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fixed costs

  • Definition
    • Costs that do not change with usage. In IT: servers, storage arrays, network gear, data center space, cooling, and the staff to run them.
    • Also called capital expenditure (CapEx) — paid up front, depreciated over years.
  • The problem with them
    • You must buy for peak demand, so you pay for idle capacity most of the time.
    • Procurement and installation take weeks or months, which kills Agility.
    • Guess too low and you cannot serve customers; guess too high and the money is already spent.
  • The cloud shift
    • AWS converts these to variable costs — operational expenditure (OpEx) — paid only for what you use.
    • This is the first benefit listed in the AWS value proposition.
  • Where fixed costs still appear in AWS

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