Back to the Basics – Compute and Spend

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Over the recent holiday break, I was doing some maintenance on my home lab environment, and my son asked me what I was doing. I decided to make it a teaching moment and give him the basics. After doing so, the iconic beginning of the speech Vince Lombardi delivered on the first day of training camp in 1961 to the Packers came to mind. “Gentlemen, this is a football.” Surely, the football players were already well aware of that, but Lombardi’s teaching of the fundamentals is what came to mind as I taught my son.

I believe it is a good idea return to the fundamentals as well. Too often as I’m troubleshooting an issue, I skip over the basics and go 10 levels deep when the issue exists and could have been corrected on the first or second level.

I started out talking to my son about services. Making the leap from services to compute was easy to understand as well. If there is a service being performed, someone or something must be doing the work to deliver that service, whether it is the waiter at the restaurant serving us dinner or a computer somewhere serving us email. Just by growing up in the world today in the country we live in, he already has exposure understanding of IT services that he himself or he sees others consuming such as emails, texting, video chatting, GPS delivery, or gaming.

At the core of all these services being delivered to us is compute. Compute can be delivered in many different forms: an Xbox, a cell phone, a smart TV, a laptop, or a server. While each device of compute is designed differently to best deliver the service they are supplying, they all share at least four common components:

  • CPU – The ability to take input, do some calculations on it and deliver output
  • Memory – The temporary location to hold the input and output from the CPU
  • Storage – The permanent location to hold the input and output from the CPU and memory
  • Network – How this device can communicate to other devices or people the information it processes

From here I decided to talk to my son about money and the cost to have services that he uses or sees me use. I recently purchased a new cell phone for my wife. To provide the service of being able to talk on a cell phone, being able to text to friends, family and coworkers, and use the services of the internet, I had to have an initial spending of money to acquire the property of the cell phone. This is called a Capital Expenditure, commonly shortened as CapEx (Capital meaning a sum of money and Expenditure meaning the act of spending it). This practice is true in all aspects of life from a cell phone to clothing. I must spend money to purchase a new school uniform for my son to wear, and now we own it.

Now that my wife owns the cell phone, it can do relatively few things on its own without being connected to any services so of course comes the next discussion of paying for ongoing services of the cell phone. This is called Operating Expenses, commonly shortened to OpEx (operating, meaning using the item with expenses simply the cost associated to using the item). We have an OpEx cost of paying Google Fi, the cell phone carrier, an amount each month to provide services to the device and us as the person consuming the service. The same is true for my son’s school uniform as well, as we must pay our utility bills of water and electricity to operate the washing and drying machines to maintain the cleanliness of the clothing and continue using them.

Cell phone costs today just seem to be exploding. Years ago, I would purchase a more than adequate cell phone for free provided I pay the monthly fee to use it. I would have $0 CapEx and just the OpEx cost to use it. Now I have an ever-growing CapEx cost to purchase the phone, and I still need to pay for the OpEx service to use it.

Businesses year over year have been tasked with this same model for the use of servers in their environment. However today, services that companies would typically have to have a large CapEx cost to acquire equipment for can be eliminated. Businesses can go straight to the OpEx cost, seemingly the opposite direction that cell phone manufacturers are going. Services like email, Active Directory, websites, databases, or practically any function a server could be needed for no longer require the CapEx cost and purchase of physical equipment. Most likely, said physical equipment will simply sit in a company’s server room or datacenter just needing to be replaced in four to five years with another large CapEx cost.

Companies now have the option to use Cloud Solution Providers such as Sikich to deliver the services using just the much more manageable and predictable OpEx cost.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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