How to choose your OpEx partner

In the last post, we talked about benefits of an OpEx model over a CapEx model. The post primarily compiled information and experience shared by multiple people, agencies, experts in past few years. Yet where we lack any advice from experts is how to effectively apply this knowledge to use an OpEx model in expenses other than real estate, SaaS, web space and IT infrastructure.
This post is an attempt to encapsulate some principles on the same from our long experience and varied experiments with OpEx. Purpose – to help you decide how to choose your OpEx partner or service provider.

A common example of OpEx in electrical infrastructure is renting appliances such as air conditioners, refrigerators, washing machines etc instead of buying them. Makes sense for people who keep moving from city to city for work or education. And there are a number of service providers who provide this service, and aggregator platforms where you can find them.
A big problem in this service most times is that the service consists only of delivering the appliance and not the performance of that appliance.

When you rent an air conditioner, the service provider may tell you the age of the appliance and features built in it.
But a number of doubts may remain unanswered, or if answered, may not be benefitting the customer. A couple of them as follows –
– How efficiently will the AC cool the air or regulate the temperature?
– How long will it run without breaking down?
– Who will pay for the maintenance?
– How much electricity will it consume?
– If it breaks down, who will pay for the damages?
– And not important to everyone, but very important to some responsible ones – what carbon footprint will it leave behind?

Then how is it better to rent an appliance instead of buying it? Isn’t the quality and performance assured and more consistent when you buy one?

Well, yes. But this problem can be fixed if the service contract answers the above questions making it favourable for the customer. It means that the service provider owns the performance of the appliance, which is the final outcome you want from the appliance.
Everything necessary to maintain the performance level then becomes the service provider’s responsibility.
Of course, the pricing will also go up as the cost and risk both go up for the service provider.
But it will still be economical for the customer, for all the reasons we discussed in the last post – Why turn OpEx from CapEx, especially if the customer is a business.

So the moral of the story is to make sure your service provider owns the responsibility of the following –

  1. Regular maintenance – Be it monthly, quarterly or at some other interval, regular maintenance by experts will ensure performance as well as will result into zero or less number of breakdowns.
  2. Performance level – For example, for air conditioning on OpEx basis, the service should mean not just renting the AC, but maintaining the desired temperature or temperature range, or ability to change temperature as and when required, based on the customer’s need.
  3. Consumption of resources- It could be electricity, it could be water, or something else.
  4. Eco-sustainability – The amount of soot emitted by a vehicle, the amount of greenhouse gases emitted by an AC, or in short, carbon dioxide equivalent added to the environment by the appliance.
  5. Efficient service – Does the service provider solve your problem fast or do you have to run behind them for it? Does this service save you time, efforts, resources and headache or does it make things more complicated for you?

Though the above are written keeping electrical appliances in focus, these criteria can be applied to any OpEx service you need.

And most importantly, does the service make your life easier? Does it let you spend more time and resources on your core area of business or on other more important things?
If yes, you have found ‘the one’!