Operating Expenses and the Hidden Element of Cost

How to measure it and why you should care


Rack space: If you've ever rented an apartment or had a mortgage on a house, you know "space is not free." The same holds true for security equipment. There's a cost associated with that space too. Let's say a building costs $1 million per year to lease and maintain, and the server room consumes two percent of that floor space at a cost of $20,000 per year. It may not come out of the security budget, or the IT budget for that matter but someone somewhere in your organization is paying for it. Then there's the additional cost of the IT staff, backup procedures, training, etc. It is hard to determine a cost for a single rack unit in a data center because there are so many variables, but we know it is not free. In an outsourced data center (e.g. http://www.hostventures.com/colocationprices.html) you could pay up to $125 per rack unit per month for a fully managed server, or at least $12,000 per rack per year. To carry through our cost example above even further, our five servers and 10 RAIDs would need 25 RU (which could fit comfortably in one rack), although I have personally created quotes for systems needing over eight racks.

The total five year OPEX, taking into account all three elements above (power, cooling and rack space) would therefore be about $88,000.


Contribution to five year OPEX by three criteria: power, HVAC and rack space.

List price for this equipment would likely be in the range of $150 to $200K, suggesting that OPEX can easily account for one-third of the Total Cost of Ownership. And this does not even take into account other potential OPEX costs, such as vendor support and maintenance, administering the system, personnel training and certification, routine operating system upgrades and other maintenance.

Other common items that we have not factored in here, neither for CAPEX nor OPEX, include: rack-mounted encoders and decoders, UPS systems, patch panels, video distribution amplifiers, code mergers, central servers, network switches and redundant storage, etc. All of these security system components need power, cooling and rack space. Furthermore, enterprise network switches can cost $100 to $200 per port (CAPEX), so the number of ports a solution requires is a factor you should consider when evaluating competing solutions.

Put bluntly, for every two dollars you spend on CAPEX you need to put another dollar aside for OPEX.
One final important point regarding OPEX is that keeping OPEX costs down starts with choosing the right solution. Don't be enticed by a deeply discounted solution (that offers a lower CAPEX) until you first analyze the OPEX.

For example, in the case of VMS solutions, some vendors' software may be designed to run more efficiently than others, allowing them to record double the number of cameras on a given network video recorder; handle double the recording bandwidth; run more channels of video analytics on a server; or even maximize the usable amount of storage on a disk array rather than losing up to 45 percent of it as overhead.

As you can see, calculating OPEX is not difficult, and well worth your time. I do it with a simple spreadsheet. If you don't have such a tool then simply add up the total number of rack units needed for all your equipment and find some co-location rental prices from the Internet (that already have everything factored in), such as the one found on this Web site: http://www.hostventures.com/colocationprices.html. This will give you an instant ballpark figure, and help you bring the hidden costs of OPEX into clear view.

Dr. Bob Banerjee is senior director of Training and Development, NICE Systems' Security Division. Banerjee develops programs and initiatives to educate, train and support NICE's network of security systems integrators and dealers and provides thought leadership for NICE's security industry outreach. He holds a Ph.D. in Artificial Intelligence from the Advanced Research Center at the University of Bristol, England.