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Cloud Computing$
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Nayan B. Ruparelia

Print publication date: 2016

Print ISBN-13: 9780262529099

Published to MIT Press Scholarship Online: September 2016

DOI: 10.7551/mitpress/9780262529099.001.0001

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Price and Value Models

Price and Value Models

(p.67) 4 Price and Value Models
Cloud Computing

Nayan B. Ruparelia

The MIT Press

Just as every undertaking has a cost and a benefit associated with it, so does a cloud service. The cost of a cloud service and the price you pay for it are assessed using various pricing schemes, known as price models. Price models categorized as utility, service, performance and marketing oriented models are discussed.To offset the price you pay for the cloud service, you need to realize a commensurate benefit. That benefit is assessed by considering value models related to cloud computing. Seven value models are considered: (1) operating expense, (2) user demand flexibility, (3) price flexibility, (4) agility for time to market, (5) location flexibility, (6) asset optimization, and (7) profit margin.A more objective approach to assessing the value of cloud computing using financial metrics is considered. Four common financial metrics for evaluating investment in a cloud service are assessed: payback method, net present value (NPV), return on investment (ROI), and time to market (TTM).

Keywords:   Cost model, Price model, Value model, Utility price models, Service price models, Performance price models, Marketing price models, Hybrid price models, Financial metrics

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