The economics of cloud computing

We'll look at the consumption-based model, one of the two economic characteristics of cloud computing compared to traditional computing economics; the second economic characteristic that cloud computing is based upon is the cost expenditure model of OpEx.

Consumption-based model?

In a nutshell, a consumption model means paying only for what you use, for the time you use the resource; this can be likened to leasing/renting something instead of outright purchasing and owning the asset. Some resources such as virtual machines can be stopped and started to reduce costs, so you only pay while running them; this is one of the key business benefits of the cloud computing cost model over a traditional computing cost model.

This section introduced the consumption-based model of cloud computing. The following section takes a closer look at the cost expenditure models.

Defining the expenditure models

It is essential to define some finance...