A research laboratory is planning a quarterly data analysis project that requires intensive computing power for only three days per quarter. The laboratory chooses to deploy virtual machines in Microsoft Azure using a consumption-based model instead of purchasing on-premises physical servers.
Which of the following describes a financial implication of this decision?
- The laboratory eliminates upfront Capital Expenditure (CapEx) for hardware and instead incurs ongoing Operational Expenditure (OpEx) based only on active virtual machine usage.Answer
- BThe laboratory incurs a Capital Expenditure (CapEx) for the virtual machines, which must be depreciated as physical assets over several years.
- CThe laboratory pays a fixed upfront Operational Expenditure (OpEx) that covers the entire year of potential compute resource availability.
- DThe laboratory eliminates Operational Expenditure (OpEx) entirely by converting all cloud-related infrastructure costs into Capital Expenditure (CapEx).
Answer
The laboratory eliminates upfront Capital Expenditure (CapEx) for hardware and instead incurs ongoing Operational Expenditure (OpEx) based only on active virtual machine usage.
In a consumption-based cloud model, organizations pay only for the resources they actively use, with no upfront physical infrastructure costs. Since the laboratory only runs the genetic sequencing VMs for three days per quarter, they avoid the Capital Expenditure (CapEx) of buying physical servers and instead pay for the VMs as an Operational Expenditure (OpEx) only during the active analysis periods.
Step-by-Step Solution
Key Concept
Consumption-Based Model (CapEx vs OpEx)