Learn the difference between Operational Expenditure (OpEx) and Capital Expenditure (CapEx) and how they affect your Azure cloud migration. Find out why OpEx is the preferred expenditure type for cloud services.
Table of Contents
Question
Tradewinds Traders is planning to migrate to Azure cloud services however management has questions regarding the expenditure once they migrate. You have been asked to research expenditure types and how they differ. Based on your research you have identified two types of expenditure that are relevant to Cloud migration. Capital Expenditure (CapEx) and Operational Expenditure (OpEx).
Which of these expenditure types requires no upfront cost and allows you to pay for services as you use them?
A. Operational Expenditure (OpEx)
B. Expenditure (CapEx)
Answer
A. Operational Expenditure (OpEx)
Explanation
Operational Expenditure (OpEx) is spending money on services or products now and being billed for them now. You can deduct this expense in the same year you spend it. There is no up-front cost, as you pay for a service or product as you use it.
The correct answer to the question is A. Operational Expenditure (OpEx). This is because Operational Expenditure (OpEx) is a type of expenditure that does not require any upfront cost and allows you to pay for services as you use them.
Operational Expenditure (OpEx) is the ongoing cost of running a service, such as electricity, maintenance, or rent. In contrast, Capital Expenditure (CapEx) is the cost of acquiring or upgrading a physical asset, such as a building, a computer, or a software license. Capital Expenditure (CapEx) usually requires a large upfront investment and has a long-term impact on the financial performance of an organization.
When you migrate to Azure cloud services, you can reduce your Capital Expenditure (CapEx) and increase your Operational Expenditure (OpEx). This is because you do not need to buy or maintain any physical infrastructure, such as servers, storage, or network devices. Instead, you can use Azure’s pay-as-you-go model, where you only pay for the resources and services that you consume. This gives you more flexibility and scalability, as you can adjust your usage according to your business needs.
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