The economics of cloud computing

Soon after the discovery of gold in the American Nevada Mountains in 1848, many gold diggers poured into California State, triggering a vigorous gold rush. But who knows that the fortune in this gold rush is not the man who digs the gold, but the man who sells the water at the mine. But when there are more water people, who else can get rich?

Cloud computing platforms are equivalent to gold mines, and a variety of application providers based on cloud platforms are the people who sell water on the mines. In this way, the combination of infrastructure and value-added services, the enterprise is no longer a separate individual, but a commercial ecological community.

The economic attributes behind cloud computing have doomed cloud computing to be an entirely new kind of productivity, making our social life different from business and industrial economic times. In the industrial economy era, users are the recipients of the product and cannot get involved in the production process. But in the information society, the production process is also the innovation process, the user demand can also affect the product production process.

We can easily understand cloud computing as a new generation of infrastructure and tools to serve the economy, which leads us to a brand-new era of service economy, farewell to the single and cost of large industrial production, and farewell to the high cost and inefficiency of the agricultural economic times. The products provided in the era of industrial economy are difficult to meet the personalized demand, while the products provided by the agricultural economy era are individualized, but cannot be mass-produced.

The service economy era combines the advantages of both, avoids its shortcoming, brings the human production into a new era, and this is also the great economic significance of cloud computing. Because of such a sense, cloud computing brings enormous potential to any industry, region, enterprise, or even a country that requires us to think about it and use it.

Re-define Cloud concepts

As for cloud computing, we can find countless definitions. According to the American Institute of National Standards and technology, cloud computing is a new usage pattern for IT resources and a new delivery model for IT resources.

Where's the new? First, cloud computing is turning IT resources into a pool of resources that is dynamic, can be shared, and driven by configuration, and is a dynamic, flexible, cutting, shared pool of resources.

Cloud computing has three more points. First, access through the web, just as we do every day through the browser, and the second, which can be accessed on demand anytime. Amazon provides the cloud computing services, only need to fill in online requirements, such as how many servers, CPU for how many MHz, bandwidth needs, the configuration of the hard disk and so on. Credit card number can be completed payment, a few 10 seconds will receive feedback, computing resources can be used. If you take the traditional it procurement channels, it may take more than three months; third, from the management point of view is completely automated. In other words, the allocation of resources, use, demonstrations are automated, do not have to pay too much management costs.

Understanding these three points makes it clear that cloud computing is a new, flexible, dynamic, sharable, configuration-driven It resource form that can be automated and managed on demand via the Internet.

Business form triggers change

Cloud computing means self-service on demand, ubiquitous network access, and resource pools that do not take into account specific physical locations. In the use of the process, the system can automatically detect the needs of users, dynamic distribution, when the demand is reduced, and then dynamically recover the resources, and the use of this rigorous monitoring of the entire process, to understand the use of each user, according to the use of the situation to charge. This enables cloud computing to acquire commercial attributes from purely technical means and to open up new business forms.

Let's take a look at four forms of cloud computing: private cloud, public cloud, mixed cloud, and community cloud.

Private cloud is a computing resource platform built in-house, IBM owns and uses many private cloud platforms within the enterprise, such as developing Test cloud IBM Ring Cloud.　Developers can't see the physical machine, everyone is using a virtual machine, what kind of environment they want to assign to him, and innovation Cloud, IBM employees can publish their own innovative applications to run, and may be developed into new products; IBM Blue Insights Cloud on the company's global sales of data, can be based on these data analysis forecasts, such as can predict which customers should be sold next month, what customer needs, the general trend of sales performance, accuracy as high as 90%.

The public cloud is a computing platform built on public networks, such as the cloud services provided by websites such as Amazon. Community Cloud is a number of enterprises sharing a cloud computing platform, between the common cloud and private cloud, the main feature is the right to use and the separation of ownership. A hybrid cloud is a computing resource that combines a private cloud with a public cloud, such as many banks and insurance companies that need a lot of computing resources when they make statements at the end of the month, and if the hardware is wasted at this peak, 80% of the machines are idle for 80% of the time. You can connect the machines within the enterprise to cloud service providers such as Amazon and, when needed, hire machines through cloud computing services.

According to the economics concept, cloud computing makes the right to use and ownership of IT infrastructure separate from the delivery channel level. At the delivery service level, the process of cloud computing being used and abandoning the infrastructure is done in a service manner. At the level of delivery mode, the private ownership and ownership of private cloud are combined; the right to use and ownership of the public cloud is separate, and the owner allows open access to the people, the enterprise, the Community cloud users are restricted target groups, and the mixed cloud combines the public cloud with the private cloud.

Cloud computing can also provide application services than infrastructure. In other words, not only can help the customer to do the system well, the platform is built, provides the tool to the customer, enables it to use this platform to carry on the work deployment, the cloud computing service provider may also on the platform for the customer constructs the application, provides the application service.

This is extremely important in economics, where cloud computing brings new service delivery patterns.

Cloud computing to reshape economics

Do you know how many times Google has updated its system in 2008? The answer is 380 times, which means an average of at least one update per day. It all depends on user needs and market competition, which are the problems that Internet companies face at a certain stage, which requires them to become more dynamic, flexible and on demand. This not only brings cost, speed advantage, but also brings different open standards and economic models. Cloud computing through the new form of it resource usage patterns, the same physical resources can do more things, lower cost, more efficient, and have a more convenient customer experience, but these are only very basic level of value.

The greater value of cloud computing lies in leveraging the business innovation opportunities created by this new IT form. Cloud computing has revolutionized traditional business models and business models because of its own economic model.

First, cloud computing has a scale effect, and Google has millions of servers. But Google's fixed assets are not just these servers, but the network effects. The more people on the phone, the greater the network value of the telephone. This also applies to the cloud services provided on the Internet, the more people use, the greater the value. Google's search results are being revised daily based on the search results of each searcher, and if Google offers a high rate of search results, it is because every user is contributing.

And Amazon's cloud services, because the number of consumers buying books is huge, so Amazon can provide a very strong recommendation list, which is based on the reader's purchase data. This is the traditional cross-selling, Amazon's sales of more than half of the books sold in this way, this is Amazon's unique, not copied business secrets.

This is the network effect, all cloud services in fact more or less have this feature. What is the net effect plus the results of global access? From the point of view of economics, the marginal cost is decreasing, the benefit increasing, and the marginal cost tends to be zero.

Cloud computing also brings personalized value, almost all cloud services provide search, and recommendation is another search. Web site can be based on the user's current search action, by the system automatically recommend which consumers may be interested in, thus forming the recommended list. This is also true of social networks, where the preference of experts and celebrities in certain areas can become a new trend and a new fad in this field. Mobile interconnection has brought unknown attributes, further let our preferences have a spatial segmentation, through these can fully put the consumer's personality and preferences are caught. And these will have the greatest commercial value, because the Internet to provide users with personalized services, which is the user's most wanted, this is the industrial economy and large-scale sales completely different.

Cloud computing also brings a long tail effect, and a lot of personalized requirements add up to great value. Consumers may well not know that the obscure books on Amazon's web site add up to more than 70% of total sales, while the best-selling book accounts for only 30%. So the value of cloud services is to create a "blue sea." In terms of economics, cloud services have more than a few orders of magnitude of competitive power than traditional services.

Cloud computing production can also be crowdsourcing, which is also the characteristics of all Internet services. Let's look at Apple, which relies on crowdsourcing to develop software on both the iphone and the ipad, and does not need to consume Apple's resources, and every software developed on this platform will pay Apple 30% of its profit if it is profitable.

Network effect, personalized service, long tail effect, blue ocean, crowdsourcing, cloud computing brings not only the change of IT infrastructure use, but also the reshaping of the economic concept, promoting the change of business model so as to quickly move to the service economy era.