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Challenge 03: Cloud Pricing Models

Estimated Time

20-30 min | Cost: Free | Domain: Cloud Concepts (25-30%)

Exam skills covered​

  • Describe the consumption-based model
  • Compare cloud pricing models (CapEx vs OpEx)
  • Describe serverless

Overview​

One of the biggest shifts when moving to the cloud is how you pay for IT. Traditional on-premises computing requires large upfront investments (buying servers, building datacenters). Cloud computing shifts this to a pay-as-you-go model — like paying for electricity rather than building a power plant.

Understanding the difference between Capital Expenditure (CapEx) and Operational Expenditure (OpEx) is fundamental to the AZ-900 exam and to understanding cloud economics.

Explore​

Task 1: CapEx vs OpEx​

AspectCapEx (Traditional)OpEx (Cloud)
Payment timingUpfrontMonthly/hourly
OwnershipYou own itYou rent it
DepreciationDepreciates over timeNo depreciation
ScalingBuy more hardwareClick a button
RiskOverprovisioning or underprovisioningPay for what you use
ExampleBuying servers for $100KAzure VM at $0.05/hour

Task 2: Use the Azure Pricing Calculator​

  1. Open azure.microsoft.com/pricing/calculator
  2. Click Virtual Machines from the products list
  3. Configure:
    • Region: East US
    • OS: Linux
    • Type: D2s v3 (2 vCPUs, 8 GB RAM)
    • Leave other defaults
  4. Observe the monthly cost estimate
  5. Now change to Windows — see how the cost increases (OS licensing)
  6. Change region to West Europe — notice price may differ by region

Task 3: Use the TCO Calculator​

  1. Open azure.microsoft.com/pricing/tco/calculator
  2. In Define your workloads, add:
    • Servers: 2 servers, Windows, 4 cores, 16 GB RAM
  3. Click Next (Adjust assumptions)
  4. Review the assumptions about electricity, labor, etc.
  5. Click Next (View report)
  6. See the 5-year cost comparison between on-premises and Azure

Task 4: Understand the consumption-based model​

The consumption-based model means:

  • No upfront cost — start using services immediately
  • No wasted resources — stop paying when you stop using
  • Pay for what you need — scale up/down with demand
  • Predictable billing — usage-based forecasting

Real-world analogy:

ModelAnalogy
CapExBuying a car (upfront cost, maintenance, depreciation)
OpExUber/taxi (pay per ride, no maintenance, no ownership)

Task 5: Understand serverless​

Serverless computing is the ultimate consumption-based model:

  • You deploy code, not infrastructure
  • The platform manages all servers
  • You pay only when your code runs (per execution)
  • Azure Functions: first 1 million executions/month are free
Azure CLI Alternative
# List available VM sizes and specs
az vm list-sizes --location eastus --query "[?name=='Standard_D2s_v3']" --output table

# List VM sizes available in the region
az vm list-sizes --location eastus --query "[?name=='Standard_B1s']" --output table

Key Concepts​

ConceptDefinition
CapExLarge upfront investment in physical infrastructure; depreciates over time
OpExOngoing operational spending; pay-as-you-go with no upfront cost
Consumption-basedPay only for what you actually use; meters track usage
ServerlessMaximum abstraction — no server management, pay per execution
Reserved InstancesCommit to 1-3 year terms for significant discounts (still OpEx)
Spot pricingUse unused Azure capacity at deep discounts (can be evicted)

Knowledge Check​

1. A company is considering moving to Azure to avoid purchasing new servers. Which financial benefit of cloud computing does this represent?

2. Which pricing model means you only pay for resources when they are being used?

3. What is a characteristic of serverless computing?

4. Which Azure tool helps you estimate the cost savings of migrating on-premises workloads to Azure?

5. A company deploys an Azure Function that processes 500,000 requests per month. The free grant covers 1 million executions. How much will they pay for the executions?

Learn More​