Over the past decade, we’ve seen the tech market evolve from traditional on-prem configurations to cloud-based setups. This comes with multiple benefits, not only for resiliency, but also for running your business on an easily forecastable budget. Many businesses are moving to solutions with as-a-Service licensing models because they’re easier to maintain, forecast, and budget against. Factors that are harder to predict, such as hardware, downtime, repair, and disaster recovery, are mediated by the cloud-based service provider. Let’s take a closer look at how to complete the conversion from a CapEx-heavy IT budget to a more consistent OpEx model.   

What Are the Differences Between CapEx and OpEx in Tech?

Within IT, you’ll inevitably have both Capital Expenditures (CapEx) and Operational Expenditures (OpEx), but in today’s unpredictable economy, it can be beneficial to shift toward OpEx where possible. The two models require different IT administration approaches, and your company may budget differently for each as well. Here are the most notable differences between the two types of expenses, with examples of each:

Capital Expenditures 

• Upfront cost
• Intended for more than a year of use 
• Usually a property or equipment purchase 
• Lifespan could be anywhere from 2-10 years depending on deprecation

Examples of CapEx:

• Data center infrastructure
• Physical server hardware
• Windows 10 licenses
• Network storage devices

Operational Expenditures 

• Recurring cost to run the business
• Flexible; can expand or shrink based on need and utilization
• Usually a service, subscription, or contract
• Lifespan could be indefinite depending on the service

Examples of OpEx:

• SaaS application licenses
• ISP business internet
• Utilities

Capital Expenses and Traditional On-Prem Solutions

Traditional on-premises configurations require hardware servers, locally installed applications, and varying styles of licensing. On-prem servers present an initial up-front capital expenditure as high as several thousand dollars depending on make, model, and hardware requirements as determined by your utilization and organization size. 

Other costs associated with traditional on-prem infrastructure include measures to ensure reliability, sustainability, and availability of your technical architecture. You may also need to allocate funds for a data center or server room, disaster recovery, backups, load balanced networks, and more. These additional (Read more…)