Please explain the difference between CapEx vs OpEx?
Is paying electricity every month for your datacenter a Capital or Operational Expense?
CapEx vs Opex
The major difference between CAPEX and OPEX can be identified with the question: "Is what you are buying or intend to buy an asset? An Asset is something you can either sell or keep to gain continuous value from it. For example - An asset is the server in the data center, or even the software and the databases on the servers. Electricity is not an asset. The company cannot own it. It is seen as an OPEX.
This can become tricky when we are looking at XAAS. Software as a service (SaaS) for example is something the company never owns, and as such OPEX. However, customisation of code on top of the SAAS, could be CAPEX.
PWC wrote a brilliant article on it - https://viewpoint.pwc.com/dt/gx/en/pwc/in_depths/in_depths_INT/in_depths_INT/Configuration-and.html
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Capital Expenditure (CapEx) is the Upfront cost on physical infrastructure along with Server costs (server clustering, redundant power supplies, and uninterruptible power supplies), storage cost, network etc. whereas Operational Expenditure (OpEx) there is No upfront cost but you pay for the service/product as you use it.
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That makes perfect sense. I thank you very much for your informative response.
Regards,
Brent
this is just a general explanation of capex and opex costs, but your answer doesn't classify or clarify where electricity costs belong to.
Paying electricity for our data center is an example of OpEx?
This question may be quite confusing...referring through a lot of dumps I have found it as a CapEx.
I think it can be both CapEX and OpEx.
CapEx in the sense that during the manufacturing time we invest the wire cost, joining cost, unit box(meter Box) cost which all come only once during the time of installation and it is the one-time asset of the organization whereas at the same time the monthly bills come under OpEx but for that also we call it an electricity bill. Thus, it's quite confusing.
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