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December 7, 2021

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Rveena Ranaa

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Why do companies opt for SaaS?

  We will, however, restrict this discussion to SaaS. The question then is why should a company consider SaaS as an option for their technology needs. Those who have some basic understanding of finance will know the difference between CAPEX (capital expenditure) and OPEX (operating expenses). CAPEX is about investing money in assets or technologies the return of which will be received over more than one financial year whereas OPEX is about the expenses that are written off in the P&L of a single financial year. Tax benefits apart, cash flow is the big advantage in the OPEX route.  With the option to pay for the use of applications and services on a monthly or quarterly or yearly frequency, your cash outflow then becomes your OPEX(operating expense).  This is aka on-demand or pay-as-use or subscription model. Under the conventional spending method, for huge investments in the form of capital expenditure, you had to flush out a huge amount of money, mostly through borrowing which would add to your finance cost or dilution of equity. Then, you would have to wait for years to recover the investment and start generating profits.    Uncertain and volatile times or situations like the ongoing […] read more
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