ERP Software: Should I go Capex or Opex?

One of the most frequent misconceptions about Capex and Opex is which is preferred. But in reality, both have their own era which depends on different business and persons perspectives.

Capex and Opex stands for consistently Capital expenditure and Operating expenses where Capex calculate the major and long term expenses and Opex calculate the day to day expenses of a company. A software could be both as Capex and Opex for the same organization based on price and priority.

Same software could be considered as asset (Capex) or regular expenses (Opex). Now the question arises, how could it be?

We can get a clear picture of Capex and Opex from a general point of view in this table. Here, Software, Hardware and Server all are considered assets, which are one time or long term cost. If a company wants to purchase these Software, Hardware and Server for once then it will be under Capex. Because of their monthly packages, Internet and Maintenance are recurring expenditures, whereas Training and Implementation are variable as regular expenses.

So,Internet, Training, Implementation, Maintenance all of these terms are Opex.

Now what if a company wants to purchase software as a service?

If a company wishes to purchase a software as a service it will be a recurrent service and it will be covered by regular expenses. When it comes to Hardware, Server and the Internet, If a company rents a data center, these three services become recurrent services. When costs become recurrent or regular, they are classified as Opex, whereas in the previous table, Software, Hardware and Server are classified as Capex.

Training and Implementation are considered as variable as Opex whereas Maintenance is also considered as regular expenses.

From the above discussion, it is totally clear that a company will go for Capex or Opex depending on the company’s own perspective. Both terms have their individual priority and benefit level. The company will determine whether to proceed with Capex or Opex based on the company’s terms and requirements from a different viewpoint.