Consumption Based Model
- Companies have two kinds of expenses: Captial Expenditure (CapEx) and Operating Expenditure (OpEx)
- Capital Expenditure is one-time, up-front expenditure to purchase or secure tangible resources. Eg A new building, Buying Vehicle
- Operating Expenditure is spending money on services or products over time. Eg Signing up for cloud services, Renting a convention center
- In consumption-based model, you pay for the IT resources you use
Benefits of consumption-based model
- No upfront costs.
- No need to purchase and manage costly infrastructure that users might not use to its fullest potential.
- The ability to pay for more resources when they're needed and the ability to stop paying for resources that are no longer needed.
Traditional Datacenter
- You setup the physical infrastructure,
- You pay for electricity, the security, and for maintaining a datacenter.
- If you overestimate your future resource needs, you spend more on your datacenter than you need to and potentially waste money.
- If you underestimate your resource needs, your datacenter will quickly reach capacity and your applications and services may suffer from decreased performance. Fixing an under-provisioned datacenter can take a long time. because you may need to order, receive, and install more hardware. You'll also need to add power, cooling, and networking for the extra hardware.
Cloud Computing
- Cloud computing falls under OpEx because cloud computing operates on a consumption-based model.
- Cloud computing is the delivery of computing services over the internet by using a pay-as-you-go pricing model.
- Instead, you pay for the IT resources you use. If you don’t use any IT resources this month, you don’t pay for any IT resources.
- Cloud computing is just a way to rent compute power and storage from someone else’s datacenter.
Cloud Computing Benefits
- Plan and manage your operating costs.
- Run your infrastructure more efficiently.
- Scale as your business needs change.
- The cloud provider takes care of maintaining the underlying infrastructure for you.
- Enables you to quickly solve your toughest business challenges and bring cutting-edge solutions to your users.