Opex vs Capex Comparison and Diffreneces

OPEX or CAPEX? How do I choose?

Five years have gone past way too quickly and you face the prospect of ensuring that your business’ IT systems are up to the job for the next five years. Among CIOs and CFOs the debates continue on how to best budget for and acquire IT resources.

Do you spend your valuable cash or credit on buying new servers (at the expense maybe of that much needed monetary injection into accommodation or personnel) or do you look at alternatives which do not consume your cash and which could even offer a cash flow benefit?

Have You Thought about Server Hosting?

Server hosting provides just such an alternative: use your monthly operating expenses (OPEX) to fund a high performance server solution leaving valuable cash/credit (CAPEX) to fund business growth. Sound like a no-brainer?

If you have available cash then a CAPEX purchase maybe the solution. Funding capital with an overdraft/loan is a risk in these tough financial times, loans can be withdrawn at any time leaving your business exposed but hosting your new server system will allow you to plan your IT expense with a predictable OPEX monthly payment and reap many additional benefits. That new office or equipment begins to seem more like a possibility.

The Benefits of Server Hosting

So, what benefits can you expect when you use your monthly OPEX to fund a high performance server solution?

  • Predictable monthly expense
  • No capital outlay – cash/credit available to invest in business growth
  • Possible lower tax for your company*
  • No on-going maintenance costs
  • An opportunity to manage IT staffing levels
  • Lower energy bills – no need to power or cool your servers
  • Possible mid-term technology refresh for increased performance
  • You are guaranteed high performance, secure, resilient and reliable servers
  • A fully managed service is also available if your need it (contact the team for more information)

*The tax benefits of hosting and paying a regular monthly payment are company dependant, review at this example and then ask your accountants to calculate the benefits your company can achieve

And here’s how…

Example:
3 Dell Blade servers with dual processors, 16Gb ram, 600Gb disk, Dell Pro Support Plus maintenance agreement, 100MB leased line with router and Firewall and UPS assuming a 5 year loan at a 5% flat interest rate.

The cost of ownership story:

Capital outlay – £15,750 if you purchase a server plus £158 per year interest – your capital expense is ZERO if you HOST your servers.

Additional costs – if you purchase your systems you will need to spend £8,000 per year for a high performance leased line – a high performance leased line is INCLUDED in your monthly HOSTING payment. £355 per year maintenance contract costs – Veber handle the hardware so you pay NO maintenance costs.

Other Savings – You pay no energy costs for powering or cooling your servers saving you up to £1,556 per year. You will have NO costs for server space or security. As Veber manage your servers you may also have lower costs for IT staffing.

Peace of mind – HOSTING your servers will allow you to plan low monthly payments, enjoy lower energy bills, you will not need to worry about loans for server hardware, you can plan your business in the knowledge that as you grow your servers can grow with you without additional capital. You will be able to focus on your business plans in the knowledge that your key IT infrastructure is secured in a purpose built data centre and that you have the support of the Veber team to keep you running.

No-brainer scenario again? The cash flow benefits are clear. Server hosting requires:

NO upfront capital
NO upfront VAT
NO loan interest
 

moneyImage source – Didier Weemaels (CC License)

A holistic approach

A great server hosting solution for your business covers all the bases, financial and technical:
High performance, secure, resilient and reliable servers with availability of 99.999%

A London Data Centre with:

  • Dual power supplies for resilience
  • N+1 Cooling which provides dual cooling systems plus a hot backup
  • Dual communication lines with unlimited bandwidth
  • 24/365 physical security

Access to a supportive and knowledgeable team of hosting professionals

Computer hardware is predictable, it breaks – that’s why you have a maintenance agreement. A typical server maintenance agreement is £355 per year (Dell Pro Support Plus)

Servers consume power and need to be cooled for maximum reliability. The cost of supplying power to a typical server solution could be more than £778 per year, if cooling is required the cost could be double at £1,556 per year (Based upon a typical 4 server solution using Veber’s Data Centre power utilisation and a typical industry business rate for electricity of 21.31p per Kw/hour)

Next year’s server hardware will be higher performance for a similar cost leading to a rapid decline in the value of your servers. Within a year a computer will be outdated by a new model which is faster for a similar price as predicted by Moore’s law. If needed a hosted solution can be upgraded with no additional capital outlay.

Conclusion

So, which wins the OPEX vs CAPEX battle? The decision is yours. Do you want to spend your valuable capital or use credit to purchase servers, support them with power and cooling, pay for an expensive maintenance contract, employ and train staff to manage the continual operating system upgrades, spend more money to enhance performance after a few years and after 3-5 years do it all again…

OR

Use your OPEX to host your solution with Veber. We will provide you with the very latest Dell Servers, secured in a managed environment which has a proven record of 99.999% uptime. Veber manage the hardware so you have nothing else to pay above your predictable monthly hosting fee. For that you get high performance, reliable, resilient servers which you can upgrade at any time to suit your growing business needs. Whilst we are ensuring that your servers are operating effectively and securely, you’ll be using the intelligently saved CAPEX to grow your business and model your offices on Virgin Holidays’.

For more information visit our post about the benefits of OPEX hosting. Also, if you are interested in dedicated server hosting, Veber offers a powerfull and high-speed solution by using only the best hardware available.

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