CAPEX vs OPEX

Issue 1 2021 Infrastructure

With COVID-19 rapidly accelerating the pace of digital transformation last year, many organisations were forced to invest in data storage infrastructure. However, these businesses often face the dilemma of whether to opt for a solution that is acquired as a Capital Expense (CAPEX) or Operating Expense (OPEX).


Hayden Sadler.

CAPEX is generally used to fund major investments and is shown on a company’s balance sheet. Essentially, capital is exchanged for an asset, which can then be amortised and depreciated over its lifespan, and can add value to the business.

OPEX on the other hand is generally used for ongoing expenses and organisations are increasingly leaning towards this model to fund solutions. This is largely due to the economic turmoil created by the COVID-19 pandemic and is set to continue for some time, with the result that companies will continue to be short of cash for long periods of time.

Conversely, if a company wants to save money in the long term, it may opt for the CAPEX model. This means making a bigger payment upfront, but ultimately saving money by not having to pay premiums that include interest on a loan over the lifespan of the asset.

Finding the sweet spot

Both approaches have merit, but there is a sweet spot in the middle. Too often, organisations are forced to choose between one or the other and we’ve seen companies make drastic changes to their financing options just to remain agile. They often end up procuring a more expensive solution simply because they didn’t opt for a better consumption model.

Now more than ever, organisations should be looking for a data storage provider that not only affords them the choice between CAPEX and OPEX, but also the opportunity to change between these models as they see fit.

The right vendor will proactively offer both finance models with built-in price disruption, enabling businesses to be more agile. This is a departure from the traditional approach, which dictates that in order to have both CAPEX and OPEX models, organisations would have to acquire two separate storage systems.

Yet, having to manage two systems is often twice as hard as managing one. Elastic pricing disrupts this model by enabling companies to purchase a single data storage solution and pay for a portion of the capacity using OPEX and the rest using CAPEX. In addition, customers who change their mind can switch between the two as and when they need.

Providing agility, lessening risk

The economy has changed dramatically and this approach is particularly useful under current conditions. For example, when an organisation launches a service there is a risk that it could either take off or fail. It would be better to start the project with infrastructure that is not committed upfront with CAPEX, but rather with an OPEX model that provides agility and lowers risk.

However, as the project grows and takes off, the company can revert to the vendor and request to switch from OPEX to CAPEX. So, while the once-off CAPEX payment will be significantly higher than the monthly OPEX payments, the overall pricing for the required capacity will be lower in the long run. Furthermore, the infrastructure can be used for a number of years and is fully paid for. In this way, they could save a lot of money down the line by switching.




Share this article:
Share via emailShare via LinkedInPrint this page



Further reading:

Hytera supports communication upgrade for Joburg
News & Events Infrastructure Government and Parastatal (Industry)
By equipping Johannesburg’s metro police and emergency services with multimode radios which integrate TETRA and LTE networks, Hytera is bridging coverage gaps and improving response times across the city.

Read more...
The growing role of hybrid backup
Infrastructure Information Security
As Africa’s digital economy rapidly grows, businesses across the continent are facing the challenge of securing data in an environment characterised by evolving cyberthreats, unreliable connectivity and diverse regulatory frameworks.

Read more...
IoT-driven smart data to stay ahead
IoT & Automation Infrastructure AI & Data Analytics
In a world where uncertainty is constant, the real competitive edge lies in foresight. Businesses that turn real-time data into proactive strategies will not just survive, they will lead.

Read more...
Hydrogen is green but dangerous
Fire & Safety Infrastructure Power Management
Hydrogen infrastructure is developing quickly, but it comes with safety challenges. Hydrogen is flammable, and its small molecular size means it can leak easily. Additionally, fires caused by hydrogen are nearly invisible, making them difficult to detect and respond to.

Read more...
A whole-site solution to crack the data centre market
Fire & Safety Infrastructure Facilities & Building Management
Fire safety consultants and contractors who can offer a comprehensive fire safety solution to the data centre market can establish themselves as a supplier of a key safety features that help guarantee the smooth operation of critical infrastructure.

Read more...
Wireless network security market
Infrastructure
The wireless network security market is experiencing significant growth, driven by the increasing adoption of wireless technologies, a surge in cyberthreats, and rising demand for secure data transmission.

Read more...
Acronis and Metrofile Cloud announce partnership
Infrastructure Integrated Solutions
Acronis has appointed Metrofile Cloud as its premier disaster recovery (DR) partner in southern Africa, combining Acronis' technologies with Metrofile Cloud's local expertise to deliver secure and adaptable disaster recovery solutions for businesses across the region.

Read more...
Upgrade your PCs to improve security
Information Security Infrastructure
Truly secure technology today must be designed to detect and address unusual activity as it happens, wherever it happens, right down to the BIOS and silicon levels.

Read more...
The hidden cost of cheap networking gear
Duxbury Networking Infrastructure
When it comes to building a network, price is always a consideration, especially in the current economic climate, but there is a difference between smart spending and short-term savings with long-term losses.

Read more...
Open source code can also be open risk
Information Security Infrastructure
Software development has changed significantly over the years, and today, open-source code increasingly forms the foundation of modern applications, with surveys indicating that 60 – 90% of the average application's code base consists of open-source components.

Read more...










While every effort has been made to ensure the accuracy of the information contained herein, the publisher and its agents cannot be held responsible for any errors contained, or any loss incurred as a result. Articles published do not necessarily reflect the views of the publishers. The editor reserves the right to alter or cut copy. Articles submitted are deemed to have been cleared for publication. Advertisements and company contact details are published as provided by the advertiser. Technews Publishing (Pty) Ltd cannot be held responsible for the accuracy or veracity of supplied material.




© Technews Publishing (Pty) Ltd. | All Rights Reserved.