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Difficulty: MediumConsumption-Based Model (CapEx vs OpEx)

A financial technology company deploys its database workload onto Azure Dedicated Hosts to meet strict compliance requirements. Because the physical servers are dedicated exclusively to the company, the monthly subscription fees for these hosts are classified as Capital Expenditure (CapEx).

Answer: Answer

Answer

False
The statement is false because Azure Dedicated Hosts are billed as a cloud service (OpEx) on a subscription or hourly basis. The customer does not purchase, own, or manage the lifecycle of the physical hardware as a capital asset.

Step-by-Step Solution

1
Analyze the financial model of Azure Dedicated Hosts.
Azure Dedicated Hosts are billed hourly or monthly as a service under a consumption-based or subscription-based cloud model.
To determine whether the expense is Capital Expenditure (CapEx) or Operational Expenditure (OpEx).
2
Differentiate between CapEx and OpEx for dedicated physical infrastructure in the cloud.
CapEx involves upfront spending on physical infrastructure that depreciates over time. OpEx involves ongoing costs billed as a service. Because the customer does not purchase or own the underlying physical server of the Dedicated Host, the expense remains OpEx.
To identify the correct expenditure classification for the scenario.

Key Concept

Cloud services, including those running on dedicated hardware like Azure Dedicated Hosts, are billed as operational expenditures (OpEx) because there are no upfront capital costs for purchasing physical infrastructure.
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Topics

Consumption-Based Model (CapEx vs OpEx)

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