The Way You Pay for Video Conferencing: OPEX vs. CAPEX Billing Models ·
How you pay for a service often defines your experience with it.
Having a contract with a recurring fee demands more frequent use because otherwise it can seem a poor investment – it’s like a cell phone contract you don’t want to leave. Pay-as-you-go plans offer flexibility and spontaneity, but the costs can be viewed as less predictable, as usage (and thus cost) can vary.
This mentality is no different when it comes to cloud computing, and more specifically cloud-based conferencing. The two payment and use models are called Capital Expenditure (CAPEX) and OPEX (Operational Expenditure) and they each affect how customers realize value with their conferencing platform.
In effect, CAPEX is the traditional, pay-up-front model, while OPEX allows a pay-as-you-go system that gives flexibility to the user, but without the consistency. CAPEX was about buying the hardware and infrastructure (and there was often lots) where OPEX adopts the “as a service” model, giving on-demand access to the technology required for video conferencing.
Both of these pricing plans have their strengths and perceived weaknesses. However, more and more technology markets are moving away from the CAPEX model, opting for OPEX instead for their cloud computing needs. In fact, this shift in pricing is changing the way people are using their conferencing.
First, it’s important to understand the ins and outs of each model to see why the tech market is undergoing a paradigm shift:
The Pros and Cons of OPEX and CAPEX
Like most comparisons, there’s not an obvious answer to the question about which plan is better for video conferencing. There is, however, some evidence to suggest why technology markets are moving to an OPEX system.
The CAPEX pricing plan originated in a time when the flexibility of as-a-service conferencing (AAS) was just not possible. To allow for video conferencing, businesses owned their own solution and were required to have on-premise servers and other hardware capable of managing the burden of hosting video conferencing.
Companies would own all their technology, bought from large corporations often at enormous cost. Once purchased, it was owned, controlled and set up at the leisure of the company that purchased it.
The pros of this are fairly obvious – owning and operating video conferencing internally provided a great deal of autonomy, a high level of security and consistent access. But there were downsides.
Put frankly, on-premise was the only model that existed for a long time. Due to the high cost required to own all the infrastructure to run video conferencing, it was a significant barrier to entry for small and medium sized businesses who simply couldn’t afford it. Even when large corporations did deploy video conferencing, it was limited to high level personnel and executives.
But as bandwidth and internet speeds increased, AAS became an increasingly viable model, which OPEX suited perfectly. Rather than face the enormous up-front expenditure required to participate in video conferencing, businesses were now able to access it “as a service” from providers who hosted the service in the cloud.
For most businesses, OPEX was more cost effective in the short and long term, making it a budget-friendly solution. The “as a service” model also facilitates faster deployment with easily-accessible updates and new features instead of massive hardware installations to setup.
And, because it’s hosted in the cloud and operated externally, AAS conferencing allows consistent updates and downloads with little to no user oversight required. To upgrade an on premise system would require more money, time, and resources than most companies would be able to afford.
Why are Companies Choosing One or the Other?
After laying out the pros and cons of each model, it becomes pretty clear why many contemporary companies are opting for as-a-service conferencing, facilitated by an OPEX payment plan.
It reduces the responsibility of both managing and paying for video conferencing. By reducing the amount of on-premise hardware and drastically reducing up-front costs, OPEX is opening video conferencing to markets it traditionally wasn’t reaching.
However, some companies still opt for a CAPEX model of video conferencing. The main reason is security, or – at least – perceived security benefits. An internal system hosted on managed servers does give the air of security.
There is some foundation to this belief. Cloud-based services were at one time significantly less secure than their on-prem counterparts. However, as the ubiquity of the cloud increased, so too did the security demands. Over the last few years AAS models have become viable even for companies concerned about security breaches.
That said, for some companies who face significant risks or deal with very sensitive information, it may be preferable to go with on-prem solution and a CAPEX plan for the extra peace of mind it offers. There’s also a level of control owning your own solutions offers, and for companies that want complete control of their conferencing, on-prem solutions may be ideal.
Some Numbers to Consider
It’s easy to say one solution is cheaper than the other, but it’s more impactful to see them directly compared. Here’s what it would cost to outfit an on-prem solution with CAPEX billing versus two cloud solutions with OPEX plans:
Price for 25 Licenses
|Polycom On-Prem CAPEX Solution||Polycom Clariti OPEX Solution||RP1Cloud OPEX Solution|
|$307,445||$103, 430||$47, 700|
The way we access video conferencing is rapidly changing.
CAPEX used to be the only model available. It required the purchasing of hardware and a major internal setup of servers and other technology to operate, and was prohibitively expensive for small and medium sized businesses.
As internet technology improved and better bandwidth allowed for more effective transmission of information, AAS became a viable model. And, with the OPEX payment plan, it allowed fewer barriers for entry into video conferencing, providing more flexibility at a lower cost.
Many in technology industries are moving towards this model, but some are still concerned about security in the cloud. While in-house servers still offer the most security, cloud has come a long way in that area and no longer poses the same risks.
All in all, it looks like a paradigm shift is well under way, driving a more universal adoption of video conferencing across all industries.
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