects of technology in the German market are on display. I am not sure what the attendance numbers will be, but most of it looked […]

The annual CeBit fair has always been the BIG one to kick off the European season of events with 27 halls totalling nearly 500,000 square meters of exhibitors – all aspects of technology in the German market are on display. I am not sure what the attendance numbers will be, but most of it looked reasonably busy, and my unscientific sampling method suggested that attendees were there in the IT halls because they believed they needed to know more about the ‘new’ technologies and approaches now coming into the market. That’s interesting because attendance at events had been dropping as it seemed not so important to be there to see the usual range of products.
Silicon Valley was there in force with fifty companies led by Governor Arnold Schwarzenegger to announce that California was the ‘partner state for CeBit in 2009. A theme he presented with suitable enthusiasm in his speech complete with references to the weak falling away in these challenging times and the strong driving through to grow and take over their share of the market. However I thought I could see a different divide from the weak and the strong, both in the halls, but much more clearly evident in the attendance for the presentations on the conference stream.

Attendance at presentations of the biggest and best names in the business was embarrassingly low; attendance at other sessions on a relatively wide range of topics was by contrast, good to high. I can find no URL to list the presenters to show you what was on offer, but it covered Microsoft on Green IT, SAP on Business Suite 7, through to Intel and Amazon with some of the newer topics, so there was a big range. Yup, I was on stage too, focussing on how to build a business-led vision of how technology can enable your business, and how to select the three areas of innovation that can pay off; Capgemini Technovision. After my time on stage I was told, but have no verification, that I pulled in nearly three times as many attendees as a household software name had the previous day.
It seemed there was low interest in anything which was thought by the attendees to mean a traditional IT project requiring a big budget, and therefore Capital Expenditure, CapEx, against high interest in anything which was small and quick to achieve. Or best of all, anything that came supplied as a service, or in increments, that could be paid for out of Operating Expenditure, OpEx. (BTW, I think some of the conclusions about some of the household names still being only able to make ‘big’ implementations were wrong, as they are all featuring ‘fast and flexible’ approaches, even sometimes with financing – see my comments later on). Having some discussions with those interested let me build up some common insights into this.

  1. Small High Impact – making a direct difference in business activities is what people were searching for, and they were prepared to try these things by using a virtual machine on Amazon, or similar SaaS, as this was quick and painless to set up.
  2. If it doesn’t work, you can get out quick as you have no fixed investment, on the other hand if it works then you can scale up extremely quickly with no problems.

Seems obvious until you do a little more digging and thinking; conventional IT is based around ‘projects’ that will help administer the business for less cost. There is an investment, and a payback period, which means a Capital Expenditure, CapEx, budget and stability to not just finish the project, but to achieve the payback period. There is neither a lot of stability nor large budgets around, but there are a lot enterprises looking for quick wins in sharing knowledge, communicating better, or even reaching externally to add new higher value services to their existing products. All of these can now be delivered with ‘try it and see,’ using Operating Expenditure, or OpEx.
There is another side to this as well – if the service is successful then many online services don’t require cash flow lock-in as they grow. Think of Amazon selling virtual books to the Kindle reader, as the sales go up its still only one virtual copy be sold, there is no need to buy in more stocks to support the increasing sales.
But need this be purely restricted to ‘new’ things? Some of the major technology vendors have now got enough of their products based on ‘services’ as in SOA, or Web Services, that it should be possible to deliver in the same way. With a combination of ‘Agile’ and ‘Services’ maybe some previously traditional types of ERP projects could be delivered in an OpEx manner? It’s going to take some thinking through with traditional project managers and teams, but if money is tight for both buyer and supplier, there would be advantages.
A small closing plug, well actually I genuinely hope its going to be valuable, for the new Peter Fingar book called Dot.Cloud; the 21st Century Business Platform. I admit to knowing Peter and being quoted in some places in this book, but then so is anyone who could be called an authority on some element of the topic. This is the first book that I have read that really does offer a rational, readable, account of what ‘clouds’ are, how use of them is developing, and what business will get out of using Cloud technology. You can get a look at the synopsis.

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