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More for Less: The Coming Cloud Paradox

Published on 24 July 13
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Cloud computing represents âmore.â More compute power, more storage, more applications, more agility - and theoretically without limit. It's no wonder, then, that both cloud bashing and cloud hype have largely tapered off over the last few years; the technology has simply become too ubiquitous to criticize broadly, and well-known to obscure. There's a strange phenomenon at work in the cloud, however, one directly related to costs: Things are getting cheaper, but cloud use is skyrocketing. What's going on?

Is it Coaled in Here?

While the price of long-term cloud computing is still under debate as it related to on-site servers - especially for companies at high risk of discovery or compliance issues - short-term cloud operating expenditures are almost always lower than capital expenditures for the same time frame. What's odd here is that this lower cost has led to increased cloud use; with an improved price-to-performance ratio, companies should need fewer resources to get the job done, and the market should trend downward.
Economist William Stanley Jevons examined this question in the 19th century as it related to coal: When the price of coal dropped thanks to a more efficient burning process, would less be consumed? This was the expected answer, but in fact more was purchased. Why? Instead of taking their coal savings and spending them somewhere else, consumers were able to buy more coal and put it to a myriad of new uses, which before seemed ridiculously luxurious. The same is true with cloud computing - storage and servers made sense at the cloud's initial price point but as the cost for use drops, companies find they can cheaply access development environments, software-as-a-service (SaaS) applications and put money into developing a mobile cloud, all without spending unwisely. In fact, there has been an substantial increase in âsystem of engagementâ solutions like social media monitoring and campaigns - which aren't directly tied to economic benefits - because the costs are now defensible as part of an IT budget.

That what's known as the Jevons Paradox applies to cloud computing means it has crossed the threshold from outlier technology to commodity, and the market has begun to react accordingly. Price and competition are now key drivers of adoption, rather than efforts to âsellâ the cloud as an equivalent to server computing.
A New Marketplace

The initial cloud market had a few big name players, several startups and an environment of uncertainty. Now, widespread corporate adoption has created a need for new pricing schemes and prompted intense competition among providers. Consider, for example, that the average âknowledge workerâ uses four devices: A mobile phone, tablet, personal desktop and company desktop. This has helped drive the bring your own device (BYOD) trend but perhaps more importantly has led to the rise of user-based rather than device-based pricing; it's far more cost effective for companies to pay per user (regardless of how many devices they use, or where) than limiting cloud use to the office.
What's more, a host of well-known providers have entered the public and hybrid cloud race, and aren't shy about trying to drive down price. Per-minute cost models emerged to give companies better control over their data use, and much like per-second cellphone pricing this has helped make cloud computing a cost-effective must have, rather than a luxury for those who can afford the subscription. Ultimately, providers who can offer a balance of price and function will come out ahead; the obvious parallel here is again the mobile industry. While several high-end manufacturers are able to charge whatever price they want thanks to proprietary function, cheaper alternatives which focus on efficacy rather than high-end branding are quickly coming to rule the mobile market.
It's Not Over Yet

The cloud is no longer subject to the rules of technology adoption alone; it's speed and size now place it firmly under the umbrella of economic theory. But commodization isn't the last stop for the cloud - some experts believe this technology will eventually become a kind of âfifth utility,â and stand alongside water, electricity, gas lines and telephone access. In this environment, public clouds might be regulated not by private corporations but by governments, or by companies given permission by federal agencies, along with strict pricing guidelines.

Cloud computing offers more for less: More power, more speed and more storage for less money than ever. But this market isn't done evolving - while economic theory offers some insights for the future of cloud computing, the technology has fundamentally altered the corporate landscape. In other words, paradox is par for the course.
This blog is listed under Cloud Computing and Development & Implementations Community

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