Describe cloud computing
📘Microsoft Certified: Azure Fundamentals (AZ-900)
1. Why Cloud Pricing Models Matter
In traditional IT environments:
- Organizations buy physical servers.
- They pay large upfront costs.
- They pay for power, cooling, maintenance, and upgrades.
- Even if servers are underused, they still pay full cost.
In cloud computing (like Azure):
- You do not buy hardware.
- You pay only for what you use.
- You can scale up or down.
- Costs are operational instead of large upfront capital expenses.
Azure offers different pricing models depending on how long and how much you plan to use resources.
2. Main Cloud Pricing Models in Azure
For the AZ-900 exam, you must understand these three major pricing models:
- Pay-As-You-Go
- Reserved Instances
- Spot Pricing
Let’s explain each clearly.
3. Pay-As-You-Go (Consumption-Based Model)
What It Means
You pay only for the resources you use.
- No upfront payment
- No long-term commitment
- Billed per second, minute, hour, or usage amount (depending on service)
This is also called:
- Consumption-based pricing
How It Works in Azure
Examples in IT environments:
- A virtual machine (VM) running for 10 hours → You pay for 10 hours.
- A web app running continuously → You pay for compute time.
- Storing 500 GB in Azure Storage → You pay for 500 GB.
- Sending data out of Azure → You pay for outbound data transfer.
If you stop or delete the resource, charges stop (except storage in some cases).
When It Is Used
Best for:
- Short-term projects
- Development and testing environments
- Unpredictable workloads
- Startups or small businesses
Advantages
- Flexible
- No long-term contract
- Easy to start
- Good for unknown usage patterns
Disadvantages
- More expensive long term
- Costs can grow quickly if not monitored
Exam Tip
If the question says:
- “No upfront cost”
- “Only pay for what you use”
- “Flexible usage”
The correct answer is usually Pay-As-You-Go.
4. Reserved Instances (Azure Reservations)
What It Means
You commit to using a resource for:
- 1 year
or - 3 years
In return, Azure gives you a discount.
How It Works in Azure
Example:
- A company runs a production VM 24/7.
- They know it will run for at least 3 years.
- Instead of paying Pay-As-You-Go, they reserve the VM.
- They get up to 72% discount (varies by service).
This applies to:
- Virtual Machines
- Azure SQL Database
- Cosmos DB
- Other supported services
Important Concept: Commitment = Discount
Longer commitment → Bigger savings.
When It Is Used
Best for:
- Predictable workloads
- Production environments
- Long-term systems
- Enterprise applications
Advantages
- Significant cost savings
- Predictable billing
- Good for stable workloads
Disadvantages
- Requires long-term commitment
- Less flexible
- You still pay even if you don’t fully use it
Exam Tip
If the question mentions:
- “Long-term workload”
- “Predictable usage”
- “Reduce cost for 1 or 3 years”
The answer is Reserved Instances.
5. Spot Pricing (Azure Spot VMs)
What It Means
You buy unused Azure compute capacity at a very low price.
But:
Azure can take it back at any time.
How It Works
Azure data centers sometimes have unused capacity.
Instead of leaving it idle:
- Azure offers it at a big discount.
- If Azure needs the capacity back, your VM can be stopped.
Important: No Guarantee
Spot VMs can be:
- Stopped
- Deallocated
- Deleted
With little warning.
When It Is Used
Best for:
- Batch processing jobs
- Testing
- Development
- Background processing
- Non-critical workloads
Not suitable for:
- Production systems
- Critical applications
- Databases needing high availability
Advantages
- Very cheap
- Great for temporary workloads
Disadvantages
- Can be interrupted
- Not reliable for critical services
Exam Tip
If the question says:
- “Low cost”
- “Unused capacity”
- “Workload can tolerate interruption”
The answer is Spot Pricing.
6. Other Important Cost Concepts for AZ-900
These are often tested together with pricing models.
Capital Expenditure (CapEx) vs Operational Expenditure (OpEx)
CapEx (Capital Expenditure)
- Large upfront investment
- Buying servers and data center hardware
- Traditional IT model
OpEx (Operational Expenditure)
- Ongoing monthly or usage-based costs
- No large upfront investment
- Cloud computing model
Azure uses:
→ OpEx model
Exam Tip
If the question asks:
“Which cloud benefit reduces upfront costs?”
Answer:
Operational expenditure (OpEx)
7. Total Cost of Ownership (TCO)
TCO means:
The total cost of running infrastructure over time.
This includes:
- Hardware
- Maintenance
- Power
- Cooling
- Staff
- Licensing
Azure provides:
TCO Calculator
This tool helps organizations compare:
- On-premises cost
vs - Azure cloud cost
8. Azure Pricing Calculator
Another important exam concept.
Azure Pricing Calculator:
- Estimates monthly Azure costs
- Lets you choose services
- Helps plan budget
Important difference:
| Tool | Purpose |
|---|---|
| Pricing Calculator | Estimate Azure service cost |
| TCO Calculator | Compare on-prem vs Azure cost |
This is often tested in AZ-900.
9. Summary Comparison Table
| Pricing Model | Commitment | Cost | Flexibility | Best For |
|---|---|---|---|---|
| Pay-As-You-Go | None | Standard | High | Short-term & unpredictable workloads |
| Reserved Instances | 1 or 3 years | Discounted | Medium | Long-term predictable workloads |
| Spot Pricing | None | Very low | Low | Interruptible workloads |
10. What You Must Remember for the AZ-900 Exam
You must clearly understand:
✔ Pay-As-You-Go = Flexible, no commitment
✔ Reserved Instances = Long-term commitment, discounted
✔ Spot = Very cheap, can be interrupted
✔ Cloud = OpEx model
✔ TCO Calculator = Compare on-prem vs Azure
✔ Pricing Calculator = Estimate Azure cost
11. Simple Final Explanation (For Non-IT Students)
Cloud pricing models decide:
“How do you want to pay for your cloud services?”
- If you want flexibility → Pay-As-You-Go
- If you know you will use it for years → Reserved
- If you want the cheapest option and can handle interruption → Spot
Azure gives options so organizations can control cost based on their workload needs.
