A traditional retailer currently maintains its own data centers, purchasing servers every 3–5 years and paying for facilities, power, and staff regardless of demand. When it migrates its workloads to the public cloud, which change in cost model does it experience?
Trap 1: From operational expenditure (OpEx) to capital expenditure (CapEx)
This is the reverse. Traditional on-premises spending is CapEx (large upfront hardware purchases). Cloud spending is OpEx (recurring usage-based payments).
Trap 2: From variable costs to fixed monthly costs
Cloud costs are typically variable (scaling with usage), which is the opposite of fixed. On-premises depreciation schedules create more predictable fixed costs.
Trap 3: From consumption-based billing to annual depreciation cycles
Annual depreciation applies to on-premises hardware (CapEx accounting). Cloud billing is consumption-based — the opposite direction.
- A
From operational expenditure (OpEx) to capital expenditure (CapEx)
Why wrong: This is the reverse. Traditional on-premises spending is CapEx (large upfront hardware purchases). Cloud spending is OpEx (recurring usage-based payments).
- B
From capital expenditure (CapEx) to operational expenditure (OpEx)
Cloud eliminates large upfront hardware purchases (CapEx) and replaces them with pay-as-you-go usage fees (OpEx), aligning costs directly with actual business consumption.
- C
From variable costs to fixed monthly costs
Why wrong: Cloud costs are typically variable (scaling with usage), which is the opposite of fixed. On-premises depreciation schedules create more predictable fixed costs.
- D
From consumption-based billing to annual depreciation cycles
Why wrong: Annual depreciation applies to on-premises hardware (CapEx accounting). Cloud billing is consumption-based — the opposite direction.