Capital Expenditure (CapEx) vs Operational Expenditure (OpEx)
If you are studying for Microsoft Azure Fundamentals Exam, this guide will help you with quick revision before the exam. it can use as study notes for your preparation.
Dashboard Other Certification NotesCapital Expenditure (CapEx) vs Operational Expenditure (OpEx)
- Before: up-front cost in hardware and infrastructure to start or grow a business (CapEx)
- With cloud: Use services without significant upfront costs or equipment setup time (OpEx)
- 📝 Hybrid solution = combine both in cloud with using both on-premises (CapEx) and cloud (OpEx)
- Also possible to have CapEx in cloud with e.g. Azure Reserved VM Instances
- CapEx model is also sometimes use in cloud
Capital Expenditure (CapEx)
- Spending of money on physical infrastructure up front
- and then deducting that expense from your tax bill over time.
- An upfront cost, which has a value that reduces over time.
Costs of CapEx
- E.g. server, storage, network, backup & archive, organization continuity and disaster recovery, datacenter infrastructure, technical personal.
Benefits of CapEx
- Plan your expenses at the start of a project or budget period.
- Your costs are fixed, meaning you know exactly how much is being spent.
- 💡 Appealing when you need to predict the expenses before a project starts due to a limited budget.
Operational Expenditure (OpEx)
- Spending money on services or products now and being billed for them now.
- There’s no upfront cost: You pay for a service or product as you use it
- Deduct expense from your tax bill in the same year.
Billing of OpEx
- As soon as the provider provisions resources, billing starts
- your responsibility to de-provision the resources when they aren’t in use so that you can minimize costs.
- Cloud computing can bill in various ways e.g.
- Number of users, CPU usage time, allocated RAM, I/O operations per second (IOPS), and storage space.
- Billing at the user or organization level.
- Pay-per-use (or subscription model)
- Designed for both organizations and users
- billed for the services used, typically on a recurring basis
- E.g. when using a dedicated cloud service, you could pay based on server hardware and usage.
Costs of OpEx
- Leasing software and customized features
- 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.
Benefits of OpEx
- CapEx challange: Demand and growth can be unpredictable and can outpace expectation
- Companies wanting to try a new product or service don’t need to invest in equipment
- Instead, they pay as much or as little for the infrastructure as required.
- OpEx is particularly appealing if the demand fluctuates or is unknown
- Enables cloud agility
- Ability to rapidly change an IT infrastructure to adapt to the evolving needs of the business
- Manage your costs dynamically, optimizing spending as requirements change.
- E.g. service peaks one month => pay more, demand drops next month => pay less