Is Op Ex the New Cap Ex?


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Virtualization and cloud computing have surged on a promise for dramatically reduced capital expenditure through improved utilization of physical infrastructure—or the total elimination thereof. But, is this promise overstated? Perhaps.

Take virtualization, for example. On the surface, the cap ex ROI is a no brainer: a 4-5 X improvement in server capacity means fewer servers to buy. Right?

If history is prologue, the improvements in the economics of computing result in—not less spending—but a proportional increase in scale. When capacity is cheap, companies can justify deploying more workloads. This argument is corroborated by the Gartner Dataquest Worldwide Server Shipment Forecast, which indicates a sustained increase in shipment of physical servers over the next several years.

As Aristotle noted, “Nature abhors a vacuum.” In other words, when space is made available, things will always expand.

So, perhaps the cap ex reduction is a myth. But dig deeper and you’ll see the more strategic win: Projects that were once too speculative to cost justify are now fair game. Cheaper capacity means more innovation and responsiveness to business.

It also means a dramatic increase in the number of workloads that need to be managed. I’ve long contended that virtualization and cloud may be a cap ex boon and an op ex bust. Of course I’m now rethinking the “cap ex boon” (which is a shame because it sounded really great), but my contention about the “op ex bust” is firmer than ever.

Others are finally taking notice. Op ex may well be the new cap ex.

The perfect storm of massive scale, accelerating change and contracting budgets all point to op ex as the current devil for enterprise IT. This explains the renewed interest in automation and the rise of movements like DevOps—both aimed at dealing with scale, the need for speed, and mandates to do more with less.

What does this mean for IT personnel? The simplistic conclusion would be that they better freshen up their resumes. But, like the cap ex argument, that’s too hasty a conclusion. It means that they’ll have the tools they need to deal with scale. IT may not be in a great rush to hire these days, but the resources they have? They’re more important than ever.


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