Google Cloud Digital Leader Practice Exam

When an organization adopts cloud technology, how does their total cost of ownership (TCO) typically change?

1. Away from operational expenditure toward capital expenditure

2. Away from capital expenditure toward operational expenditure

3. Away from cost management toward capital expenditure

4. Away from operational expenditure toward cost management

The correct answer is: Away from capital expenditure toward operational expenditure

When an organization adopts cloud technology, their total cost of ownership (TCO) typically shifts away from capital expenditure toward operational expenditure. This transition occurs because cloud service providers offer a pay-as-you-go or subscription-based pricing model. Organizations no longer need to invest heavily in physical hardware and infrastructure upfront. Instead, they can leverage the cloud resources they need on an ongoing basis without the burden of significant initial expenditures. By utilizing cloud services, organizations can convert costs that were once categorized as capital expenditures—such as purchasing servers and networking equipment—into operational expenditures. This approach allows for more flexibility and scalability, as businesses can adjust their resource usage based on current demand and only pay for what they use. This also helps in budgeting and forecasting, enabling organizations to better allocate their financial resources and potentially reduce costs associated with maintenance and upgrades of on-premises infrastructure.