Hedonic Pricing of Cloud Computing Services

Abstract

Cloud service providers (CSP) and cloud consumers often demand to forecast the cloud price in order to optimize their business strategy. However, pricing of cloud services is a challenging task due to its services complexity and dynamic nature of the ever-changing environment. Moreover, the cloud pricing based on consumers' willingness to pay (W2P) becomes even more challenging due to the subjectiveness of consumers' experiences and implicit values of some non-marketable prices, such as burstable CPU, dedicated server, and cloud data center global footprints. Unfortunately, many existing pricing models often cannot support value-based pricing. In this paper, we propose a novel solution based on value-based pricing, which does not only consider how much does the service cost (or intrinsic values) to a CSP but also how much customer is willing to pay (or extrinsic values) for the service. We demonstrate that the cloud extrinsic values would not only become one of the competitive advantages for CSPs to lead the cloud market but also increase the profit margin. Our approach is often referred to as a hedonic pricing model. We show that our model can capture the value of non-marketable price. This value is about 43.4% on average above the baseline, which is often ignored by many traditional cloud pricing models. We also show that Average Annual Growth Rate (AAGR) of Amazon Web Services' (AWS) is about -20.0% per annum between 2008 and 2017, ceteris paribus. In comparison with Moore's law (-50% per annum), it is at a far slower pace. We argue this value is Moore's law equivalent in the cloud. The primary goal of this research is to provide a less biased pricing model for cloud decision makers to develop their optimizing investment strategy.

A Cost Estimation Model for Cloud Services and Applying to PC Laboratory Platforms

“…Hedonic approaches for the IaaS cost model assume that the price should reflect embodied characteristics valued by some implicit nonfunctional features such as QoS (quality of service) [9,10]. Mitropoulou et al show how to calculate and predict the cloud price accurately and how to avoid the price estimation bias [9].…”

Edge Computing, IoT and Social Computing in Smart Energy Scenarios

“…Cloud providers such as Amazon Web Services, Microsoft Azure or Google Cloud offer pricing plans according to the amount of resources customers use over time [65]. Cloud pricing plans are quite complex to describe, but, at a high level, cloud providers charge for computing resources (use of CPU in terms of cores×GHz×s, as well as RAM in terms of GB×s), storage and database resources (in terms of GB×month, as well as total read and write operations per month), as well as network resources (in terms of amount of incoming and outgoing traffic), among others.…”

“…In the usual cost scheme of Cloud providers, the storage and ingestion of data tends to have a reduced price, while the costs are higher both in the computation that is done on the data or the actual extraction of data out of the Cloud again [65]. Although the reduction in traffic is more significant in data uploading to the Cloud than in data downloading, reducing the traffic uploading to the Cloud allows for reducing the computing costs associated with the processing of such data.…”

Enhancing User Experiences with Cloud Computing via Improving Utilitarian and Hedonic Factors

“…When developing information systems with a hedonic nature, developers need to carefully consider intrinsic motivators, like perceived enjoyment, because they have more influence than extrinsic motivators on the adoption decision of users [8]. Cloud computing has both utilitarian and hedonic natures, depending on its Cloud service providers (CSP) are emphasizing value-based service offerings because users often do not understand the service cost (or intrinsic value), but are more willing to pay if they have a high perceived value (or extrinsic value) of the received cloud services [15,16]. Hedonic values are an important extrinsic value and have a significant influence on an individual's perceived benefits [17].…”