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Difficulty: MediumUnderstand concepts of cloud economics

A financial technology company, PaySwift, is migrating its transaction auditing system from an on-premises data center to AWS. The company currently pays fixed annual fees for physical server chassis, power, cooling, and hardware maintenance, regardless of the system's actual utilization. Which of the following best describes the economic transition PaySwift will experience by migrating this workload to AWS?

  1. A
    A shift from operating expenses (OpEx) to capital expenses (CapEx), allowing the company to own and depreciate the virtual infrastructure over time.
  2. A shift from capital expenses (CapEx) to variable operating expenses (OpEx), enabling the company to pay only for the compute resources consumed during audits.Answer
  3. C
    A transition to a fixed operating expense (OpEx) model by over-provisioning capacity to ensure billing predictability.
  4. D
    An increase in capital expenses (CapEx) through the purchase of Reserved Instances to eliminate all operational maintenance costs.

Answer

A shift from capital expenses (CapEx) to variable operating expenses (OpEx), enabling the company to pay only for the compute resources consumed during audits.
Migrating to the AWS Cloud allows organizations to shift from capital expenses (CapEx)—which involve upfront investments in physical servers and data centers—to variable operating expenses (OpEx), where they pay only for the infrastructure capacity they consume. This helps companies avoid over-provisioning for peak capacity and reduces financial risk.

Step-by-Step Solution

1
Analyze the on-premises financial model described in the scenario.
The company currently incurs fixed costs for physical hardware, power, cooling, and maintenance, which represent upfront capital expenses (CapEx).
To understand the economic transition, we must first define the starting point of the financial model.
2
Evaluate how AWS pricing models change this financial structure.
AWS uses a utility-style, pay-as-you-go pricing model where costs are treated as variable operating expenses (OpEx) based on actual consumption.
This step determines the destination state of the financial model in the cloud.
3
Identify the option that correctly represents the transition from fixed upfront costs to variable utility-based costs.
The transition is characterized as moving from capital expenses (CapEx) to operating expenses (OpEx).
This matches the definition of cloud economics benefits regarding cost flexibility.

Key Concept

Shifting from Capital Expenses (CapEx) to Operating Expenses (OpEx)
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Understand concepts of cloud economics

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