Demystifying CapEx, OpEx & Capitalisation for Product

Product leaders constantly hear requests for more CapEx or questions about capitalising work, but the real power comes from understanding that these terms have two distinct lenses: governance authority and accounting classification. When you treat CapEx as a control on long-lived commitments and OpEx as reversible operating spend, you can see which decisions truly lock the organisation into a strategic bet and which are simply day-to-day costs.

In the governance sense, CapEx is about committing to durable assets that are hard to unwind, like building a data centre or buying servers. OpEx covers ongoing costs such as cloud usage, SaaS subscriptions, and salaries. The article shows how confusing these lenses leads teams to optimise for financial approval rather than customer outcomes, distorting roadmaps toward large, capitalisable initiatives instead of high-impact experiments.

From an accounting perspective, the distinction matters for how spend appears on the balance sheet. Capitalisation decides whether a cost becomes an asset depreciated over time or hits the P&L immediately. The piece gives a practical rule of thumb: if the spend creates an identifiable, lasting asset with future economic benefit, it leans toward capitalisation; otherwise it stays as OpEx. This rule helps leaders predict the financial reporting impact of their decisions without letting accounting mechanics drive product strategy.

By internalising both lenses, leaders can separate the conversation about who can approve a spend from how that spend will be reflected in financial statements. This clarity prevents the common trap where teams chase capitalisable work to appease finance, allowing product operating models to focus on outcome-led delivery, faster decision-making, and healthier team dynamics.