“On-demand” pricing and capacity management in cloud computing
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In recent business practice, firms, to fulfill their IT requirements, are using both dedicated “on-premise” capacity infrastructure and “on-demand” capacity requirements provided by companies such as AWS, OpenStack, and VMware. In this research, we analyze the scenario where a business first invests in “on-premise” (or in-house) capacity and also procures the excess demand requirements through the public cloud provider utilizing the pay-as-you-go pricing model. We study the impact of factors such as demand correlation in buyers’ market and demand load profile on the capacity decision. We find various cloud computing strategies and link them with real-life business practices.
Keywords“On-demand” capacity pricing Cloud computing Infrastructure as a Service “On-premise” capacity investments “On-demand” capacity sourcing
The authors are indebted to the editor Professor Ian Yeoman and anonymous referees for their valuable comments and helpful suggestions that improved this paper. The second author gratefully acknowledges the funding support received from the AIRBUS Group Endowed Chair for Sourcing and Supply Management at Indian Institute of Management Bangalore for this research. The first author is grateful for the constructive suggestions made by Gunjeet Singh Mahal.
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