IT Budgets: CAPEX vs OPEX

December 21, 2017 The TNS Group

It’s that time of the year again where you may be celebrating the holidays, traveling to visit family or putting that last bit of effort to get your company to 2018 successfully and prosperously. Whatever is on your agenda, we know that it may also include finalizing your annual budget. A topic most fear as much as saying it’s time to do your taxes. It is vital for you to effectively plan and budget for technology as a key driver of your business. All departments must be in alignment when it comes to writing a budget for IT expenditures in both the short and long-term.

CAPEX or OPEX

First, when tackling your budget you want to make sure that you categorize potential expenses. Typically those fall in one of two categories; CAPEX or capital expense vs. OPEX or operating expenses. It is important to look at budgeting in these two formats so that you can deliver value to your business and achieve projected growth and performance.

What is CAPEX?

CAPEX is a finance term that identifies assets owned by the company and an immediate long-term investment. This type of expense, as it relates to IT, are those hardware and software costs that the company deems necessary assets. Businesses pay for these types of purchase up-front and can include; servers, firewalls, switches, MS Office, QuickBooks, etc.

What is Opex?

OPEX is another finance term that relates to an ongoing expense required to run your business. This includes utilities, employees costs, and facility expenses such as rent. These are categorized as the day-to-day expenses that are required for your business to stay competitive in the marketplace and run efficiently.

Some CAPEX items can be transformed to OPEX, which in doing so the expense is considered a liability. This can apply to service-oriented expenses related to the management of your technology.

If you haven’t previously worked on an IT budget or it is a newer aspect of your business, it’s recommended that you work with a Managed IT Services Provider (MSP). An MSP that can provide the strategic guidance necessary to allocate these types of expenses to meet your overall IT needs. It is always best to track expenses based on the workflow of your business as it relates to the industry.

The biggest mistake in budgeting IT costs is leaving out your staff and the services associated with the management of your technology. This added component allows you to get the best value for your investment. The need for laptop, desktop and infrastructure upgrades can increase the productivity of your staff overall and will allow you to maintain the value of the equipment that you have purchased.

The best approach is to assess where what your business and technical needs are for the coming year and compare that against what was spent in the past year. This will allow you to see what kinds of trends are aligned with your business so that you can determine the best use of those funds.

Contact The TNS Group today to establish best practices when it comes to IT budgeting. We provide the strategic guidance necessary to help you navigate the world of technology to ensure that you have a roadmap to meet your business objectives.

By: Chris Watkis, Business Development, The TNS Group

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