How the Cloud Creates Cost Savings—and Tax Benefits

Tags: Distribution, Cloud Computing, Technology , Supply Chain

Embrace the Flow of Innovation

Modernizing your distribution business isn’t just about adopting the latest and greatest technology. From seamless scalability to cost-efficiency to tax benefits, the right solutions can pave the way to significant results.

The cloud has introduced new levels of convenience, accessibility, and ease-of-management to enterprises everywhere. From any web-connected device, workers in the distribution workforce can access mission-critical data and applications wherever they may be.

Mobile productivity is just one advantage of the cloud. In fact, by shifting important resources to the cloud, businesses can realize cost savings—both from an operational standpoint and through significant tax benefits.

Increased Productivity with Decreased Costs

Modern software is designed to manage an entire distribution company, no matter the size. From forecasting inventory to selling and ordering products to delivering and processing payments, today’s technology handles all the crucial steps needed to operate your distribution company and everything in between. By utilizing new technologies like cloud-based computing, these software packages offer even more powerful capabilities, while reducing overall costs of operation.

In addition to greater processing power and a reduction in complex systems and servers, the cloud provides secure and on-demand access to real-time data and insights. Many distributors have found they no longer need the support of outside IT providers, as once they move to the cloud, the burden of maintaining systems simply goes away.

The proof is in the pudding: When supply-chain businesses shift from on-premise servers to the cloud they often realize immediate savings. According to a recent study, when businesses move to the cloud, they experience a 16 percent average reduction in operational costs, a 15 percent reduction in IT spending, and a nearly 17 percent reduction in average IT maintenance costs.

Shifting from CapEx to OpEx

More and more companies are seeing the benefits of moving expenditures from capital expenditures (commonly referred to as CapEx, which are funds for fixed assets, such as purchases or maintenance) to operating expenses (OpEx, or day-to-day incurred business expenses.) This comes with tax benefits, as OpEx spending is fully tax-deductible each year as it’s considered a short-term cost via a lease or subscription as opposed to a significant purchase. On the other hand, capital expenditures such as machinery or servers decrease in value over time, and only the depreciation amount is tax deductible. This again is where cloud hosted computing or SaaS (Software as a Service) applications come in, because these services are categorized as operating expenses rather than capital expenditures.

What’s more, CapEx spending often requires a major up-front investment. Consider the costs involved in setting up on-premises server farms, software licenses, and buying industrial equipment outright. With cloud software and a simple subscription fee, these costs can be minimized and streamlined—money that can be reinvested back into the business.

An OpEx model also allows businesses to “pay as they grow,” which is a crucial benefit for rapidly scaling companies. As a business grows, it often becomes more complex to run it. Modern software makes it easier than ever to expand or grow. Cloud software is built for these scenarios, with turnkey components that allow distributors to begin with the basics and add to their toolset as they scale.






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