OPEX vs CAPEX or why IT operating expenditures look more attractive than capital ones.

In recent years, more and more companies are using the services of third-party IT companies to build, maintain, and protect their IT infrastructure and are moving to cloud services. Although own IT infrastructure, at first look, seems to be more attractive in terms of cost savings and control, in the case of frequent changes in the market and the general situation in our country, this approach is not always correct. So why OPEX and not CAPEX?

The first factor is, as expected, money. Money must work – everyone knows that. The amount of money spent on the development of your own IT infrastructure, in the case of its investment, can exceed all economic expectations from its owning. In other words, a conditional thousand at the beginning of the year may well become a million at the end. As they say – Money Makes Money!

The second factor is the complete predictability. With a full understanding of your costs, budgeting becomes much easier. You pay a fixed amount for IT services monthly and do not depend on unexpected additional costs for repairs or the purchase of new equipment in the case of its failure. You do not need to think about upgrading your equipment in a few years, plan any probable future costs because all these problems are transferred to your IT service provider.

The third important factor is greater flexibility. For example, your business has gone up. You open new offices across the country and at some point realize that the existing IT infrastructure no longer meets your growing requirements. In the CAPEX model, purchasing additional hardware is usually not only more expensive per unit, but can also lead to an undesirable variety of equipment, which is likely to affect the stability, reliability, and security of your IT infrastructure. The opposite option is a business downsizing when it comes to the existing IT infrastructure redundancy reduction. This applies not only to the number and capacity of equipment that is no longer fully used, but also, unfortunately, to the staff of the relevant departments, which must be reduced. In contrast to CAPEX, in the OPEX model everything is much simpler. You do not need to look for new staff, or reduce it, do not need to buy new, or think about what to do with existing equipment. All you need to do is apply for the change of current services volume. That is, the OPEX model allows you to respond much faster to any changes, use, and pay only for what you need now.

In any case, the choice between OPEX or CAPEX IT expenses models needs to be carefully considered. The OPEX model gives you more flexibility in doing business, complete predictability of costs, and saves your time. On the other hand, the CAPEX model can be more profitable, but only on one condition – you know exactly and are sure how exactly your business will develop in the coming years.

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