Covering peak demand by using cloud services – an economic analysis. Issue 2 (2nd April 2016)

• Record Type: Journal Article
• Authors: Henneberger, Matthias
• Is Part Of: Journal of decision systems. Volume 25:Issue 2(2016)
• Page Start: 118
• Page End: 135
• Publication Date: 2016-04-02
• Subjects: Cloud computing -- decision model -- infrastructure as a service -- stochastic demand -- capacity planning; Decision support systems -- Periodicals; Management information systems -- Periodicals; Information resources management -- Periodicals; Information storage and retrieval systems -- Periodicals; Management -- Communication systems -- Periodicals; Decision support systems; Information resources management; Information storage and retrieval systems; Management -- Communication systems; Management information systems; Periodicals; 658.40305
• DOI: 10.1080/12460125.2016.1141275
• Languages: English
• ISSNs: 1246-0125

Abstract

Abstract: By using cloud services, companies can access computing capacity on demand, paying only for the capacity that is actually used. This makes cloud services especially interesting for covering peak demand. In this paper, we evaluate under which conditions such a strategy is economically reasonable. We develop a simplified stochastic optimisation model that is suited to support cloud computing decisions. Analysing the model reveals that – under certain assumptions – it is always reasonable to use cloud services to cover peak demand, even if the price is high or if service levels are low. Furthermore, it turns out that higher variance of demand for capacity should not automatically result into a more extensive use of cloud services. These findings as well as our modelling approach can support companies to increase the value of their information technology (IT) infrastructure by leveraging cloud services.