Cloudonomics: The Business Value of Cloud Computing, + Website

What Is the Cloud?

In the next chapter, we define the cloud more rigorously. For now, we quickly address the cloud and its context.

Assertion 1: Cloud computing is a revolutionary new technology and business model.

Cloud computing combines several newer technologies, such as virtualization, with new architectural approaches to scalable infrastructure. However, the business model is thousands of years old. The model of resources available on an on-demand, pay-per-use basis dates back to the Roman Republic or earlier, and is found not only in computing, but in hotels, rental car services, storage units, electrical, water, and gas utilities, among others. This is not a bad thing: It proves the durability and value of this business model.

Assertion 2: The term “cloud” is interchangeable with “pay per use” or “on demand.”

Many people use these terms interchangeably to refer to the attributes often found in cloud. However, although these concepts often coexist, from an economic perspective, they are separable. Pay-per-use pricing generates benefits in the presence of variable demand by eliminating payments for unused resources; on-demand resources generate benefits in the presence of unpredictability by ensuring that there are neither too few nor too many resources. The two are often found together but need not be. Consider a hotel room reserved months in advance. It is still pay-per-use but hardly on demand, given the long lead time. The economic benefit of pay-per-use relates ...