I'm sure there will be a financial innovation to address that. Like Reserved Instances, but more so.

ohhhh that's interesting ... especially as all it takes to make cloud a capital investment is a contract with the cloud provider and rental agreement ...

False,I know of a large Australian bank who was looking into S3 late last year.

Unless you're an insanely large company, in the long-run, you can probably save on OPEX by switching to cloud infrastructure. You get away from purchasing hardware for yourself, which inherently reduces OPEX.

[I'm not an accountant]

I think spydum's comment refers to the difference in the effect on the balance sheet. If you outright buy servers, you incur a capital investment in a fixed asset, which increases your balance sheet but doesn't hurt your EBITA. If you instead contract out to a 3rd party cloud provider, you incur an OPEX-- which shows up on your income statement and lowers your EBITA.

I'm not sure how investors favour this difference, but I do know that airline companies love to move aircraft purchases off their balance sheet, probably for cash flow reasons. They do this by leasing a/c instead of outright purchases.

You've now gotten me curious as to why firms behave different when it comes to buying aircraft vs servers.

Airline companies don't want to buy aircraft because their highest-probability outcome is to declare bankruptcy (which happens about every 10 years for most major airlines in the US, it seems). Far simpler to tear up your lease than to dispose of large, expensive assets like aircraft as part of the bankruptcy.

My initial thought was your comment was bullshit, until I googled and read this article.

http://www.economist.com/node/21543195

As Richard Branson said, the easiest way to become a millionaire is to start with a billion and buy an airline.

Purchasing hardware is generally put in the 'capital expenditure' bucket, as far as I know.

Paying someone to rack it, sure.

Err, doesn't a hosted solution reduce capex and increase opex?