These two approaches to IT investment are referred to as:
Capital Expenditure (CapEx): CapEx is the spending of money on physical infrastructure up front, and then deducting that expense from your tax bill over time. CapEx is an upfront cost, which has a value that reduces over time. Physical infrastructure looses value fast and out-dated equipment soon hinders performance.
Operational Expenditure (OpEx): OpEx is spending money on services or products now and being billed for them now. You can deduct this expense from your tax bill in the same year. There’s no upfront cost. You pay for a service or product as you use it.
Azure & cloud computing costs using (OpEx) – With cloud computing, many of the costs associated with an on-premises server are shifted to the service provider. Instead of thinking about physical hardware and IT administration costs, cloud computing has a different set of costs. For accounting purposes, all these costs are operational expenses.
Cloud computing provides services to customers without significant upfront costs or equipment setup time.
Cloud computing has many advantages, and one of the most powerful is scalability, Cloud computing allows you to can rapidly respond to meet new demands – either in size or volume – it is scalable, and the costs relate the current level of usage. With Microsoft Azure scalability works both ways both up and should usage fall, reduced costs take place.