CIOs To VAR500 Attendees: Op-Ex, Cap-Ex Flexibility Key In Winning Deals

Providing the flexibility of either operating expense or capital expense, technology solution options can mean the difference between winning and losing a deal.

That was just one of the big takeaways from a no-nonsense, 45-minute session with two of the best and brightest CEOs in the business at the VAR500 2011 solution provider conference session Monday at the Sawgrass Golf Resort & Spa in Jacksonville, Fla.

"Op-ex and Cap-ex flexibility has been one of the key evolutionary points of IT in the last couple of years," said Michael Skaff, CIO for the San Francisco Symphony in an open question and answer session with about 75 VAR500 solution provider attendees. "I am keen on having the flexibility between op-ex and cap-ex so we can shift (IT purchases) things back and forth. That can be the difference frankly between making a sale or not. That is a critical point for me."

Operating expense based IT solutions are on the rise with the rapid acceptance of cloud computing solutions. Many CIOs are moving to buy more IT services under a cloud computing utility model, paying a monthly operating expense bill based on usage rather than opting to invest huge sums to own hardware-software infrastructure under the old capital expenditure IT project model.

Andrew Black, CIO for Stein Mart, a Jacksonville, Fla.-headquartered $1.3 billion department store retailer with 265 stores in 33 states, said one of the advantages of the cloud computing revolution is the "financial engineering" flexibility it offers CIOs to pay for IT solutions by the "drink."

"Sometimes you want to use cap-ex and sometimes you want to use op-ex," Black said. "When cap-ex is constrained you can trade capital for an ongoing expense stream. That is attractive to me."

Black said his capital expenditure-based IT budget is up four times what it was four years ago in the wake of a significant IT overhaul that included the hiring of a financial analyst who identified key cost cutting opportunities including reduced software maintenance fees for licenses that were no longer applicable.

The San Francisco Symphony has also moved aggressively to cut software maintenance fees, said Skaff, noting his capital expenditure IT budget is up. "We've gone after fat and been able to reinvest it elsewhere."

Next:The CIOs Sound Off On Cisco

Skaff and Black took questions from the solution provider audience in the session, which was moderated by Everything Channel Senior Vice President Strategic Content Robert DeMarzo.

Commenting on vendors, Black applauded Cisco's move to focus more aggressively on its core networking router/switch mission. "They took their eye off their core networking business for a while," he said. "I've noticed a very different Cisco." He said he recently cut down on Cisco SmartNet maintenance fees by moving in some cases to provide spare products in the field.

Skaff said he recently stuck with Cisco during a network product evaluation because of "entrenched knowledge" in his technical team. But he noted that the market is shifting. "HP has a compelling set of network solutions," he said.

Among the tips, the two CIOs gave to VAR500 attendees is no cold calls accepted and do your homework before you make a sales pitch.

"Invest the time to understand my business and what my challenges are," said Skaff. "Don't toss random solutions at me and see if they stick against the wall. It has to be specific. It has to be spear fishing versus throwing things at the wall."

As to what are the keys to choosing a VAR from a field of competitors, Skaff said he looks closely at whether partners are "viable" financially and have technical muscle to do the job. He said customer references are key.

Black said he usually does not trust the lowest or the highest bids and relies on his technical managers to evaluate the technical merits of a solution. He said he looks for partners that bring exceptional technical technical talent to a project. "I look for guys that are smarter than my people so my guys can learn," he said.