INSIGHTS ON CAPEX & OPEX MODEL FOR IT INFRASTRUCTURE
What is CAPEX Model?
Any procurement with the upfront investment is known as capital expenditure or CAPEX Model. Ideally, large enterprises, Multinational companies, Government organizations opt for the CAPEX model for complete ownership, cost-saving benefits, and reduced operational expenditure.
What is OPEX Model?
Any software services or infrastructure resources subscription without upfront investment is known as operational expenditure or OPEX Model. Ideally a startup or a mid-size organization would opt for the OPEX model because of the insufficient funds/cash flow for capital expenditure.
What Is The Difference Between CAPEX And OPEX Models?
| S.No | CAPEX Model | OPEX Model |
| 1 | Upfront investment | No upfront investment |
| 2 | Sufficient budget/ cash flow should be available for CAPEX | If there is a low budget/less cash flow, then the OPEX model the best option |
| 3 | High-cost savings because of upfront Investment | Fewer cost savings compared to CAPEX Model |
| 4 | Best suited for the very high utilization of the infrastructure, long term investment | Best suited for the less utilization of the infrastructure, seasonal / on demands/ short term requirement |
| 5 | Infrastructure ownership is with the customer | Infrastructure ownership is with the service provider |
| 6 | The approval process takes time | The approval process will be faster than the CAPEX model due to no upfront investment |
| 7 | Most of the Finance, Government & Defense organizations protocol is to keep data on-premise and within the organization which leads to the CAPEX | Many organizations are concerned about data security and not about the data location. Most of them are looking forward to the service-oriented models such as IaaS, PaaS, BaaS, DRaaS, etc., which are available in the OPEX model offered by Azure, AWS, Google Cloud, etc. |
| 8 | The high total cost of ownership | Zero total cost of ownership |
| 9 | The organization must wait for a longer period for the ROI | Organization can get benefit out of OPEX by using it for seasonal/short term requirement |
Stages & Key Processes Involved In The CAPEX Model
- Understanding the immediate, near future, and the long-term requirement
- Analyze and arrive at the budget
- Budget approval from the Organization’s management
- The market study on the best solution providers and their offerings
- Choosing the best solution stack
- Proof of concept on the selected solution stack
- Comparisons on the proposal from the different vendors
- Choosing the best vendor and work order placement
- Project Plan, Design, Build, Testing, Go-Live & Maintenance
Stages & Key Processes Involved In The OPEX Model
- Understanding on the immediate requirement
- Comparison of the services, features & proposal offered by the service providers
- Choosing the best service provider
- On-boarding and subscribing the required service/resources and start the development activity
- Choosing the billing cycle (Monthly, Quarterly, yearly) for subscribed services & the resource utilization
Ideally OPEX model is a cloud-based offering. If you need an OPEX model for on-premise we have multiple options for the same. Would you like to know about Datacenter Modernization and considerations?
Zindagi Technologies Pvt Ltd is a fast-growing organization and provided consulting services to its clients and helped them in choosing the right investment model (CAPEX/OPEX) for their IT infrastructure. We have a team that holds 30+ Years of industry experience & certified subject matter experts.
Are you looking forward to the IT infrastructure modernization and need assistance in Consulting/Planning/Designing /POC/Built/Operations or everything in a one-stop destination? Please reach us and we will surely help you or visit our website.
Author
Leela Krishnan
Data Center Consulting Engineer
