Research On Pricing Strategy Of Cloud Computing Service

In the21st century, with the rapid increase of computer processing technology, network communication technology, storage technology and virtualization technology, cloud computing was born in the background of globalization. As a new technology, cloud computing has made tremendous progress. It has completely changed the traditional operation of IT industry by the way of shifting from providing hardware and software to providing services. In recent years, plenty of companies in the field of cloud computing has emerged by the support of government. And nowadays cloud computing penetrates our daily life and work deeply. Cloud computing market has developed into a trillion-scale high-tech market.With the expansion of the market in cloud computing, the industry and academia both turn sight to the study of cloud computing. New technologies and applications have leaped forward. However, it is rare to find some papers for pricing strategies and business model of cloud computing. The researches on financial aspects of cloud computing are still in their infancy, and most researches focused on the discussion and improvement of the pricing models given by industry leaders, and rarely discussed dynamic pricing from customers’ perspective and long-term cloud computing market.As is stated above, this paper proposes to overcome the pricing issue of cloud computing by using the theory of two-sided market. The characteristics and the attributes of cloud computing are further analyzed by studying the pricing strategies of industry leaders and relevant cloud computing literatures. And the pricing model is increasing renewed so that it can be as realistic as possible.This paper is concerned primarily with the market structure of cloud computing, the factors affecting the prices of cloud computing, the pricing analyses for an oligopolistic and competitive market, the influence of multi-homing users’behaviors for prices in cloud computing market and the pricing mechanism and market strategy in a two-stage market with preferential policies or no preferential policies based on existing work. According to the study part and the discussion part, this paper draws several conclusions as follows.(1) Cloud computing market is a typical two-sided market. By the analysis of cloud computing value chain, it is shown that there are three types of participants in a cloud computing market, which are users, developers and carriers. The trade between users and developers is in the cloud platform given by carriers. Users and developers are closely linked by network externalities. Besides, according to the changes of markets and competition environments, carriers have settled the prices to attract more attention in different operational stages. All these measures are meant to fit the basic characteristics of two-sided market. In the analysis of Even, cloud computing carriers can be considered as a demand coordinator. (2) Two-part tariff is the optimal pricing mode that satisfied carriers’needs, whether it is an oligopolistic or competitive market of cloud computing. Based on three fixed pricing model given by actual carriers of cloud computing, this paper presents the dynamic pricing models of cloud computing from three different charging modes-charging a lump-sum fee, charging a per-transaction fee and two-part tariff. By comparing the three modes and considering customers’ needs, it is found that two-part tariff is superior to others, which allows carriers to adjust price structures in order to respond swiftly to market changes and ensure their maximum revenues.(3) Differentiation in management is an inevitable way for cloud computing carriers. Despite the analysis and numerical simulation of new pricing models, it is argued that the revenues of carriers are rising by differentiation in management, including long-term revenue and short-term revenue. And the status of carriers in cloud computing market also might benefits from differentiation in management.(4) Multi-homing will lead to a higher price for users which is charged by cloud computing carriers. When users are partial multi-homing, the price for users is higher than the price when users are single-homing, and the price for developers is lower. In addition, the number of multi-homing users rises proportionately to the price for users, and is inversely proportional to the price for developers. There will be a positive feedback about the revenue of carriers only if there are enough multi-homing users.(5) The discounts offered to new customers are passed on a percentage by cloud computing carriers to regular customers. In a two-stage markets, carriers will adapt to offer discounts and other preferential policies to attract new customers to join, that is, price discrimination for new and regular customers. Moreover, the higher the discount offered by carriers for new customers, the higher the prices for regular customers. That means carriers shift the discounts on to regular customers.(6) An increase in Cross-side network effect between users and developers has resulted in the decline of cloud computing carriers’revenues. Cross-side network effect reflects the interaction between users and developers. When Cross-side network effect is increasing, the utilities received by users and developers are correspondingly added. However, an increase in Cross-side network effect can be causing the decline of cloud computing carriers’revenues. So it is necessary to adjust the network effect between users and developers and achieve the win-win purpose.The main innovations of this paper are as follows:(1) On the basis of two-sided market theory, the cloud computing market is studied in this paper. The scientific study on the pricing strategies of cloud computing has just started internally in recent years. Most of the recent researches are concerned with the fixed pricing mechanism provided by cloud computing carriers. This paper focuses on the characteristics of platform economics from the cloud computing market. And it integrates the theory of two-sided market and the Hotelling specification, makes the innovation of systematically researching the pricing strategies and market strategy, and compares with these present prices. This paper provides a new way to study the pricing models of cloud computing.(2) This paper considers the pricing problem of cloud computing from the perspective of users’and developers’returns. Unlike the previous studies, the revenues of users and developers are taken into account in building the pricing models under the oligopolistic or competitive market of cloud computing in this paper. It finds a pricing way to achieve the win-win between users, developers and carriers. Meanwhile, the market behaviors of users, the different charging modes and the differentiation in management, etc., are added in the pricing models. (3) The pricing strategies in a long-term cloud computing market are studied in this paper. With the development of cloud computing market, users and developers frequently change their decisions and select new cloud computing. So the carriers should readjust their prices by the market in order to achieve the operation target and raise the competition position. Therefore, the pricing strategies of the long-term cloud computing market are put forward in this paper. The decision-making condition of cloud computing carriers is expanded from one-stage market to two-stage market. All those have been neglected in previous studies.(4) Under the background of Westlakecloud, the practicality and reliability of the pricing models have been verified by numeric simulation. And this paper studies the effect of differentiation in management, market size, switching cost and preferential policies on pricing strategies of cloud computing in details.