OOOOhh...PEX!

Steering operational expenditure is paramount to maximising your application's return on investment and helping to improve your company's bottom line


Often, the operational expenditure (OPEX) that your team needs to incur after introducing a new application comes as a bad surprise. Especially in a corporate context, you do not need to foot the entire bill - so why bother?


Your team's operational expenditure for a given application directly determines your company's return on investment and, therefore, the capital expenditure (CAPEX) that will be available to you in the future. Operational expenditure that can not be directly attributed to your application (indirect cost) affects your company's bottom line and thereby its long-term viability.


Making your application's OPEX transparent and trying to minimise it as much as possible therefore really pays off both for your team and even your entire company.


What is Operational Expenditure?


Simply put, OPEX are the costs that you need to pay in order to keep an application running and functioning as intended. Normally, such costs are recurring and are paid for a certain period of time (e.g. monthly or yearly maintenance fees) or are tied to the volume of operational parameters, such as network traffic, virtual CPUs/RAM or even amount of emails transmitted. The latter are designated as variable costs, whereas costs that do not depend on the "consumption" or load of your application are referred to as fixed costs.


Steering Your Application's Direct Costs


The direct costs arising from your application's operation are the costs that are directly related to making your application run and function properly. In order to ensure proper steering of your direct costs, you need to distinguish between fixed costs and variable costs and need to ensure closed-loop monitoring of the latter.


A typical example for fixed costs are yearly maintenance contracts with suppliers that, e.g. cover services ensuring ITIL-conformant service operation. You can try to minimise your direct fixed costs by, for instance, renegotiating your maintenance contracts.


Variable costs, on the other hand, are often closely related to the usage or load of your application and may include license costs, network ingress/egress traffic in a datacentre or infrastructure hosting costs. Especially when hosting your application in the cloud, the latter two may be highly dynamic. This requires your team to set a range for your monthly or yearly budget for direct variable costs, to track and, if possible, predict the development of variable direct costs and to correct if required. In my experience, refactoring and architecture adaptations are the best means to minimise this cost component.


Do not Forget Your Indirect Costs

I earlier wrote about how indirect costs should also matter to your team, as they affect a company's bottom line. But can your team really influence indirect costs to an extent to would actually make a difference? In certain cases, yes, but you first need to understand your application's footprint in the company.


Let me give you an example: Poorly designed applications can lead to incidents occuring frequently, which will absorb its users, your helpdesk and, when talking about high-availability applications, your operations control centre. This generates unneccesary costs which, in certain cases, may be hard to quantify (think about your company's reputational damage) and in others, not, such as when thinking about the efforts made in the helpdesk and the operations control centre to solve such incidents. You can influence the latter by, for example, implementing appropriate architectural changes to your application that fix the root causes behind the incidents.


Accordingly, minimising your application's indirect costs is quite possible and can positively influence your company's bottom line. Your team needs to focus on understanding where potential levers within your organisation are located and needs to deduce measures on how to use them.


Care to Know More?


Would you also like to know more about this post's topic? If so, then please post your questions in the comments below and I will be answering them. If the subject of your question is a hot topic, then I will dedicate a post to it in the future.



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