Find out why more CEOs are shifting their IT investments from CapEx to OpEx
Before the rise of the SaaS business model in the IT industry, companies needed to decide between CapEx and OpEx in order to properly develop their IT infrastructure. To do so, they could’ve either bought their IT assets, which would result in capital expenditure (CapEx), or they could lease them (OpEx), which would result in an operational expense.
CapEx vs OpEx – An analysis
When compared to CapEx alternatives, OpEx customers save 75-80% of their IT expenditures. Most OpEx solutions are quite transparent, allowing businesses to only pay for the power and services they use. Businesses are now able to shift to an IT spending model that is more flexible and requires less capital investment thanks to the rapid implementation of business models such as infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS).
Today, IaaS/PaaS/SaaS and the evolution of these business models gain popularity. What used to need dedicated real estate, specialist staff, and a lot of time may now be done remotely through the Cloud or by dedicated organizations that require a subscription fee. This frees up capital for investments in the company’s core business, marketing, and sales, as well as other ventures that generate revenue and growth.
The scalability of these technologies is impressive: whether you simply require a big number of users for a few months or if you need to expand fast to fulfil a sudden demand. A SaaS provider allows you to grow instantaneously, as with a cloud service, you may quickly increase your use — and then simply scale back down when the additional power is no longer required.
At some point, your organization will need to choose between CapEx and OpEx when developing its IT infrastructure. An increasingly high number of organizations are now leaning towards an OpEx solution.
Nowadays, software solutions are not only more agile but also more cost-effective than ever before. Instead of obtaining expensive licences under a CapEx model, the current trends are heading towards SaaS choices. In turn, these SaaS choices operate through internet connections and demand more affordable, monthly fees.
This approach contrasts with the traditional strategy, which uses the CapEx model, as SaaS solutions may help businesses improve their cash flow over time while just requiring a small monthly payment.
In turn, this does not require them to make a long-term commitment. Therefore, if you discover a solution that doesn’t truly match your requirements, it’s simple to cancel your subscription and start using another service that will be more appropriate for your circumstances.
Eight advantages the OpEx model has, and how it can help your IT infrastructure
The OpEx solutions are quite transparent, enabling businesses to pay only for electricity and services that they really use.
OpEx lets you pay for IT assets over time. Signing a lease agreement with your Managed IT Services Provider gives you access to the IT assets and services you require for a fixed monthly fee. This frees up IT funds for revenue-generating ventures.
3. No Depreciation
Following a CapEx strategy implies worrying about IT assets degrading or falling behind. If you lease your IT equipment under OpEx, maintenance and updates are covered.
4. Latest IT assets and services at your disposal
OpEx provides many ways to access your company’s latest IT assets and services. With a managed IT infrastructure arrangement, you receive an economical, secure network. The operational expenditures (OpEx) model provides several ‘as-a-service’ choices, such as SaaS, IaaS, and DaaS, to keep your company’s operations updated and working at ideal levels.
5. Reduced maintenance and upgrade responsibilities
Once your company has a Reliable Managed IT Services Provider, maintenance and updates are handled. Your agreement may cover backups, OS updates, IT support and repairs, and staff onboarding.
6. Less bureaucracy
Low monthly expenses speed up OpEx IT budget approval. This saves time and boosts productivity.
7. Scalable, market-responsive infrastructure
Technology and markets evolve. Your company processes should be scalable and flexible, allowing you to switch easily to a better product for your organization, and up and downscale quickly.
8. Predictable IT budget
IT leasing reduces IT budgets. With predictable monthly expenditures, you can budget ahead of time, thus allowing you to calculate more accurately your IT ROI.
This level of adaptability cannot be found in any CapEx solution you will ever come across.
IP Leasing Analysis
While many major businesses are concerned about the safety of leasing the IPs, others choose to purchase the IPs instead.
It’s quite clear that the IPv4 address is now a commodity as the price of IPv4 transfers has a direct bearing on the pricing of genuine IP leases.
IPv4 addresses are in such high demand mostly as a result of the requirements of huge companies like Amazon and Microsoft, which has caused the costs to skyrocket. This significant cost increase has become an obstacle that prevents small and medium businesses from growing.
A shortage of IP addresses launched the IP brokerage sector and in the past years, 350 million IPv4 addresses were moved. During this period, IP address costs were $18 to $25. The cost per IP address rose by approximately 80% in 2022, hitting $36-$40 per IP. In the last five years, hyperscalers, ISPs, and IP transit companies bought the most IP addresses. Such businesses now hold 94% of the IPv4 transfer market share.