Information Technology Reference
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Costs
As computing was done at even larger scales, new economics present themselves. If com-
puting becomes cheaper at larger scales, then it becomes advantageous to build a larger
infrastructure. If you build an infrastructure larger than you need, you simply have to de-
velop the technology that lets you “rent” the spare capacity to others. The part you use is
cheaperthanitwouldhavebeenotherwise;thepartyoudon'tuseturnsaprofit.Iftheprofit
is small, it offsets the cost of your infrastructure. If the profit is large enough, it could pay
for all of your infrastructure. At that point your computing infrastructure becomes “free”
for you. Do things right and you could have an infrastructure with a negative cost. Imagine
running all of Amazon's infrastructure and having someone else pay for it. Now imagine
trying to start a new web site that sells books when your competition gets its infrastructure
“forfree.” These are the economic aspirations that drive the supplier side ofcloud comput-
ing.
Inthecloudcomputingera,thescaleprovideseconomicsthatmakethecostaneworder
less expensive. This frees up enough headroom to price the service at less than customers
could do it themselves and delivers additional profit that subsidizes the provider's infra-
structure. Anything done to improve the efficiency of operations either adds to the service
provider's profitability or enables it to offer services at a lower cost than the competition.
To understand the consumer demand for cloud computing, we need to look at the costs
associatedwithsmall-scalecomputingsystems.Atasmallscaleonecannottakeadvantage
of the economics of distributed computing. Instead, one must achieve reliability through
moreexpensivehardware.Automationmakeslesssensewhendoingthingsatasmallscale,
which drives up the operational cost. When automation is created, it is more expensive be-
cause the cost is not amortized over as many uses. Many distributed computing techno-
logies require people with specialized knowledge that a small company does not possess,
sinceatasmallscaleonemusthiregeneralistsandcan'taffordafull-timeperson(orteam)
to oversee just one aspect of the system. The use of external consultants when such expert-
ise is needed can be expensive.
Many of these problems are mitigated when small-scale computing is done by renting
space on a cloud infrastructure. Customers get to take advantage of the lower cost and
greaterpowerefficiency.Difficult-to-maintainservicessuchasspecializedstorageandnet-
workingtechnologycanbeofferedinawaythathidesthedifficultbehind-the-scenes man-
agement such systems require.
Therearealsonon-costadvantagesforthecustomers.Elasticityistheabilitytoincrease
and decrease the amount of resources consumed dynamically. With many applications, be-
ing able to spin up many servers for a short amount of time is valuable. Suppose you have
an advertising campaign that will last for just one week. While the ads are running, you
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