Shifting IT expense methods is attractive but challenging

A new report shows a majority of federal financial professionals see value in shifting from capital expenditures to operational expenses for IT, but government IT managers are less gung-ho about making the change.  

The Meritalk study “The Color of Money” found 70 percent of federal financial professionals see benefits in moving from IT funding from CapEx to OpEx, but only 36 percent of IT managers are considering making such a transition. Nearly 60 percent of finance professionals believe operational budgets will give agency a better understanding of IT budgets.

The change is about how IT expenses are budgeted and accounted for. CapEx are expenditures creating future benefits, such as acquiring or upgrading assets, while OpEx are ongoing costs related to the production of an organization's goods or services.

Although fewer IT managers are currently thinking about changing their funding model, consideration rises to 46 percent among those who actually know such a shift is desirable. More than one-fifth are unaware the president’s fiscal 2012 budget encourages a move from CapEx to OpEx funding, the report said.

Of those IT managers who recognize the move would be a good idea -- in the administration's eyes anyway -- 43 percent indicated the transition would better align what they use and what they pay for. The same cohort said the shift would mean fewer administrative requirements for justifying operational expenses as well as provide more control over capacity.

Federal finance professionals agreed the move would better leverage funds and make the budget easier to justify to appropriators and the Office of Management and Budget. 

Making the actual transition, however, could be more of challenge, respondents say. The main obstacles include operational budgets wholly dedicated to O&M of existing infrastructure and too many people involved in the approval process. Respondents also cited inadequate funds and not getting the green light from the finance department as roadblocks for the move.

Federal IT professionals also connect the implementation of cloud computing to operationalizing IT funding. Seventy-two percent of the respondents said conversion from CapEx to OpEx is needed to adopt public or community cloud computing, mainly to align the cost of supporting infrastructure to the recurring cloud service cost.

The study, which was underwritten by Brocade, conducted online surveys of 102 federal IT managers and 102 federal financial managers in April 2012.