Scaling up is all about upgrading processors, RAM, and storage in existing servers. Typically, scaling up starts with upgrading CPUs, but when you do this, you usually want to upgrade your memory accordingly, as higher-end CPUs require more memory capacity in order to optimize compute capability.
Once you've exhausted the performance potential of existing servers, it's usually time to scale out. When scaling out, choose servers with the latest processor and memory technology. This gives you the flexibility to scale up in the future by adding high performance memory and storage components as workloads increase.
Scaling up makes sense when you haven't maximized the performance potential of your existing systems. If you're nowhere close to hitting your performance ceiling, there’s no reason to scale out-- just upgrade your CPUs, memory, and storage. However, if you've exhausted your infrastructure's performance potential, it's probably time to scale out. Choose the approach that best compliments your budget, workload, and short/long-term performance goals.