Capital vs Operating Expenditures for Microsoft Cloud

When it comes to integrating cloud infrastructure (e.g. Microsoft Cloud) into your operations or enhancing your existing setup, it’s pretty easy to become conflicted. The need to make informed decisions on whether you want to use a significant portion of your resources at once (CapEx) or a smaller portion every month (OpEx) gives further rise to the age-old CapEx vs OpEx debate. 

However, your objective in both methods remains the same; to efficiently provide resources to drive productivity and revenue for your business.

Understanding CapEx vs OpEx

CapEx refers to an initial and usually high cost a company bears to purchase the necessary products and services to build or enhance a part of its entire infrastructure. CapEx is no different for digital infrastructures, as servers, cloud consultants, and migration specialists are often not cheap. Once the infrastructure has been acquired and is ready to be used by a company’s IT team, the company starts a depreciation counter, usually between 2 and 10 years, to ascertain its life.

OpEx is a cost that a company pays to a service provider on a recurring basis. Suppose a company decides to opt for Infrastructure as a Service. In this case, they only have to bear the cost of the IaaS service charges, which are usually not as high as the CapEx involved in building in-house solutions. A growing number of businesses prefer using IaaS because they have to pay little or no upfront payment to gain access to the infrastructure, and they get to spread their costs over many months and years. 

Making a choice, CapEx vs OpEx

Deciding between acquiring the required infrastructure brings us to the CapEx vs OpEx question, whose answer lies with the CFO. Suppose they feel that the company has the capital resources to efficiently acquire the infrastructure or its upgrades and maintain it throughout its lifespan. CapEx is probably the ideal choice in this case.

However, the CFO might prefer opting for the OpEx route despite having the resources by getting IaaS services from a cloud service provider. They could do this to save capital resources that could then be redirected to other departments to accelerate its growth.

The OpEx spending model is simple to understand, flexible to adjust, and economical to implement in the IT industry. Usually, only a small budget is needed on a recurring basis which also often simplifies budgeting decisions. These features settle the CapEx vs OpEx debate for most people by signalling OpEx as the clear winner.

Microsoft Cloud Services: Azure and its uses

Azure is a cloud computing platform from Microsoft, which delivers computing services to numerous organisations based on their needs of bandwidth, storage, database, or intelligence over the internet. With Azure, organisations can utilise flexible resources to attain economies of scale. Microsoft only charges its users based on the cloud services they opt for; this helps lower OpEx significantly. As your business grows, you can simply scale your service plan to meet its demands. 

Depending on the nature of the business, companies consider moving to cloud computing for the following reasons: 

1. Creating cloud-native applications
2. Testing and building applications
3. Storing backups
4. Analysing data
5. Streaming audio or video
6. Embedding intelligence 
7. Delivering software on demand
8. Moving BAU workloads 

Why Azure is beneficial than an on-site data center

Here are seven reasons why more organisations consider shifting to Azure cloud services instead of an on-site infrastructure. 

1. Cost
   When companies opt for cloud computing, they eliminate their CapEx of buying hardware, software, setting up their onsite data center, and providing uninterrupted power and cooling to the equipment.
2. Speed
   Organisations can get cloud computing through self-service according to their specific requirements. Even when they require considerably larger computing resources, they can be provisioned with a few clicks.
3. Scalability
   The company can quickly scale Azure cloud computing services whenever required to meet any immediate or long-term needs. 
4. Productivity
   When organisations shift to cloud computing, their staff members are no longer required to maintain their on-site data centers. As a result, the staff has more time to work on other, more critical tasks. 
5. Reliability
   Organisations can take advantage of the cloud provider’s network by mirroring their backups in a safe location. This makes their data more secure and its storage more cost-effective. 
6. Security
   Cloud service providers, such as Microsoft Azure, constantly upgrade their systems for improved security and better performance. Users get immediate access to these upgrades that further secure their data against the ever-growing types of cyber threats. 

Conclusion

Business leaders and CFOs must conduct thorough CapEx vs OpEx analyses to understand how cloud computing services can provide them cost benefits without compromising the technical advantages their business needs. If you want to learn how your company can benefit from OpEx-driven cloud computing solutions, please contact us.

Rob Rattray

Rob Rattray is the Sales Director of A1 Technologies, a Microsoft consultancy based in Australia. Rob's focus is settings the strategic and cultural direction for A1 Technologies, while also overseeing Sales and Marketing. Rob is passionate about business and helping good people do good things through technology.