Payment Model of Cloud Computing
Capital Expenditure (CapEx):
When the money is spent on something in advance like an asset but, that is called CapEx – Capital Expenditure.
- These are kinds of expenditure gives you benefit in long run but for that, you need to spend money in the first place.
- This is not a recurring expense. Generally, you spend money to acquire something like Land or data center as part of CapEx.
- In Azure, you spend money to reserve a VM for the long term like 1 year or 3 years, is CapEx.
Operational Expenditure (OpEx):
When the money is spent on something on a Pay-as-you Go basis, that is called OpEx - Operational Expenditure.
- This is an ongoing expense for running a product or service or a system.
- This is just like your mobile, Gas, or electricity bills, you pay only for what you use.
- This is a Consumption-based pricing model.
OpEx vs CapEx via example
- CapEx - Let’s say you keep a VM for only 3 hours, but still, it is a CapEx. Why? Because for those 3 hours the VM is kept reserved for you. Now whether you use it or not, it is up to you.
- OpEx – Let’s say you keep a VM for 3 hours BUT whenever you are not using that VM (let’s say for 30 mins) within that 3 hours, you will not be charged for those 30 mins.
IMP:
- Please make a note that Azure Reserved VM is a type of CapEx - Capital Expenditure.
- In the case of OpEx, even if VM is stopped, you will be charged for OS, IP, disk space. If you don’t want to be charged for those things when your VM is stopped, you need to de-provision/delete it.