Skip to main content
SpringerLink
Log in

Pricing schemes and profit-maximizing pricing for cloud services

  • Practice Article
  • Published:
Journal of Revenue and Pricing Management Aims and scope

Abstract

As cloud computing rapidly penetrates enterprise computing markets, the paradigm of enterprise computing shifts from client–server data centers to cloud-based data centers. While cloud computing is leading technological innovations to a new level, it is challenging for cloud providers to make informed decisions in regard to pricing of their services. This study presents a typology of pricing schemes for cloud services and develops a decision model based on the perspectives of both cloud providers and corporate customers to maximize the total profit for cloud providers. The model is operationalized with an illustration using real pricing data. A sensitivity analysis provides valuable insights into the pricing dynamics between cloud providers and cloud customers.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8

Similar content being viewed by others

References

  • Abhishek, V., Kash, I.A., and Key, P. 2012. Fixed and market pricing for cloud services. In Proceedings of the 7th workshop on the economics of networks, systems, and computation (NetEcon 2012), 157–162, Orlando, FL, USA. Washington, DC: IEEE Computer Society.

  • Al-Roomi, M., S. Al-Ebrahim, S. Buqrais, and I. Ahmad. 2013. Cloud computing pricing models: A survey. International Journal of Grid and Distributed Computing 6 (5): 93–106.

    Article  Google Scholar 

  • Andrzejak, A., D. Kondo, and S. Yi. 2010. Decision model for cloud computing under SLA constraints. In 2010 IEEE international symposium on modeling, analysis & simulation of computer and telecommunication systems (MASCOTS), Miami Beach, FL.

  • Ben-Yehuda, O.A., M. Ben-Yehuda, A. Schuster, and D. Tsafrir. 2013. Deconstructing Amazon EC2 spot instance pricing. ACM Transactions on Economics and Computation 1 (3): 16.

    Google Scholar 

  • Bitran, G., and R. Caldentey. 2003. An overview of pricing models for revenue management. Manufacturing & Service Operations Management 5 (3): 203–229.

    Article  Google Scholar 

  • Chakraborty, S., S. Basu, and M. Sharma. 2014. Pricing Infrastructure-as-a-Service for online two-sided platform providers. Journal of Revenue and Pricing Management 13 (3): 199–223.

    Article  Google Scholar 

  • Cross, R.G., J.A. Higbie, and Z.N. Cross. 2011. Milestones in the application of analytical pricing and revenue management. Journal of Revenue & Pricing Management 10 (1): 8–18.

    Article  Google Scholar 

  • Dikaiakos, M.D., G. Pallis, D. Katsaros, P. Mehra, and A. Vakali. 2009. Cloud computing: Distributed Internet computing for IT and scientific research. IEEE Internet Computing 13 (5): 10–13.

    Article  Google Scholar 

  • Erdogmus, H. 2009. Cloud computing: Does nirvana hide behind the nebula? IEEE Software 26 (2): 4–6.

    Article  Google Scholar 

  • Huang, J., R.J. Kauffman, and D. Ma. 2015. Pricing strategy for cloud computing: A damaged services perspective. Decision Support Systems 78: 80–92.

    Article  Google Scholar 

  • Infoworld. 2017. Cloud pricing comparison: AWS vs. Microsoft Azure vs. Google Cloud vs. IBM Cloud. https://www.infoworld.com/article/3237566/cloud-computing/cloud-pricing-comparison-aws-vs-azure-vs-google-vs-ibm.html.

  • Iveroth, E., A. Westelius, C. Petri, N. Olve, M. Cöster, and F. Nilsson. 2003. How to differentiate by price: Proposal for a five-dimensional model. European Management Journal 31 (2): 109–123.

    Article  Google Scholar 

  • Jain, T., and J. Hazra. 2018. “On-demand” pricing and capacity management in cloud computing. Journal of Revenue and Pricing Management.. https://doi.org/10.1057/s41272-018-0146-0.

    Google Scholar 

  • Javadi, B., R.K. Thulasiram, and R. Buyya. 2011. Statistical modeling of spot instance prices in public cloud environments. In 2011 fourth IEEE international conference on utility and cloud computing, 219–228, Victoria, Australia.

  • Jin, H., X. Wang, S. Wu, S. Di, and X. Shi. 2015. Towards optimized fine-grained pricing of IaaS cloud platform. IEEE Transactions on Cloud Computing 3 (4): 436–448.

    Article  Google Scholar 

  • Mireslami, S., L. Rakai, B.H. Far, and M. Wang. 2017. Simultaneous cost and QoS optimization for cloud resource allocation. IEEE Transactions on Network and Service Management 14 (3): 676–689.

    Article  Google Scholar 

  • Laatikainen, G., A. Ojala, and O. Mazhelis. 2013. Cloud services pricing models. In Software business from physical products to software services and solutions, ed. G. Herzwurm and T. Margaria, 117–129. Berlin: Springer.

    Chapter  Google Scholar 

  • Lehmann, S., and P. Buxmann. 2009. Pricing strategies of software vendors. Business & Information Systems Engineering 1 (6): 452–462.

    Article  Google Scholar 

  • Li, Z., H. Zhang, L. O’Brien, S. Jiang, Y. Zhou, M. Kihl, and R. Ranjan. 2016. Spot pricing in the cloud ecosystem: A comparative investigation. Journal of Systems and Software 114: 1–19.

    Article  Google Scholar 

  • Ojala, A. 2016. Adjusting software revenue and pricing strategies in the era of cloud computing. Journal of Systems and Software 122: 40–51.

    Article  Google Scholar 

  • Pal, R., and P. Hui. 2013. Economic models for cloud service markets: Pricing and capacity planning. Theoretical Computer Science 496 (2013): 113–124.

    Article  Google Scholar 

  • Piercy, N.F., D.W. Cravens, and N. Lane. 2010. Thinking strategically about pricing decisions. Journal of Business Strategy 31 (5): 38–48.

    Article  Google Scholar 

  • Reen, N., M. Hellström, K. Wikström, and O. Perminova-Harikoski. 2017. Towards value-driven strategies in pricing IT solutions. Journal of Revenue and Pricing Management 16 (1): 91–105.

    Article  Google Scholar 

  • Rohitratana, J., and J. Altmann. 2012. Impact of pricing schemes on a market for software-as-a-service and perpetual software. Future Generation Computer Systems 28 (8): 1328–1339.

    Article  Google Scholar 

  • Schwab, K. 2016. The Fourth Industrial Revolution, what it means and how to respond. https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/.

  • Sharma, B., R.K. Thulasiram, P. Thulasiraman, S.K. Garg, & R. Buyya. 2012. Pricing cloud compute commodities: A novel financial economic model. In Proceedings of IEEE/ACM international symposium on cluster, cloud and grid computing (CCGrid), Ottawa, Canada.

  • Stoppel, E., and S. Roth. 2015. Consequences of usage-based pricing in industrial markets. Journal of Revenue and Pricing Management 14 (3): 140–154.

    Article  Google Scholar 

  • Vaquero, L.M., L. Rodero-Merino, J. Caceres, and M. Lindner. 2009. A break in the clouds: Towards a cloud definition. Computer Communication Review 39 (1): 50–55.

    Article  Google Scholar 

  • von Martens, T., and A. Hilbert. 2011. Customer-value-based revenue management. Journal of Revenue and Pricing Management 10 (1): 87–98.

    Article  Google Scholar 

  • Weinhardt, C., A. Anandasivam, B. Blau, N. Borissov, T. Meini, W. Michalk, and J. Stosser. 2009. Cloud computing—A classification, business models, and research directions. Business & Information Systems Engineering 1 (5): 391–399.

    Article  Google Scholar 

  • Yeo, C.S., S. Venugopal, X. Chu, and R. Buyya. 2010. Autonomic metered pricing for a utility computing service. Future Generation Computer Systems 26 (8): 1368–1380.

    Article  Google Scholar 

  • Youseff, L., M. Butrico, and D. Da Silva. 2008. Toward a unified ontology of cloud computing. In Grid computing environments workshop (GCE ‘08), Austin, TX.

Download references

Author information

Authors and Affiliations

  1. Cecil P. McDonough Endowed Professor in Business, School of Computer Sciences, College of Business and Technology, Western Illinois University, Macomb, IL, 61455, USA

    In Lee

Authors
  1. In Lee
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to In Lee.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Lee, I. Pricing schemes and profit-maximizing pricing for cloud services. J Revenue Pricing Manag 18, 112–122 (2019). https://doi.org/10.1057/s41272-018-00179-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41272-018-00179-x

Keywords

Search

Navigation