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Difficulty: EasyUnderstand concepts of cloud economics

A regional retail bakery chain is migrating its point-of-sale inventory system to AWS. By moving to the cloud, the bakery avoids purchasing expensive on-premises hardware upfront and instead pays a monthly bill based on actual resource consumption. Which economic transition does this scenario demonstrate?

  1. Replacing upfront capital expenditures with variable operational expensesAnswer
  2. B
    Converting variable operational costs into fixed capital expenditures
  3. C
    Trading system elasticity for increased capital investments
  4. D
    Shifting from a decoupled architecture to a monolithic billing model

Answer

Replacing upfront capital expenditures with variable operational expenses
Moving to the cloud allows the business to replace capital expenditures (CapEx) for physical servers with variable operational expenses (OpEx) paid monthly.

Step-by-Step Solution

1
Identify the financial model of the on-premises setup described in the scenario.
Purchasing physical hardware upfront is classified as a capital expenditure (CapEx).
Capital expenditures are upfront investments in physical assets.
2
Identify the financial model of the AWS Cloud setup described in the scenario.
Paying a monthly bill based on actual consumption is classified as a variable operational expense (OpEx).
Operational expenses are day-to-day costs of running a business.
3
Combine these definitions to identify the correct transition.
The transition is from CapEx (upfront hardware cost) to OpEx (monthly pay-as-you-go cost).
This represents replacing upfront capital expenditures with variable operational expenses.

Key Concept

Understanding CapEx versus OpEx in cloud economics
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Understand concepts of cloud economics

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