OpEx or CapEx With SD-WAN, which model should you opt for?

Short answer: Under CapEx, a company buys SD-WAN hardware and software up front as assets; under OpEx, it pays a recurring subscription or managed-service fee. Many organisations prefer OpEx for SD-WAN because it eases cash flow, gives one point of contact and leaves upgrades, licensing and warranty to the provider. Nexapp offers this as Network as a Service on a per-site subscription.

CapEx and OpEx are two terms that have been used quite a lot in the day to day corporate world. Let’s first understand these two terms and what their differences are.

What is the difference between CapEx and OpEx?

To put it simply, CapEx or Capital Expenses are any expenses made by any organization which essentially are the company asset. For example, computers, servers, vehicles, etc for the company, or owning land under the company name is a company asset. Where the company is incurring expenses now in order to make profits off these expenses in the future. On the other hand, OpEx or Operational Expenses are those expenses made by the company that are required for the continued operation. Expenses that are recurring or on a subscription-based model like salary and wages, insurance fees, raw materials and supplies etc – all fall under Operational Expenses or OpEx.

Why do companies choose OpEx for SD-WAN?

But when we talk about technology, many companies are shifting to an OpEx model rather than sticking with the CapEx model. Companies are transitioning to an OpEx model as this directly helps with a better cash flow, which in turn serves to be a more profitable and smarter choice for organizations.

When we talk about networking and WAN, following a CapEx model is not only monetarily expensive, but it also drains in a lot of man power. The ease of doing business is another key factor. A fully managed SD-WAN service solution hands over its entire operation, management, security, and troubleshooting responsibility to a trusted managed service provider. By adopting a managed solution strategy, organizations can get rid of multiple vendor agreements and benefit from an experienced partner. Hence, making the entire process a smooth hassle-free journey.

With the growing shift to Software as a Service (SaaS) solution, it is now one of the strongest trends in the IT/Software market. It is easy to say that the expenses related to a SaaS solution are that of the OpEx model. With new purchase options created, which in turn have a varied range of financial models used to pay for software. Being a subscription-based model, SaaS provides the flexibility of shifting in between expenses and understanding what model works for their company best – rather than spending a large sum on something that may or may not be required in the future. Being a cloud-based solution, SaaS minimizes the additional expenses on hardware and infrastructure as well.

With remote and hybrid work now common, good connectivity has become a necessity rather than a luxury. For companies and industries this is more of a challenge, as everything is linked to their DC and employees can find it difficult to reach portals from outside the workplace. With cloud computing taking over, network as a service (NaaS) makes it easier to extend the network to wherever people work. Nexapp offers a NaaS model, which in turn makes networking a more financially viable option.

What does a managed SD-WAN provider handle?

Adopting the OpEx Model for SD-WAN is the route many organizations are taking up, and rightly so. Working with an external vendor minimizes all the additional expenses.

• There is a single point of contact for all the problems that a company might face.  
• The external vendor is the one-stop-shop for all large and minute issues that an organization may experience.
• Vendors take care of all the necessary upgrades, licensing and warranty issues that may come up, making it a hassle-free experience for the company.

Handling remote locations is not just a click away, with the new cloud-based application, it becomes extremely convenient to manage the connectivity of all remote locations with ease.  In turn, providing real-time data on the usage and the speed at each location.

With an OpEx model, there is an added benefit of an option of termination if the company is not satisfied with the product or services. Not being at the mercy of anyone. Helping businesses save time, bring down operating expenditures, and free up IT resources to focus on other value-added tasks.

Organizations are looking for solutions with lower upfront expenditure and better use of resources. This is where the OpEx model plays a vital role for SD-WAN, and Nexapp is a one-stop provider for SD-WAN solutions. That said, a CapEx model can still suit organizations that prefer to own and run their infrastructure, and Nexapp’s platform can also be self-hosted by the customer.

Related: Network as a Service on a per-site subscription, managed SD-WAN and NOC services and SD-WAN vs MPLS cost in India.

Frequently asked questions

What is the difference between CapEx and OpEx in networking?

CapEx is money spent up front on assets the company owns, such as routers and servers. OpEx is recurring spend needed to keep operating, such as subscriptions and managed services.

Is managed SD-WAN an OpEx model?

Yes. With managed SD-WAN, the organisation pays a recurring fee and the provider takes on operation, management, security, upgrades, licensing and troubleshooting.

What is included in Nexapp's Network as a Service?

Nexapp NaaS bundles last-mile connectivity, Instaroute hardware, SD-WAN and security, site deployment and a 24x7 NOC on a per-site subscription.

Can we host the SD-WAN management platform ourselves?

Yes. Nexapp's platform can be Nexapp-hosted in India or self-hosted by the customer, which suits organisations that prefer to own and run the infrastructure.

See Network as a Service from Nexapp to know more about the financial benefits of SD-WAN.