Buying your next system

You’re not going to buy your next system outright, are you?

Traditionally, organisations used to buy software outright using a capital expenditure (CapEx) approach. It’s a big, one-off cost that requires upfront investment that depreciates over time. This was a common model for arts CRM systems, though it has some pretty major limitations:

• The value of your system starts to diminish straight away. Systems get updated, payment security standards evolve, customer expectations change. In order to stay up to date, you need to upgrade and pay out again - even though you already paid a big upfront cost.
• You'll need to find a big chunk of upfront cash which can be painful for your organisation. Some providers will allow you to spread the cost over time, but there will still be a sizable chunk to pay in year one.
• Your supplier is disincentivised from helping you once you’ve paid. CapEx sales mean suppliers derive profit and value from the sale at the start of the relationship. Every time they engage with you after that, the conversation is loss-making for them unless you pay again. The relationship is not geared towards mutual long-term success.

Operational Expenditure = investment in your arts organisation 

Instead of CapEx, let's consider a different approach - operational expenditure (OpEx). What if you didn’t need to budget for a major one-off system purchase but instead moved the cost of your CRM system to an operating expense?

This is a much more contemporary way to pay for ticketing, marketing and fundraising solutions. In practice, it means paying an ongoing fee for your platform each month, relative to the amount you use it. There are significant advantages to this approach:

• Your supplier relationship is geared towards mutual success. Because the cost is tied to your usage, your success is your supplier's success. So, both parties are invested in making it work in the long term.
• Systems sold on an OpEx basis typically include upgrades and system developments as standard. Ask your new potential supplier what’s included.
• It's much easier to onboard. There’s often little or no cash required upfront, so replacing a system doesn’t mean a major investment in a single budget year that depreciates over time. 

Software as a Service (SaaS)

Suppliers who offer their systems as OpEx will often also describe their product as ‘Software as a Service’ - or ‘SaaS’. The exact meaning of this varies by vendor, but it typically means:

• You access the software through the internet. It’s not installed on a server in your building. The provider is solely responsible for making sure that it works and is well maintained.
• You can sweep away the need to buy and maintain servers. The vendor handles all of that. You focus on using the software, not maintaining the systems that keep it going. 
• It expands and contracts with your organisation. Instead of determining how many users you need for the next two, three or five years - SaaS means you can typically scale up and down users rapidly with little or no cost penalty.