I'm taking a class on cloud computing this semester and our first reading assignment is entitled "Cloudonomics". Here's a link to the paper: link
The focus is on the economic viewpoint of cloud computing, starting with the definition provided by NIST, and providing economic views on each piece. The author translates the components into an acronym:
Common infrastructure
Location Independence
Online connectivity
Utility Pricing
on-
Demand Services
Here are my notes:
Common Infrastructure
Multiplexing demand over a common infrastructure can increase utilization, lowering the cost per delivered resource.
The coefficient of variation cv = std deviation / absolute mean, the lower the more smooth/flat
The smoother and flatter the demand, the better the utilization.
Multiplexing demand can help reduce cv, increasing utilization.
This is especially true if the demands offset, such as with the power grid having business usage peaked during the day and home usage peaked in the evening.
These economies are reached even at a mid-sized provider level, giving them economies similar to large providers.
Location Independence
Latency is an issue, especially with user interaction.
Latency is dependent on distance due to the limit of the speed of light in fiber and router hops.
As a private company tries to reduce that latency by increasing coverage, they will see diminishing returns on their investment.
Utility Pricing
Cost savings are more than on a per unit basis, but are on a utility pricing basis. You only have to pay for what is used.
Analogy of renting a car vs. buying it for a couple days use.
It gets interesting when using the cloud costs more than owning the resource, but demand is variable. There is a utility premium that must be accounted for. Intuitively if the demands are long term it may be cheaper to buy, if short term then may be cheaper to rent.
On-Demand Services
On-demand avoids excess and insufficient resources.
Really useful when demand is unpredictable and/or non-linear
Online Connectivity
Network costs allowing sharing must be factored in.
Behaviors, Complexity
Users may be slow to adopt due to "loss aversion"
But lack of upfront costs may help speed adoption
Finding the optimal tradeoff between statistics of scale and user experience intractable.