When assessing costs associated with an on-premises data center, a company needs to consider both the Capital Expenditures (CapEx) which include hardware costs, physical infrastructure, and long-term software licenses, as well as the Operational Expenditures (OpEx) that encompass ongoing costs like maintenance, electricity, and cooling. These costs can be significantly reduced in a cloud environment through a pay-as-you-go model, which eliminates many of the upfront and ongoing expenses of owning and operating data center hardware. The cost of managing on-premises security appliances is not typically reduced in the cloud because security remains a shared responsibility, and application update costs are generally the same whether on-premises or in the cloud.