Are fixed assets still applicable in Technology Finance in today’s Cloud age?
Firstly, it is important to set the context for the above conversation. I am referring to enterprises that are transitioning from a traditional in-house or 3rd party data-centre setup used to host infrastructure such as severs, storage, etc to Cloud Infrastructure vendors such as Amazon, Azure & Google.
One could say that in a world where infrastructure is paid for on a “pay-as-you-go basis” to Cloud vendors, it is arguable that such payments cannot be recorded as “Fixed Assets” and that they are “Variable Assets”. I believe this argument is only partially valid. Many organisations tend to opt for payment on “reserved instances” for a multi-year period for infrastructure they know is likely going to be in constant use such as a production server; and on a “pay-as-you-go basis” for infrastructure that likely has a short-term project specific demand such as a test server that is specific to a project. Payment for “reserved instances” for a multi-year period could be classified under ‘Capital Lease’ (a type of Fixed Asset) subject to conditions.