CapEx vs OpEx: New Opportunities for Data Transfer and Edge Storage

Feb 16, 2022
IT Leadership

Many organizations manage their storage budgets more effectively by shifting from a CapEx model to a more optimal OpEx model.

Credit: Seagate Technology

When confronted with the need to pay for storage, organizations have two options:

  1. They can buy it upfront as a capital expense (CapEx). There are benefits to IT hardware bought as a capital expenditure. The buyer is in complete control of the purchase from selection to installation to maintenance to decommissioning. However, that might not be such a positive strategy in the long run. This approach can lock organizations into substantial upfront investment, depreciation over 3-5 years, management costs, responsibilities for repair and maintenance, the need to add drive expansion over time if data sets grow, and sunk cost problems if a platform doesn’t provide the feature set, scale, or performance needed over time. It reduces available cash, forces organizations into ongoing and sometimes unpredictable maintenance and upgrade expenses, and leads to technology and ecosystem lock-in challenges
  2. They can rent it as an ongoing operational expense (OpEx). This approach lets organizations manage an ongoing bill from one or more service providers depending on how many clouds they use. These bills are usually tied to capacity or number of objects under management. The service provider is responsible for repair and maintenance. Adding capacity is seamless. Finally, if the service isn’t working well, it’s easier to migrate to another service without worrying about sunk costs or the need to decommission an on-premises storage system.

Increasingly, organizations are treating storage as an operational expense. Relying on cloud providers to supply a turnkey storage-as-a-service platform simplifies access and gives IT teams a way to add new services without substantial upfront costs. There’s a growing shift from CapEx to OpEx for all types of storage, including mass data transfer and edge storage. An OpEx model for storage makes a lot of sense, but only if organizations vet it to make sure there are no unpredictable costs.

Pricing 1.0: Traditional OpEx storage

The reality of storage-as-a-service is that, when purchased through certain cloud service providers, it can be potentially complicated by confusing and opaque cost models. This is especially true for edge storage and data migration capabilities provided by leading cloud vendors. Some cloud providers’ pricing models are almost impossible to understand and difficult to manage. As data sets grow and needs evolve, cost unpredictability can spiral out of control and result in budget overruns and executive frustration.

In some providers’ edge storage portfolios—made up of several devices used for edge aggregation, automated data transfer, and even physical data shipments—the pricing models are just as complex. They offer a model in which:

  1. Moving data into a cloud is free, but moving data out of the cloud and into the edge (or into another cloud) incurs additional cost
  2. Keeping data in sync from edge to cloud (aka replication) incurs additional cost
  3. Moving data from one cloud region to another incurs additional cost
  4. Keeping edge devices more than five days incurs additional cost

To make matters worse, their edge storage portfolio is a locked ecosystem—it only works with their cloud. This is how organizations end up with CapEx-style lock-in. You’re just paying monthly instead of as an upfront purchase.

Pricing 2.0: A better OpEx model


Seagate Technology

Vendors can choose to create a pricing model that reflects the needs of organizations for simplicity, clarity, and openness. It is characterized by all the OpEx advantages—including pay-as-you-go, no upfront costs, no maintenance, no sunk costs—but it also offers streamlined pricing and an open ecosystem. Organizations pay only for what they need, when they need it, with a model that’s simple and transparent.

Such an edge storage and data transfer solution can sidestep all the unnecessary complexities of conventional OpEx models, enabling businesses to aggregate, store, move, and activate their data without the limitations of a closed ecosystem—whether required month by month or on an annual basis.

See how Seagate’s new Lyve Mobile data transfer as a service helps customers capitalize on the OpEx model here.