CapEx - OpEx - TCO - What does it all mean?! | C2C Community

CapEx - OpEx - TCO - What does it all mean?!

  • 16 June 2021
  • 2 replies
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In episode 25 of That Digital Show, Jon Naseath joined @ChrisHood to discuss how enterprises address technology and strategic transformation and how the financial engineering of CapEx helps in the migration to the cloud. 

 

Watch and listen to the episode

 

 

But what is CapEx? What is the relation with OpEx? And what has TCO done with them?

CapEx is Capital Expenditure. For organizations that build and deploy apps on-premises, there’s a heavy emphasis on capital expenditure to set up and maintain their IT infrastructure. The main challenge is to carefully balance between under-purchasing and over-purchasing so that the organization doesn’t end up with unserved demand or wasted capacity.

CapEx

OpEx comes from Operational Expenditure. When an organization migrates or builds and deploys apps using cloud services, there is a greater emphasis on operational expenditure. The organization is paying for what they need when they need it.

With CapEx companies spent a substantial amount of money upfront to set up their IT infrastructure and their CapEx would include paying for:

  • Hardware
  • Software
  • Networking
  • Security Systems
  • Storage
  • Space & associated costs

On the other hand, when companies run their business using public cloud services, much of their CapEx shifts towards an OpEx pay-as-you-go model.

 

In one sentence, for me, CapEx is expenses for the company, while OpEx is an investment!

 

Finally, we have TCO. When working on the cloud the Total Cost of Ownership will vary. It varies from company to company. It varies with complexity. A company might move for the first time from on-prem to the cloud. Migrate from one cloud to another. Or to multi-cloud providers. Or they might be on-prem + Multi-cloud.

So with CapEx, the cost model is:

  • Simple
  • Predictable
  • Infrequent

but with OpEx it will be:

  • Complex
  • Unpredictable
  • Agile

Best practices when working on the cloud are:

  • Identify the individual or the group/team that will manage costs. Use the IAM roles and the least privilege for your project.
  • Learn the difference between the invoices and the cost tools. Use billing - budget alerts, quotas…
  • Use the cost management tools for accountability

2 replies

Userlevel 7
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Thank you @ilias! Sometimes all these acronyms can feel like you’re consuming digital alphabet soup, but this recap breaks it down. Great work, @ChrisHood!

Userlevel 7
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I totally agree with you @Content.Sabina. Acronyms are all Greek to me! :joy:

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