All About the Economics of Cloud Computing

  • 5th Oct'21
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Earlier, before cloud computing was introduced, companies had to invest a huge amount in infrastructure to set up an IT department. It is time-consuming, needs a lot of training, and is expensive. When cloud computing came in, we got a go-to solution, especially for those dealing with IT, as it saves a lot of time and money and provides many benefits. While using cloud services, you should also be aware of how to address poor cloud computing behaviors? 

There are various advantages to using cloud computing services. You get a customized configuration that addresses all your needs according to your priorities. However, the economics of clouding is quite complicated. 

You need to understand the basics of cloud economics. Let us take a look at it. 


What is cloud economics? 

The economics of cloud computing involves understanding the costs and benefits along with their economic principles. It also speaks on the most important aspect of the businesses, What is the return on investment (ROI) of opting for a cloud service. 

The economics of cloud computing is based on the pay-you-go method. The customers can pay only for how much they have used the cloud services. This makes cloud computing economically feasible for individuals as well as organizations to use them. This is all about the basics and benefits of cloud computing services. 


Economic background of cloud computing

As we discussed above that cloud computing is economically feasible, let us know-how. It is beneficial for the users in mainly two ways when we consider its economic aspect: 

  • It is charged on a pay as you use model 
  • Scalable and user friendly

It mainly allows the users to reduce capital costs, eliminates maintenance costs and administrative costs. 


Economics of cloud computing


What are Capital Costs in Startups? 

Capital costs include costs of purchasing infrastructure, assets that are important for your products and services. It takes a long time to reach a break-even point while investing heavily in infrastructure. For startups engaging such a huge sum of the amount initially becomes difficult to arrange. Therefore they need services at minimum costs. This is how cloud computing reduces capital costs for startups. 


Pricing Strategies of Cloud Computing 

There are three types of pricing strategies that are introduced in cloud computing, depending on the convenience of the users. 


Tiered Pricing

The companies that provide cloud computing services offer services in various tiers. Each tier offers fixed services and a specific cost. This is called tiered pricing. 


Prices per unit 

This is a unit-specified service concept. You have to pay to the cloud only for the cloud service used. If you use cloud services only for memory allocation and data transfer, you will only pay for this service. 


Subscription-based pricing 

In this model, the customers pay periodically by paying a subscription fee for using cloud services. 


Economics of cloud computing


How are the costs of cloud services decided?

The cost of the cloud services can be calculated on the basis of the following: 


Cost of Current data center

It is obvious that data centers provide cloud services. The data center determines its costs based on the infrastructure and costs of a cloud of services, along with their service fees. 

If you have to set up your own data center, you need to calculate the basic infrastructure costs, maintenance contracts, software licenses, cloud space, and taxes. 


Migration Costs 

If you are availing of one data service provider, but over time, switch to another, you will have to pay specific migration fees. This also includes the integration and testing of your data. 


What to avoid while using cloud computing?

Though cloud computing is the easiest way to store your data to run your business, there are a few loopholes to avoid while availing of this service. 

  • Cloud Computing service should be compatible with your business and working style. 
  • An outdated cloud computing service is a bane for you. 
  • Avoid unnecessary services that are simply becoming a burden on your pockets. 



Cloud Computing is one of the most widely used services by offices and personally. While opting for any cloud computing service, you should wisely choose a cloud computing service provider to avoid further hurdles and complications. 


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About the author:

Prachi Chouksey (Editor), Super admin

An artist by heart and a writer by profession, Prachi is a vivacious reader.  She believes in hard work and her dedication has never let her down. She puts her heart and soul in everthing she does. Though life has not been a bed of roses for her, she affirms that the best way to live it is to maintain an equillibrium between the tunes of life.  

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