GCP Cloud Digital Leader Practice Question

When a company moves a key application from its own data center to Google Cloud, the spending category changes from capital expenditures (CapEx) to operational expenditures (OpEx). How does this shift typically affect the organization's total cost of ownership (TCO) over time?

It usually raises TCO because cloud providers charge premium rates compared with equipment the company already owns outright.
It can lower TCO by eliminating large up-front hardware purchases and letting the company pay only for the resources it actually uses.
TCO becomes unpredictable because OpEx is locked into fixed multi-year contracts rather than pay-as-you-go billing.
TCO generally stays the same because depreciation of owned hardware offsets ongoing cloud subscription fees.

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Answer Description

In an on-premises model, an organization must make large, up-front investments in servers, networking equipment, and data-center facilities, then depreciate those assets over several years while also paying for ongoing maintenance, power, and cooling. After migrating to Google Cloud, the company instead pays a usage-based OpEx bill for compute, storage, and networking. Because it avoids new capital purchases (and therefore future depreciation) and reduces facility and maintenance costs while paying only for resources actually consumed, the organization can usually achieve a lower overall TCO compared with continuing to own and operate its own infrastructure. The other choices are incorrect: cloud pricing is designed to be competitive rather than consistently premium, existing depreciation does not fully offset new cloud fees, and most Google Cloud services use flexible pay-as-you-go pricing rather than fixed multi-year commitments, which can improve-not reduce-cost predictability.

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