1.3 Capital vs Operational Costing

Financial Shift

• The businesses does not always necessarily have peak traffic, it depends on seasonal demand, so it would be inefficient to invest on hardware. The cost is justified for some season and not justified for other seasons.
• This is where OpEx comes into play.

OpEx	CapEx
Cost incurred for goods and services on an ongoing basis, with expenses aligned to usage.	Initial investment in physical assets.
Invoicing for these expenditures is immediate	The value of capital expenses diminishes over time due to depreciation.
Fast paced market	Long term investment.