Pricing the Cloud: An Auction Approach

Cloud computing has changed the processing and service modes of information communication technology and has affected the transformation, upgrading and innovation of the IT-related industry systems. The rapid development of cloud computing in business practice has spawned a whole new field of interdisciplinary, providing opportunities and challenges for business management research. One of the critical factors impacting cloud computing is how to price cloud services. An appropriate pricing strategy has important practical means to stakeholders, especially to providers and customers. This study addressed and discussed research findings on cloud computing pricing strategies, such as fixed pricing, bidding pricing, and dynamic pricing. Another key factor for cloud computing is Quality of Service (QoS), such as availability, reliability, latency, security, throughput, capacity, scalability, elasticity, etc. Cloud providers seek to improve QoS to attract more potential customers; while, customers intend to find QoS matching services that do not exceed their budget constraints. Based on the existing study, a hybrid QoS-based pricing mechanism, which consists of subscription and dynamic auction design, is proposed and illustrated to cloud services. The results indicate that our hybrid pricing mechanism has potential to better allocate available cloud resources, aiming at increasing revenues for providers and reducing expenses for customers in practice

Pricing and Upgrade Strategies for Software Vendors in the Software-as-a-Service Market

This study examines the competition between an independent software vendor (ISV) who offers a standard fixed-price software product and a cloud software vendor (CSV) who adopts a usage-based linear pricing scheme for its cloud-based software. Using a game theoretic approach, we set up a duopoly model to derive the optimal pricing and product feature choice decisions for both the ISV and the CSV in a market characterized with heterogeneous consumer preferences for software features, and different risk structures. Next, we plan to extend the duopoly model into a two-stage game and examine how the equilibrium outcomes change when we allow both vendors to exercise their software upgrade strategies. The results of our study will provide important implications to vendors and consumers in software markets where the Software-as-a-Service (SaaS) business model began to prevail and contribute to the growing literature on economics of cloud computing