[Olreich]

It’s all about accounting for the spend. Wall Street often looks at Capital Expenditures as a sign of growth or at least net neutral, but they view Operating Expenses as negative. If you can reduce your operating expenses by 200k, but increase your capital expenditure by 400k, you’ve reduced overall profit in order to increase growth potential because your investing 400k into new stuff that will bring in more revenue.

This strategy cannot work long term unless there is growth happening elsewhere in the company to make up for the excess money burned on contractors and reduced number of employees. But it can definitely work short term if the growth numbers for the quarter are going to look bad, and it has the benefit of giving management someone else to blame when the project work doesn’t get done.

If your company starts replacing employees with contractors, that’s a bad sign.

[mrweasel]

That might be it, this company was obsessed with CAPEX vs. OPEX. Everything was always put into the context of CAPEX or OPEX. OPEX being bad and CAPEX good.

[TeMPOraL]

Wait, when did that change? I thought the prevailing wisdom in our industry is that CAPEX sucks, OPEX rules. I understdood that's what's driving SaaSification of everything - replacing some internal tool and labor with a SaaS is literally turning CAPEX into OPEX, and it was supposedly what the investors liked.

[pclmulqdq]

The only real difference is tax treatment. Opex is subtracted from earnings before public reporting and before taxes. So opex are more tax-efficient, but they lower your reported earnings.