CAPEX vs OPEX

Issue 1 2021 IT 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.

For more information contact Infinidat, scapoor@infinidat.com, www.infinidat.com




Share this article:
Share via emailShare via LinkedInPrint this page



Further reading:

Integrated facilities management solutions
Issue 2 2021 , IT infrastructure
Tsebo Facilities Solutions provides a smart remote monitoring solution that will increase efficiency and, most importantly, mitigate risk.

Read more...
Creating hyper-aware industrial facilities
Issue 2 2021 , IT infrastructure
Jacob Chacko expands on what a cognisant industrial site is and why edge technology and the Industrial Internet of Things (IIoT) are relevant to it as well as hyper-aware industrial facilities.

Read more...
Increase data centre uptime
Issue 2 2021, Grafo Wiremarkers Africa t/a Brady South Africa , IT infrastructure
Brady Corporation offers reliable labels that are designed to reliably identify any data centre cable, server, component and rack to take the guesswork out of troubleshooting.

Read more...
Cloud workload protection with container security
Issue 2 2021 , IT infrastructure
New innovations enable collaboration between InfoSec and DevOps teams to reduce risk and protect public cloud and on-premises Kubernetes environments.

Read more...
Agile networking for unpredictable business landscapes
Issue 2 2021 , IT infrastructure
Although the events of 2020 may have put SD-WAN implementations on the back burner, the agility, resilience and performance it offers are actually the ideal solution to many current and future business challenges.

Read more...
Cisco and AMD improve performance, security and hybrid cloud operations
Issue 2 2021 , IT infrastructure
Cisco has announced?an expanded engagement with AMD?to help businesses?accelerate advanced digital experiences?and improve hybrid cloud operations

Read more...
GJD unveils new Network Bridge product
Issue 2 2021 , IT infrastructure
GJD has announced the launch of its new Network Bridge, designed to easily connect GJD IP devices with third-party video management software and network compatible products, including Avigilon and other proprietary CCTV systems.

Read more...
Backup servers with free Altaro software
Issue 2 2021 , IT infrastructure
Altaro Physical Server Backup enables you to easily restore a physical server on your network and access it on your existing virtual environment, as a virtual disk or fully functional virtual machine.

Read more...
Vehicle-to-office connectivity
Issue 2 2021 , IT infrastructure, Mining (Industry)
A large coal and heavy minerals mining company in South Africa is rolling out a mine-wide wireless digital connectivity networking solution that interconnects the various employees’ mobile devices to monitoring systems on vehicles, mining equipment and conveyor belts throughout the mine.

Read more...
Introducing Video Storage Solutions
Issue 1 2021 , Integrated Solutions, CCTV, Surveillance & Remote Monitoring, IT infrastructure
Video Storage Solutions (VSS) was formed with the single objective of providing system integrators who are part of the Milestone Community with verified video recording and storage appliances. VSS is distributed in South Africa by First Distribution.

Read more...