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CapEx vs OpEx in IT infrastructure

In order to understand the place of both CapEx and OpEx in IT infrastructure, firstly, it’s important to define both terms. 

CapEx refers to long-term investments in assets, for example buying a building, paying for a website build, or buying computer servers for on-premise infrastructure. 

OpEx refers to the running costs of your business’s day-to-day operations, for example employee salaries, utility bills, or monthly payments for cloud hosting. 

CapEX vs OpEx comparison diagram

On-premise infrastructure tends to come with higher CapEx, and lower OpEx. For example, certain servers will need to be fully replaced every four years, as they stop being supported by the manufacturer. If you are running these servers on-premise, you will then face a significant CapEx cost to replace all of your hardware. Other CapEx costs for on-premise infrastructure can include additional hardware to scale up if your business needs grow, and costs for upgrades. 

OpEx costs of on-premise infrastructure can include rent for the space housing your servers, monthly payments for software, and electricity costs of running equipment.

In contrast, when using cloud infrastructure, you will have reduced CapEx costs, as the purchase of hardware and upgrades is typically managed by the provider. Instead, you will have OpEx costs, primarily in the form of monthly billing. With some hyperscalers, this OpEx can be very high, particularly as your usage scales up, with unpredictable costs each month. However, with a provider with transparent billing, fixed costs, and affordable scaling, this monthly OpEx can provide cost-savings over the lifetime of your infrastructure against the CapEx costs of on-premise. Additionally with a cloud solution, you will not have separate OpEx costs of renting server space, software payments or electricity, as this is all included in the monthly cost of the platform.

With either on-premise or cloud, when you are managing your infrastructure in-house, salaries for a skilled IT team can also raise your OpEx. This cost can be reduced through a managed cloud solution, which removes the need to have in-house experts.

It is important to regularly review your CapEx and OpEx costs with your IT infrastructure, comparing both your predicted capex and opex costs over several years of operation, to decide which is the most cost-effective solution for your needs. In many cases, migrating to a managed cloud solution can bring genuine cost savings for your business.

Migrating to cloud to reduce CapEx and OpEx

If you’ve decided on migrating to a cloud solution to reduce your costs, you will still be left with a significant amount of options and questions. When choosing a provider, you should consider the following: 

Transparent billing – Not all cloud providers are equal. To avoid unexpected OpEx you should use a provider with transparent billing so you can effectively plan your costs. 

Consultation – In order to minimise your OpEx by keeping your payments for your infrastructure low, an optimised, bespoke solution is vital. With some off-the-shelf solutions, you can be left paying for resources or services you don’t need. When you are migrating to our solutions, our experts will consult with you to assess your business needs, and design an optimised platform, so you are only paying for exactly what you need. 

Ease of migration – Many providers will need to completely rebuild your product to migrate to their platforms, or may have a lengthy migration process which causes disruption to your business. We can create a bespoke solution, which can include moving your existing infrastructure without recoding, and as part of our management services our experts can handle the migration process for you to ensure the simplest transition.

Support – The cloud sector can be challenging to navigate, with changes to hardware and software, regulations, and technological advances to consider. We offer 24/7/365 support, with our cloud experts always on hand to answer your questions and concerns, and stay up to date with any industry developments that could impact your infrastructure.

Management – Working with a managed provider can support you to control OpEx from salaries by removing the need for in-house expertise. Our cloud experts act as an extension of your business, maintaining your infrastructure and handling any support needs, upgrades, and scaling requirements.  

What next?

You can speak to one of our experts today to discuss how you can reduce your CapEx and OpEx, with an initial consultation call to advise on the best solutions for your business, and give a cost estimate for your project. Fill out our contact form and we will be in touch. 

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