When working with the budget for a customer or for internal use, it is important to know if your client or your financial department is more familiar/more comfortable with placing an order as a Capital Expense (CapEx) or an Operating Expense (OpEx). Depending on accounting or the time of the year, there may be a preference for CapEx, but in most cases OpEx is preferred, since OpEx is something that can be planned for month-to-month. Most of our services are covered by the OpEx model, but if you prefer we can build a system more in-line with CapEx purchases.
A traditional CapEx order would be ordering a whole rack filled with servers, along with all the infrastructure and labor hours required to make the sale happen. In a CapEx sale, the customer assumes all risk from the get-go, with the possibility that the solution won’t meet their ROI expectations over time, whereas the vendor in question has already completed everything on their side in regards to hardware and software sales. However, because the Vendor wants to make that sale again in X amount of time, where X is equal to the length of their sales cycle, they will support the customer and ensure the experience is a positive one.
OpEx orders, in comparison, consist of the customer buying what they need today, and the sale continuing on every month to ensure the customer is happy with the arrangement. The vendor gets paid on a residual basis, so while their upfront sale isn’t as large, they have the opportunity to have a more stable pay cycle when maintaining multiple clients (since every client needs to pay for the service at the set payment intervals). Sales cycles are a bit different for OpEx models as well – clients can scale their needs monthly, so the relationship between client and vendor is more consultative typically that it would be in a CapEx model.
In other words, for sales staff, channel partners and more, signing a business deal is a little different in the two models. Signing a contract in a CapEx model gives the vendor a pot of gold up front, whereas OpEx gives the vendor a smaller pot of gold that can replenish itself potentially forever. However, because a CapEx sale is much riskier than an OpEx sale, CapEx sales tend to be harder to close, even though at the end of a contract (say, 3 years) the customer has usually paid the same amount in either case.
Vault Networks products are primarily designed to be priced around the OpEx model. Dedicated Servers and vnCloud solutions are both available on a month-to-month basis, with the ability to scale as needed. Colocation services are also billed monthly as opposed to a large, up-front sum. However, if a customer would prefer a more CapEx sale (or if you prefer it), CapEx deals can be done and sometimes there are promotions that tie directly to that, such as our promotion with Dedicated servers offering customers 2 free months of service when they pay for a year upfront.
OpEx is a large part of any cloud solution like our vnCloud, and there are great benefits for companies that can work with that type of sale, and we encourage service providers who are interested in working with a cloud service to consider joining our Channel Program so they can have an OpEx product of their own to sell. This is a great opportunity for those organizations to make revenue that is evergreen and sticky among their own clients. After all, it’s not like your customers will stop needing their servers after a year of service – by growing your book of business with OpEx deals, you can grow your business to a point where you can be comfortable by just maintaining existing accounts and resolving their issues, and not needing to hunt for new business. To learn more about how Vault Networks can help you build an OpEx business, or to learn more about our services, feel free to reach out to us by calling (305) 735-8098 option 2 or by emailing sales@vaultnetworks.com.