CAPEX vs OPEX: Industrial Giants Borrow a Page from the Tech Playbook

By Erika Malzberg October 11, 2016

“If you’re an executive at an industrial company, you’ve likely been grappling with the industrial Internet of Things. The rapid development of technologies that connect every part of our lives has moved from our smart phone to the jet engine. There’s perhaps no greater testament to the importance of this connectivity than General Electric’s massive effort to rebrand itself as the “digital industrial” to attract the world’s best technologists. IoT’s emergence is causing leading manufacturers to rethink their go-to-market strategies and take a page from the technology playbook: subscriptions.”

“Historically, manufacturing companies and OEM providers have operated in a capital expense (CAPEX) environment, meaning their revenue has come from selling a certain component or product to another company in a one-time, upfront transaction. The shift to a subscription model, or operating expense (OPEX), means manufacturing companies and OEM providers can now generate recurring, long-term revenue from the successful operation of, rather than the sale of, their products.”

“This new approach creates a smoother stream of cash flow for providers, while customers are assured that they have the most up-to-date products and that they’re only paying for what they need.”

Companies that invest in the subscription model will ultimately reap the rewards.

Read the full article here: TechCrunch.

To learn more about taking an OPEX rather than a CAPEX approach to IT, check out our guide: How to Overcome IT Organizational Inertia.