Cloudonomics in Advanced Cloud Computing

Cloudonomics in Advanced Cloud Computing

1. CLOUDONOMICS

2. 2 Contents Cloudonomics Laws of Cloudonomics

3. Cloudonomics is the Economics of Cloud Computing. It is based on the business value of cloud computing.  Cloudonomics gives us overall knowledge into the business estimation of the Cloud for officials, experts, and strategists in for all intents and purposes any industry innovation administrators as well as those in the promoting, operations, financial aspects, funding, and monetary fields. 3

4. CLOUD: FROM AN ECONOMIC VIEW POINT Common Infrastructure Pooled standardized resources, statistical multiplexing Location Independence Ubiquitous availability meeting performance requirements Latency reduction and user experience enhancement Unit Pricing Usage sensitive or pay per use pricing Benefits environment with variable demand levels On demand Resources Scalable, elastic resources are provisioned and deprovisioned without delay or cost associated with change 4

5. Economies of Scale Reduced overhead costs Buyer power through volume purchasing Statistics of Scale For infrastructure built to peak requirements: Multiplexing Demand  higher utilization. Lower cost per delivered resource than unconsolidated workloads. For infrastructure built to less than peak: Multiplexing Demand  reduce the unserved demand. Lower loss of revenue or a service level agreement violation payout VALUE OF COMMON INFRASTRUCTURE 5

6. Economics of cloud providers Cost of power: TCO (Total Cost of Ownership) power usage effectiveness tends to be significantly lower in smaller one. Power utilization effectiveness =   Infrastructure labor costs: A single system administrator manages thousands of servers in large data centers. Buying power: Operators of large datacenters can get discounts on hardware purchase of up to 30% over small buyers. 6

7. Economies of scale in the cloud 7

8. 8

9. 9 The risk of misestimating workload is shifted from the service operator to the cloud vendor. Services like google AppEngine automatically scales in response to load increases and decreases

10. 10 VALUE OF LOCATION INDEPENDENCE We used to go to computers but now but applications, services, contents now come to us! Through networks : wired, wireless, satellite etc. But what about Latency? Latency is correlated with distance (strongly) Routing algorithm of routers and switches are also related That’s why supporting a global user base requires a dispersed service architecture.

11. 11 VALUE OF UNIT PRICING Cloud services don’t need to be cheaper to be economic! Consider a car • Buy or lease for $10 per day • Rent a car for $45 a day • If you need a car for 2 days in a trip, buying would be much more costly than renting • It depends on the demand Utility Pricing is good when demand varies over time, as is the case of a start-up or a seasonal business. When Utility Premium is less than ratio of Peak Demand to Average Demand, Cloud computing is beneficial.

12. 12 Simple Problem: when owning your resources, you will pay a penalty when your resources do not match the instantaneous demand . Then either you have to pay for the unserved resources or Suffer the penalty of missing service delivery Penalty Cost If Demand is flat, Penalty = 0 If Demand is linear, periodic provisioning is acceptable   VALUE OF ON- DEMAND SERVICES

13. LAWS OF CLOUDONOMICS 13

14. In 2008, Joe Weinman, created the 10 Laws of Cloudonomics that still, are the foundation for the economics of Cloud Computing. Cloudonomics Law #1:   Utility services cost less even though they cost more. Although utilities cost more when they are used, they cost nothing when they are not. Consequently, customers save money by replacing fixed infrastructure with Clouds when workloads are spiky, specifically when the peak-to-average ratio is greater than the utility premium. Cloudonomics Law #2:   On-demand trumps forecasting. Forecasting is often wrong, the ability to up and down scale to meet unpredictable demand spikes allows for revenue and cost optimalities. 14

15. Cloudonomics Law #3:   The peak of the sum is never greater than the sum of the peaks . Enterprises deploy capacity to handle their peak demands. Under this strategy, the total capacity deployed is the sum of these individual peaks. However, since clouds can reallocate resources across many enterprises with different peak periods, a cloud needs to deploy less capacity. Cloudonomics Law #4:   Aggregate demand is smoother than individual . Aggregating demand from multiple customers tends to smooth out variation. Therefore, Clouds get higher utilization, enabling better economics. Cloudonomics Law #5: Average unit costs are reduced . They are reduced by distributing fixed costs over more units of output. Larger cloud providers can therefore achieve economies of scale. 15

16. Cloudonomics Law #6: Superiority in numbers . Superiority in numbers is the most important factor in the result of a combat. Service providers have the scale to fight rogue attacks. Cloudonomics Law #7: Space-time is a continuum . Organizations derive competitive advantage from responding to changing business conditions faster than the competition. With Cloud scalability, for the same cost, a business can accelerate its information processing and decision-making. Cloudonomics Law #8: Dispersion is the inverse square of latency . Reduced latency is increasingly essential to modern applications. A Cloud Computing provider is able to provide more nodes, and hence reduced latency, than an enterprise would want to deploy. 16

17. Cloudonomics Law #9: Don’t put all your eggs in one basket . The reliability of a system increases with the addition of redundant, geographically dispersed components such as data centers and storage arrays. Cloud Computing vendors have the scale and diversity to do so. Cloudonomics Law #10: An object at rest tends to stay at rest. A data center is a very large object. Private data centers tend to remain in locations for reasons such as being where the company was founded, or where they got a good deal on property or a lease. A Cloud service provider can locate greenfield sites optimally and without such limits of legacy logic. 17

18. Questions What is Cloudonomics? Explain cloud from economic view point. Describe about Unit Pricing. Describe about on- demand service penalty cost. Briefly explain the laws of Cloudonomics. 18

19. Thank You 19