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Economics of Cloud Computing

Last Updated : 14 Jun, 2022
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Economics of Cloud Computing is based on the PAY AS YOU GO method. Users/Customers must have to pay only for their way of the usage of the cloud services. It is definitely beneficial for the users. So the Cloud is economically very convenient for all. Another side is to eliminate some indirect costs which is generated by assets such as license of the software and their support. In the cloud, users can use software applications on a subscription basis without any cost because the property of the software providing service remains to the cloud provider. 

Economical background of the cloud is more useful for developers in the following ways:

  • Pay as you go model offered by cloud providers.
  • Scalable and Simple.

Cloud Computing Allows:

  • Reduces the capital costs of infrastructure.
  • Removes the maintenance cost.
  • Removes the administrative cost.

What is Capital Cost? 

It is cost occurred in the purchasing infrastructure or the assets that is important in the production of goods. It takes a long time to generate profit. 

In the case of start-ups, there is no extra budget for the infrastructure and its maintenance. So cloud can minimizes expenses of any small organization in terms of economy. It leads to the developers can only focus on the development logic and not on the maintenance of the infrastructure. 

There are three different Pricing Strategies that are introduced by Cloud Computing: Tiered Pricing, Per-unit Pricing, and Subscription-based Pricing. These are explained as following below.

  1. Tiered Pricing: Cloud Services are offered in the various tiers. Each tier offers to fix service agreements at a specific cost. Amazon EC2 uses this kind of pricing.
  2. Per-unit Pricing: The model is based upon the unit-specific service concept. Data transfer and memory allocation include in this model for specific units. GoGrid uses this kind of pricing in terms of RAM/hour.
  3. Subscription-based Pricing: In this model, users are paying periodic subscription fees for the usage of the software.

So these models give more flexible solutions to the cloud economy.

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