Cloud Pricing Models (Draft)

Cloud computing has kept increasingly drawing social attentions in the past decade. As explained in [37], cloud computing may be defined as “an innovative computing approach with elastic deployment of existing computing technologies under pay-per-use model”, where computing resource and service are charged based on time. Although considerable researches have been carried out in market simulation for computing resource, there is very limited work in practical pricing. This paper aims to develop a systematic theory to instruct cloud providers in developing pricing strategies to maximize profits under various circumstances, including monopoly or oligopoly, constrained or unconstrained total resources, single or multiple products, possibilities and different types of outsourcing and broking. The theory covers a wide range of fields including Cloud Computing, Utility Computing, Economics, Econometrics, Mathematical Modeling, Operations Research, Mathematical Finance, Game Theory and Industrial Organization; and it may also be applied in domains other than cloud industry. Cloud industry could be divided into three layers: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS), where this paper is focused on the IaaS sector. The paper starts from an introduction to dimensions of utility pricing models and general pricing techniques, to using the basic economic concept “demand and supply” to formulate mathematical models to derive optimal pricing strategies. It also discusses a number of approaches to simulate demand and cost in a mathematical way. Finally, a spot pricing system has been developed on top of the Imperial College Cloud Platform (IC Cloud) to test the practical value of the theory.