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Difficulty: Very hardConsumption-Based Model (CapEx vs OpEx)

A multinational retail company is planning to migrate its on-premises customer ordering platform to Microsoft Azure. The platform experiences highly volatile demand: it requires a steady baseline of 10 virtual machines year-round, but spikes to over 50 virtual machines during seasonal sales events. The Chief Financial Officer (CFO) mandates that the migration must minimize Capital Expenditure (CapEx) to preserve cash flow, maximize cost savings for the predictable baseline, and maintain flexibility for temporary demand spikes without any long-term financial commitments for those spikes.

Which of the following cloud migration and billing strategies best satisfies the CFO's requirements while ensuring all cloud resources are classified under the operational expenditure (OpEx) model?

  1. Deploy the baseline workload using 3-year Azure Reserved VM Instances with monthly payment terms, and scale out using Pay-As-You-Go Virtual Machines for seasonal spikes.Answer
  2. B
    Purchase physical servers to host the baseline workload in a local colocation facility under a capital lease, and scale out to Azure Virtual Machines using Pay-As-You-Go for seasonal spikes.
  3. C
    Deploy the baseline workload on Azure Dedicated Hosts with a 3-year upfront payment, classifying the prepayment as a depreciable capital asset (CapEx) on the balance sheet.
  4. D
    Deploy the entire workload on Azure Stack Hub by purchasing the integrated hardware systems upfront to avoid ongoing operational utility bills.

Answer

Deploy the baseline workload using 3-year Azure Reserved VM Instances with monthly payment terms, and scale out using Pay-As-You-Go Virtual Machines for seasonal spikes.
The correct strategy combines 3-year Azure Reserved VM Instances with monthly payments for the baseline workload and Pay-As-You-Go for the dynamic spikes. This satisfies all constraints: Reserved Instances reduce the cost of the steady baseline, monthly billing preserves cash flow, Pay-As-You-Go handles the seasonal spikes flexibly, and all resources are billed as operational expenditures (OpEx) since Microsoft owns and maintains the physical assets.

Step-by-Step Solution

1
Analyze the financial constraints and operational demands of the workload.
The baseline workload (10 VMs) needs cost predictability and maximum savings. The peak workload (40 additional VMs) requires high flexibility with no long-term commitment. All resources must be classified as OpEx (no physical asset ownership).
This establishes the criteria for selecting the appropriate Azure billing mechanisms.
2
Evaluate the financial classification of cloud consumption models.
Cloud expenditures are operational expenditures (OpEx) because the customer pays for a service and does not own the physical servers or infrastructure, which avoids capital expenditures (CapEx).
This eliminates options involving physical hardware ownership or leasing.
3
Select the optimal combination of Azure pricing models.
Azure Reserved VM Instances (with monthly payment options) provide the necessary discount for the baseline workload while remaining OpEx. Pay-As-You-Go virtual machines are ideal for dynamic spikes because they charge only for active usage without upfront fees.
This identifies the correct combination of Reserved Instances and Pay-As-You-Go billing.

Key Concept

Consumption-Based Model (CapEx vs OpEx)
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Topics

Consumption-Based Model (CapEx vs OpEx)

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