The Pricing Model of Cloud Computing Services

Best Ph.D. Student Paper Award</p

The effect of competition among brokers on the quality and price of differentiated internet services

Price war, as an important factor in undercutting competitors and attracting customers, has spurred considerable work that analyzes such conflict situation. However, in most of these studies, quality of service (QoS), as an important decision-making criterion, has been neglected. Furthermore, with the rise of service-oriented architectures, where players may offer different levels of QoS for different prices, more studies are needed to examine the interaction among players within the service hierarchy. In this paper, we present a new approach to modeling price competition in (virtualized) service-oriented architectures, where there are multiple service levels. In our model, brokers, as the intermediaries between end-users and service providers, offer different QoS by adapting the service that they obtain from lower-level providers so as to match the demands of their clients to the services of providers. To maximize profit, players, i.e. providers and brokers, at each level compete in a Bertrand game while they offer different QoS. To maintain an oligopoly market, we then describe underlying dynamics which lead to a Bertrand game with price constraints at the providers' level. Numerical simulations demonstrate the behavior of brokers and providers and the effect of price competition on their market shares.This work has been partly supported by National Science Foundation awards: CNS-0963974, CNS-1346688, CNS-1536090 and CNS-1647084

On-demand or Spot? Selling the cloud to risk-averse customers

In Amazon EC2, cloud resources are sold through a combination of an on-demand market, in which customers buy resources at a fixed price, and a spot market, in which customers bid for an uncertain supply of excess resources. Standard market environments suggest that an optimal design uses just one type of market. We show the prevalence of a dual market system can be explained by heterogeneous risk attitudes of customers. In our stylized model, we consider unit demand risk-averse bidders. We show the model admits a unique equilibrium, with higher revenue and higher welfare than using only spot markets. Furthermore, as risk aversion increases, the usage of the on-demand market increases. We conclude that risk attitudes are an important factor in cloud resource allocation and should be incorporated into models of cloud markets.Comment: Appeared at WINE 201

Economics of Spot Instance Service: A Two-stage Dynamic Game Apporach

This paper presents the economic impacts of spot instance service on the cloud service providers (CSPs) and the customers when the CSPs offer it along with the on-demand instance service to the customers. We model the interaction between CSPs and customers as a non-cooperative two-stage dynamic game. Our equilibrium analysis reveals (i) the techno-economic interrelationship between the customers' heterogeneity, resource availability, and CSPs' pricing policy, and (ii) the impacts of the customers' service selection (spot vs. on-demand) and the CSPs' pricing decision on the CSPs' market share and revenue, as well as the customers' utility. The key technical challenges lie in, first, how we capture the strategic interactions between CSPs and customers, and second, how we consider the various practical aspects of cloud services, such as heterogeneity of customers' willingness to pay for the quality of service (QoS) and the fluctuating resource availability. The main contribution of this paper is to provide CSPs and customers with a better understanding of the economic impact caused by a certain price policy for the spot service when the equilibrium price, which from our two-stage dynamic game analysis, is able to set as the baseline price for their spot service

Pricing cloud IaaS computing services

Abstract The economics of cloud computing has recently attracted increasing attention. In particular, a topic which is still under debate is how prices charged to customers for cloud resources are formed, since alternative pricing rules could be considered. Based on three pricing schemes inspired by those used by Amazon EC2, the main global cloud service provider, in the paper we address two main issues. First we present a methodology for the relevant parameters of the pricing rules to be determined in an optimal way, that is to maximise the provider's revenue. Moreover, we discuss reasons for co-existence of three pricing rules, rather than fewer, to access the cloud. Our findings suggest that this may be due to a larger coverage of the potential demand, since customers applying for cloud services vary in their willingness to pay for the job, the time length of the service, the computational power requested etc. Furthermore, the pricing rule in the so-called, spot market, can provide the platform with useful information on the customers willingness to pay for cloud services. This is because in the spot market users offer a price for service, but pay less than that if their request is satisfied

A CROSS-COUNTRY STUDY OF CLOUD COMPUTING POLICY AND REGULATION IN HEALTHCARE

International health IT policy currently supports the move towards cloud computing. Governments, industry leaders and advocacy groups are keen to build confidence among health professionals to adopt cloud-based solutions in healthcare. However, the potential benefits from cloud computing need to be evaluated against the risks. This research is a comparative study on U.S and EU health professionals´ views on the potential benefits and risks from cloud computing. The results from surveying healthcare organizations in the U.S and five EU countries (France, Germany, the Netherlands, Sweden and the UK) identify differences across countries in health IT policy, incentives for adoption, privacy and security, and trust in third party suppliers. Our findings show that privacy and security are important issus for healthcare organizations, yet differences exist between the U.S and across EU Member States in how these concepts are viewed. U.S laws and EU Directives on data protection are more advanced than other international regulatory systems. Our study provides insights on cross-jurisdictional approaches to personal data and privacy, regulations and rules on health data export, how countries interpret and implement different data protection regulations and rules, and the practical implementation of regulatory rules using a comparative research method. \

Multi-attribute demand characterization and layered service pricing

As cloud computing gains popularity, understanding the pattern and structure of its workload is increasingly important in order to drive effective resource allocation and pricing decisions. In the cloud model, virtual machines (VMs), each consisting of a bundle of computing resources, are presented to users for purchase. Thus, the cloud context requires multi-attribute models of demand. While most of the available studies have focused on one specific attribute of a virtual request such as CPU or memory, to the best of our knowledge there is no work on the joint distribution of resource usage. In the first part of this dissertation, we develop a joint distribution model that captures the relationship among multiple resources by fitting the marginal distribution of each resource type as well as the non-linear structure of their correlation via a copula distribution. We validate our models using a public data set of Google data center usage. Constructing the demand model is essential for provisioning revenue-optimal configuration for VMs or quality of service (QoS) offered by a provider. In the second part of the dissertation, we turn to the service pricing problem in a multi-provider setting: given service configurations (qualities) offered by different providers, choose a proper price for each offered service to undercut competitors and attract customers. With the rise of layered service-oriented architectures there is a need for more advanced solutions that manage the interactions among service providers at multiple levels. Brokers, as the intermediaries between customers and lower-level providers, play a key role in improving the efficiency of service-oriented structures by matching the demands of customers to the services of providers. We analyze a layered market in which service brokers and service providers compete in a Bertrand game at different levels in an oligopoly market while they offer different QoS. We examine the interaction among players and the effect of price competition on their market shares. We also study the market with partial cooperation, where a subset of players optimizes their total revenue instead of maximizing their own profit independently. We analyze the impact of this cooperation on the market and customers' social welfare

Dynamic Pricing Strategy for Maximizing Cloud Revenue

The unexpected growth, flexibility and dynamism of information technology (IT) over the last decade has radically altered the civilization lifestyle and this boom continues as yet. Many nations have been competing to be forefront of this technological revolution, quite embracing the opportunities created by the advancements in this field in order to boost economy growth and to increase the accomplishments of everyday’s life. Cloud computing is one of the most promising achievement of these advancements. However, it faces many challenges and barriers like any new industry. Managing and maximizing such a very complex system business revenue is of paramount importance. The wealth of the cloud protfolio comes from the proceeds of three main services: Infrastructure as a service (IaaS), Software as a service (SaaS), and Platform as a service (PaaS). The Infrastructure as a Service (IaaS) cloud industry that relies on leasing virtual machines (VMs) has a significant portion of business values. Therefore many enterprises show frantic effort to capture the largest portion through the introducing of many different pricing models to satisfy not merely customers’ demands but essentially providers’ requirements. Indeed, one of the most challenging requirements is finding the dynamic equilibrium between two conflicting phenomena: underutilization and surging congestion. Spot instance has been presented as an elegant solution to overcome these situations aiming to gain more profits. However, previous studies on recent spot pricing schemes reveal an artificial pricing policy that does not comply with the dynamic nature of these phenomena. In this thesis, we investigate dynamic pricing of stagnant resources so as to maximize cloud revenue. To achieve this task, we reveal the necessities and objectives that underlie the importance of adopting cloud providers to dynamic price model, analyze adopted dynamic pricing strategy for real cloud enterprises and create dynamic pricing model which could be a strategic pricing model for IaaS cloud providers to increase the marginal profit and also to overcome technical barriers simultaneously. First, we formulate the maximum expected reward under discrete finite-horizon Markovian decisions and characterize model properties under optimum controlling conditions. The initial approach manages one class but multiple fares of virtual machines. For this purpose, the proposed approach leverages Markov decision processes, a number of properties under optimum controlling conditions that characterize a model’s behaviour, and approximate stochastic dynamic programming using linear programming to create a practical model. Second, our seminal work directs us to explore the most sensitive factors that drive price dynamism and to mitigate the high dimensionality of such a large-scale problem through conducting column generation. More specifically we employ a decomposition approach. Third, we observe that most previous work tackled one class of virtual machines merely. Therefore, we extend our study to cover multiple classes of virtual machines. Intuitively, dynamic price of multiple classes model is much more efficient from one side but practically is more challenging from another side. Consequently, our approach of dynamic pricing can scale up or down the price efficiently and effectively according to stagnant resources and load threshold aims to maximize the IaaS cloud revenue

AN ADAPTABILITY-DRIVEN ECONOMIC MODEL FOR SERVICE PROFITABILITY

Ph.DDOCTOR OF PHILOSOPH