Sunday, December 27, 2009


When is your Information Technology investment in general and Service related investment in particular is CAPEX and not an OPEX? Let’s consider an example, if service is a value-add then money spent on it will be CAPEX, otherwise if it is something you have to do to keep your product alive – it’s definitely OPEX.

From architecture point, CAPEX services can be developed in an isolated environment and tied back to the product via satellite interface. Many such services are offered via browser and charged on pay-per-use billing model. On the other hand, core business services like messaging and security are integral part of the product and are tightly integrated with it. Mostly, customer will end up paying for OPEX service in one way or other.

Recently, my cell phone provider offered me additional data storage for fixed cost per month. This is a good example of a CAPEX service. Same provider is charging me fixed price for each text message [since I don’t have text plan] – I guess, for the provider, this is an OPEX service.

There are many things we consider while evaluating any technology including distribution model. With SOA, this distribution channel and CAPEX / OPEX model will decide many things like coupling architecture, SLA and revenue projections…

**I am not an accountant and do not understand the nuances involved in this CAPEX Vs OPEX discussion. So feel free to correct me …

Happy Holidays!


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