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OPEX, the other Expense

by Hu Yoshida on Jul 16, 2007

In the last few posts, I have been describing the elements of Capital expense or CAPEX, and how new technologies like control unit virtualization and thin provisioning can address these expenses.

The other expense is operational expense, OPEX, which is composed of the following general categories.

The analysts like IDC and Gartner used to say that OPEX was 2 t0 5 times the CAPEX. However, I believe that this ratio has come down since I see the same number of Storage Administrators managing 100 TB of storage today that were managing 10TB 5 years ago. While SRM tools have helped, I suspect that it is not about being more efficient, but about buying more storage to mask the inefficiencies of management.

When I showed this to one data center manager, he said the problem was that the financial people focus on CAPEX because those financial numbers were hard numbers versus soft operational numbers which required some assumptions and projections. As a result the buy decision would be made on the lowest CAPEX instead of the total cost of storage ownership (TCSO), and the operations people would be left to compensate for the higher OPEX out of their own time and effort. The OPEX to CAPEX ratio may be coming down, but it is putting an enormous strain on operations especially with the every increasing amount of storage, new retention and auditing requirements, and additional factors like increasing power and cooling costs.

While new tools like virtualization, tiered storage, and thin provisioning can help to reduce CAPEX, the bigger value can come in reducing OPEX. So the time has come to realistically consider the other expense, OPEX, and factor that into a TCSO when making a buy decision.

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Comments (3 )

[...] Hu makes a great argument regarding the Total Cost of Ownership (TCO) of storage. The key observation I had was that, in the enterprise, it’s easier for the finance folks to measure based on capital expenses (CapEx) than operational expenses (OpEx) because CapEx is an easily measurable expense. I think this is somewhat human nature. Folks simply walk away from deep analysis in those circumstances where qualifying and quantifying are difficult; settling for estimations and best guesses. [...]

[...] Hu Yoshida: OPEX, the other Expense “While new tools like virtualization, tiered storage, and thin provisioning can help to reduce CAPEX, the bigger value can come in reducing OPEX. So the time has come to realistically consider the other expense, OPEX, and factor that into a TCSO when making a buy decision.” [...]

[...] Hu Yoshida, CTO at HDS, recently blogged about CAPEX and OPEX.  This has triggered a series of emails between Randy Chalfant, CTO at Sun, and Rob Nieboer, also of Sun, about the validity of Yoshida’s thesis.  I am not going to steal Randy’s thunder and I really want to see what he blogs back from his perch.  I will join the battle when the lines have been drawn.  For now, I offer only this bit of research help: [...]

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