Financial aspects of business models : reducing costs and increasing revenues in a cloud context

Abstract

The emergence of cloud computing induces opportunities for software vendors and for organizations with great storage needs. Indeed, software companies have begun to adopt cloud technologies and offer their software as a service to customers instead of selling software products. As a result, their revenue models have changed, and the diversity and complexity of the resulting pricing models have created both opportunities and impediments to competition in the market. On the other hand, due to the exponentially growing volume of digital content, organizations have an increasing demand for storage and need to choose between private, public, and hybrid storage solutions. This decision requires consideration of various determinants; cost is one of the most vital factors. This dissertation investigates the impact of cloud computing technologies on the IT industry, with a focus on the financial aspects of business models. That is, this research uses quantitative, qualitative, and analytical-mathematical research methods, as well as simulations, to find ways to improve companies’ financial performance by enhancing their pricing models and reducing their storage costs. In particular, this research contributes to the cloud pricing literature by proposing a pricing framework developed specifically for the cloud industry, by providing insights into the relationship between software architecture and pricing, and by providing a view on how cloud technology adoption has changed software pricing models. In addition, this research contributes to the cloud cost literature and to the concurrent sourcing literature by providing analytical models that capture the effects that various cost determinants have on the cost- efficiency of private versus public storage and the cost of hybrid storage. This research indicates that, in the case of exponentially growing storage demand, reestimating future needs and acquiring the necessary in-house infrastructure usually makes the private cloud more cost-effective than the public cloud; the total cost of hybrid storage decreases as well. In addition, this research sheds light on various details regarding storage cost reduction, such as the roles of volume uncertainty and volume variability in hybrid storage costs, the time point when reestimating hybrid storage needs results in the greatest cost benefits, and the magnitude of these achievable cost benefits.