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Azure CapEx vs. OpEx

Capital Expenditure (CapEx)

  • Upfront cost on physical infrastructure
  • You need to plan your expenses at the start of a project or budget period.
  • CapEx computing costs:
    • Server costs – server clustering, redundant power supplies, and uninterruptible power supplies.
    • Storage costs – centralized storage and fault-tolerant storage for critical applications.
    • Network costs – cabling, switches, access points, routers, wide area networks, and Internet connections.
    • Backup and archive costs – backup maintenance and consumables like tapes.
    • Organization continuity and disaster recovery costs – recover from a disaster and continue operating using backup generators.
    • Datacenter infrastructure costs – costs for construction and building equipment.
    • Technical personnel – technical expertise and workforce to install, deploy, and manage the systems in the data center and at the DR site.

Operational Expenditure (OpEx)

  • No upfront cost but you pay for the service/product as you use it
  • OpEx is particularly appealing if the demand fluctuates or is unknown
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  • OpEX computing costs:
    • Leasing software and customized features –  responsibility to de-provision the resources when they aren’t in use so that you can minimize costs.
    • Scaling charges based on usage/demand instead of fixed hardware or capacity – plan for backup traffic and disaster recovery traffic to determine the bandwidth needed.
    • Billing at the user or organization level – when using a dedicated cloud service, you could pay based on server hardware and usage.

Azure CapEx vs OpEx

Validate Your Knowledge

Question 1

Question Type: Hotspot

For each of the following items, choose Yes if the statement is true or choose No if the statement is false. Take note that each correct item is worth one point.

Correct Answer: No-Yes-Yes

Capital Expenditures or CapEx is defined as funds used by organizations to obtain, upgrade, and maintain physical assets such as data centers. These expenditures are generally nonrecurring and result in the acquisition of permanent assets.

Azure Reserved Instances is an example of a CapEx model.

Operating Expenditures or OpEx is defined as funds that are used by organizations for their day-to-day operations. Think of OpEx as your electricity and water bill. The more you use, the higher the charges.

Azure on-demand or pay-as-you-go is an example of an OpEx model.

Therefore, the following statements are true:

  • Capital expenditures generate benefits over a long period. These expenditures are generally nonrecurring and result in the acquisition of permanent assets.
  • Operating expenditures are ongoing costs of doing business. Consuming cloud services in a pay-as-you-go model could qualify as an operating expenditure

The statement that says: Two virtual machines that use D2d v4 instance will always be billed the same monthly costs is incorrect because despite having the same instance type, they may differ on the following specifications: type of OS, region location of each virtual machine, and storage size, type, and transaction. These must always be specified when creating a virtual machine.

References:
https://docs.microsoft.com/en-us/azure/cloud-adoption-framework/
https://azure.microsoft.com/en-us/pricing/calculator/

Note: This question was extracted from our AZ-900 Microsoft Azure Fundamentals Practice Exams.

For more Azure practice exam questions with detailed explanations, check out the Tutorials Dojo Portal:

Microsoft Azure Practice Exams Tutorials Dojo

Sources:
https://docs.microsoft.com/en-us/azure/cloud-adoption-framework/strategy/business-outcomes/fiscal-outcomes
https://docs.microsoft.com/en-us/learn/modules/principles-cloud-computing/3c-capex-vs-opex

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