CAPEX vs OPEX
CAPEX vs OPEX
Opex and Capex are two very different, but very important part of any business’s expenditure. Capex (capital expenditure) is money used to buy products and services that help businesses advance. This includes upfront purchases like hardware, equipment, or productivity solutions like Photoshop. Opex (Operating Expenditure) is the ongoing amount you need to run your business, month to month. Examples of Opex are monthly wages and equipment repair costs.
Many business owners, from startup entrepreneurs to Enterprise CIOs are starting to realize the benefits of incurring monthly expenses rather than an upfront capital investment.
Facilitated by the cloud and the growing number of “as a Service” solutions, the pay-as-you-go option gives you the freedom to add or subtract users as needed. Scalability and customisability is crucial for growing SMEs, who see frequent team expansion and change.
As CFO Innovation’s Cesar Bacani recently uncovered during a discussion with regional Financial Executives, the “OPEX model offers improved financial flexibility and enables better control over expenditure on IT services. …So the Asian enterprises that prefer a predictable billing structure will welcome this model.”
Given the speed of advancing technology, finance managers are “reluctant to approve large IT investments that have a lifespan beyond three years due to the risk of winding up with obsolete assets on their books”2.
When you purchase hardware, it’s your asset (or sometimes, liability) for life. Although this might seem advantageous at first, this means that you are less able to afford new models released, which most often have improved functionality and features.
With its monthly subscription option, the Opex model allows you to avoid paying hefty fees upfront for something that might not last. A hardware leasing model, for example, lets you refresh your business laptops and other essential devices every few years, exchanging your leased laptop for a new one each contract cycle. This ensures that you always have the latest technology at your fingertips.
The main reason for the shift from capex to opex is cashflow.
With the cloud and the cropping up of numerous “as-a- Service” solutions, many IT solutions are now offered as monthly opex models. Where business owners had to shell out over $600 previously to purchase a Microsoft Office license, Office 365 on the cloud now enables businesses to enjoy it for a monthly price as low as $6.60.
Plus, with capex, it’s not just about buying the product upfront. Businesses should also account for servicing and upgrading costs. Thus, investing in something long-term like equipment not only costs you the upfront capital expenditure, its upkeep also sets your operating expenditure back everytime you need to repair or upgrade the equipment.
On the other hand, comprehensive opex solutions often come with packages that include upgrades and servicing in the price itself. StarHub’s Device Subscription Service, for example, bundles top class HP hardware, business producitivity tools like Office 365 and dedicated IT support into one comprehensive package.
With no upfront cost and a fixed monthly subscription fee, your capital expenditure of up to thousands of dollars is reduced to opex as low as $43 a month. With minimal spending on such top of the line productivity solutions, you free up plenty of cashflow to grow your business the way you want to.