Know Your CAPEX from Your OPEX

Find out why selling communications solutions that adopt an opex-based model can be more beneficial to your customers and your profit than traditional capex-based options.

A capital idea

With the change in companies’ purchasing habits following the recession, customers’ demand for services with little or no upfront investment and the subsequent increase in sales of hosted communications systems, telephony suppliers have found themselves having to adopt a different revenue model than they have been used to in the past.

This change from traditional capex-based purchasing to an opex-based recurring revenue model offers some great benefits for service providers and customers alike. For example, an opex-based model gives you as the service provider the ability to forecast a more predictable revenue stream year-on-year, that can easily outpace capex-based commissions. Changing to opex-based pricing can also make your services more accessible to customers who may not have been in a position to make a large upfront investment, allowing them to make operational improvements to their business without the perceived financial risk.

 

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PBXs

Helping you to make the change to an opex-based service model is the increase in popularity of hosted telephony. With traditional solutions, having an on-premise PBX incurs both an upfront cost as well as ongoing investment in maintenance. A hosted telephony solution moves the PBX to the cloud, removing the need for any maintenance and ensuring the customer only has one monthly cost for the service.

Handsets

With the cost of the PBX out of the way, the next big ticket item on many telephony quotes is handsets. As the end goal is to remove the majority, if not all, of the capex costs associated with telephony, many resellers are now choosing to lease the handsets to customers. In some cases, you may choose to lease phones over a period of a few years, enabling the customer to keep them after they have been paid off. There are also a number of providers that are choosing to include selected handsets free of charge when a hosted solution is purchased. In fact, some suppliers also offer software alternatives to traditional handsets. For example, did you know that your customers can now make and receive calls directly from their desktops using telephony software?

Put simply, by including hosted communications in your product portfolio you are able to offer your customers the complete solution; hardware, software and the capability to stay connected, whilst benefitting yourself from a consistent monthly revenue contracted for a number of years.

Support and service

In addition to the cost saving benefits of a hosted solution, customers are also attracted to the remote support capabilities. This means that the majority of the time repairs can be carried out remotely rather than having the expense of sending an engineer to site. Customers are also more frequently seeking cloud services that include unlimited support with their monthly service bills.

To a provider used to charging for a maintenance service for on-site PBXs, giving away support for free can seem like a strange thing to do. Yet rolling support into your service offering can actually add value and increase your competitiveness as a result.

Include installation – build the installation cost, which you’d normally charge on a per visit basis, into a monthly recurring charge for the life of the contract. When the contract renews, you can remove that charge, lowering the customer’s costs and keeping them happy.
Nothing is free – keep in mind that you’re not giving away service. Everything you do is built into the single monthly price for your customers, including your initial install costs, handset hardware costs and monthly support costs. Set your pricing to ensure that you can provide as much support as required, without charging anything beyond your per-user, per-month fee.
Self-service has arrived – many hosted solutions give the customer the ability to control their own features and settings once installed. This means that you should see a reduction in the number of incoming calls you receive requesting help with time consuming, yet relatively simple changes such as amends to call plans or adding new users. Cloud-based solutions give customers the ability to make changes themselves with just a few clicks using a simple web portal.

Offer your customers a service model with a single monthly fee that covers everything from support to service and all that’s in between and you’ll soon see an increase in your recurring revenue.

Change your operation

The move to an opex-based revenue model may seem daunting but it can also be a change that propels your business forward. By switching models, you’ll be able to enjoy:

More attractive contracts for customers – removing the need for large capital expenditure can make your service offering more competitive and increase the likelihood of new customers moving their communications across to you.
More predictable, recurring revenue streams – moving to an opex-based model removes large unpredictable spikes in revenue throughout the year, making for easier forecasting and a stronger bottom line.
Improved profitability from support services – reduce the amount of support spent on simple requests from customers by allowing to make the changes themselves.

Start the move to an opex-based model today and ensure you’re meeting the needs of tomorrow’s customers.

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26 February 2015 | Justin Coombes

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The views in this article are the personal views of the author and are not necessarily endorsed by Gamma.