There's a very interesting insight from your message.
The Cloud providers made a lot of sense to finance departments since aside from the promised savings, you would take that cloud expense now and lower your tax rate.
After the passing of the One Beautiful Bill ("OBB"), the law allows you to accelerate CapEx to instead expense it[1], similar to the benefit given by cloud service providers.
This puts way more wind on the sails of the on-prem movement, for sure
CFO here and I capex everything I can, never understood why you'd want to opex this. I'm trying to make EBITDA as enticing as possible for investors and anyone else that cares. Also want to show we have control over technology cost and it grows at a step function instead of a linear. Capex spending is usually large and planned, so we monitor it more closely and need to see a good reason to approve a large new purchase. Giving AWS a credit card is giving devs a blank check.
Believe you're talking about conserving cash through reduced taxes since this guy was against paying taxes.
However, spending a premium on cloud services over what you could with an on-prem capital investment does not help your cash position.
His tenant of frugality would have conflicted, especially since the cloud premium can easily exceed the tax rate - that is to say, paying taxes would have been cheaper
In any case, spending on this either opex or capex doesn't help you gain or lose marketshare. Conserving cash can help, so you'd want to employ the lower cost option regardless of what line of the financial statement it hits - it's not going to be cloud if you follow that thought through
If cost was equal then opex gives a tax advantage, most companies are valued on EBITDA so still may not be their priority to optimize tax spend - a lot of other methods to avoid taxes. But the environment I've operated in I choose to capex because it conserves cash (is cheaper) and improves EBITDA optics (is excluded)
Probably depends on where your gross margins would be with cloud and if you're higher or lower growth. If cloud will let you grow faster (HA/DR on-prem is hard) and you'll still have 75-80%+ gross margins, why slow top-line growth to do on-prem?
It’s not a real concern for vast majority of businesses. It’s a common excuse but practically no business is outgrowing a cheaper than cloud solution. Maybe on-prem isn’t right first step, but that doesn’t force you to cloud. There’s dedicated servers and everything in between.
On prem is maybe not the best first step but Colo or dedicated servers gives you a cleaner path to going on-prem if you ever decide to. The cost of growth is too high in cloud.
Learning how to run servers is actually less complicated than all the cloud architecture stuff and doesn’t have to be slower. There’s no one sized fits all, but I believe old boring solutions should be employed first and could be used to run most applications. Technology has a way of getting more complex every year just to accomplish the same tasks. But that’s largely optional.
What you said doesn’t make sense. Make it make sense. I was left guessing.
In other words, please explain how it makes sense to lower tax bill by shift the expenses to opex when that process involves paying more for the same utility?
The only reason to lower the tax bill is to conserve cash. The article you linked to explains it that way too.
The Cloud providers made a lot of sense to finance departments since aside from the promised savings, you would take that cloud expense now and lower your tax rate.
After the passing of the One Beautiful Bill ("OBB"), the law allows you to accelerate CapEx to instead expense it[1], similar to the benefit given by cloud service providers.
This puts way more wind on the sails of the on-prem movement, for sure
[1] https://www.iqxbusiness.com/big-beautiful-bill-impact-on-cap...