Pricing Strategy for Cloud Computing Services

• Main Author: HUANG, Jianhui
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2014
• Subjects: cloud computing; economics; pricing strategy; experimental research; informedness; willingness-to-pay; Computer Sciences; E-Commerce
• Online Access: https://ink.library.smu.edu.sg/etd_coll/103; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1102&context=etd_coll
• Institution: Singapore Management University

The cloud computing services market exhibits unique characteristics such as instant accessibility, fluctuating demand and supply, and interruptible service provision. Various pricing mechanisms exist in current industry practice. None of these pricing mechanisms, however, is comprehensive enough to capture all these features in a way that allows the vendors to optimize resource allocation. This dissertation identifies key factors related to cloud computing pricing, and examines their interplays. This research uses multiple approaches, including a market survey, game theory modeling, simulation, lab experiments and econometric modeling, to analyze the pricing strategy of cloud services vendors. A field study of a representative set of cloud vendors’ pricing approaches provides background information to motivate this dissertation. Important factors in current cloud pricing practice are highlighted. This part of the work offers an overview of how cloud computing services are priced and how the pricing approaches have evolved over time. This is important for identifying the causes of confusion among clients regarding the pricing of cloud computing services, especially when new pricing methods emerge. The following study reports on an analytical model and simulations to derive optimal pricing strategies for a monopoly cloud services vendor that operates in the re-served and spot-price services market. Although interruptible spot services potentially cause undesired consequences for clients, the cloud services vendor can improve its profit by offering low quality interruptible spot-price services, together with high quality fixed-price reserved services. The last study examines clients’ willingness-to-pay for brokered cloud services offered with a hybrid pricing mechanism in the presence of fixed-price reserved and spot-price on-demand services through behavioral experiments. This study yields two findings. First, subjects’ willingness-to-pay is affected by their informedness of the service interruption risk associated with spot-price on-demand services. Second, this effect is moderated by their aversion to risk.