Cloud Digital Leader Why Cloud Technology Can Transform Business Practice Question

Answer analysis

Option-by-option breakdown

For each option: why learners choose it and why it is or isn't the right answer here.

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  Compute instance costs

  Why it's wrong here

  Compute instance costs are a direct operational expense in Google Cloud, replacing on-premises server capex but not eliminating IT spend. While the cloud enables flexibility through auto-scaling, rightsizing, and the use of preemptible VMs, the per-vCPU and per-memory billing can be comparable to or even exceed the cost of an on-premises server if utilization is low. These costs are also variable depending on machine type, region, and discount commitments, so they are not inherently reduced by migration. Thus, compute costs are a significant cloud bill item, not a cost-saving benefit.

• ✓

  Hardware purchase and data centre costs

  Why this is correct

  Hardware purchase and data centre costs represent the on-premises capital expenditure for servers, storage, networking gear, and facility resources like power, cooling, floor space, and physical security. Migrating to Google Cloud transfers these responsibilities to the provider, converting large upfront capex into predictable variable opex that scales with usage. The cloud eliminates the need to procure, maintain, and eventually decommission hardware, and it removes the sunk cost of over-provisioned capacity. This is the most direct and substantial source of cost savings in a cloud migration, especially when existing data centres are aging or underutilized.

• ✗

  Software licensing fees

  Why it's wrong here

  Software licensing fees are not avoided by moving to Google Cloud; they are simply re-packaged. Many operating systems and middleware products are billed per vCPU per hour in the cloud, which can lead to higher costs over time than a perpetual on-premises license. While some providers offer license-included images or allow Bring-Your-Own-License (BYOL) flexibility, the total licensing expense can stay the same or increase depending on application architecture and compliance requirements. Therefore, licensing is not a distinct cost-reduction driver and may even offset other savings.

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  Network egress charges

  Why it's wrong here

  Network egress charges are a unique cloud cost that does not exist in an on-premises data centre, where traffic stays inside private LANs with no per-byte provider billing. In Google Cloud, data transferred out to the internet or across zones/regions incurs metered charges, which can become significant for data-heavy or egress-intensive workloads. This is an added operational expense introduced by migration, not a benefit, and it must be carefully managed through architecture decisions like using internal traffic, caching, or selecting appropriate regions. Hence, egress charges represent a potential cost increase rather than a cost savings.

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