CapEx vs OpEx

October 07, 2020

1 min read

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What Is CapEx?

CapEx is the spending of money on physical infrastructure upfront and then deducting that expense from your tax bill over time. CapEx is an upfront cost, which has a value that reduces over time and usually has no recurring cost. Deploying your own data center and Azure Reserved VM Instances are a few examples of the CapEx pricing model.

What Is OpEx?

OpEx is spending money on services or products now and being billed for them now. You can deduct this expense from your tax bill in the same year. There’s no upfront cost but has a recurring cost. You pay for a service or product as you use it i.e. pay-as-you-go pricing.

Azure provides flexibility between CapEx and OpEx

Capital expenditures generate benefits over a long period. These expenditures are generally nonrecurring and result in the acquisition of permanent assets. Building an application could qualify as a capital expenditure. Example, Azure Reserved Instances (Azure RI) help Azure’s most active customers save on long-term VM usage reserving VMs in advance at a discounted price by committing to a one or three-year benefits.
Operating expenditures are ongoing costs of doing business. Consuming cloud services in a pay-as-you-go model could qualify as an operating expenditure. Example, you pay for a service or product as you use it i.e. pay-as-you-go pricing.