Data Centres and the Cloud
The Economics of the Cloud
Why companies rent computing from cloud providers instead of owning servers, how pay-as-you-go pricing works, and why cloud markets are concentrated.
The cloud lets companies rent computing power and storage over the internet.
Why rent
- No upfront investment in servers.
- Pay as you go: costs rise and fall with use.
- Scale up quickly during traffic spikes, like festival sales.
- Reliability and security managed by experts.
Economies of scale
Big providers buy servers and power in bulk, spreading costs across millions of customers.
Market leaders
- Amazon Web Services (AWS), Microsoft Azure and Google Cloud dominate globally.
- These three hold a large majority of the global cloud market.
Concentration concerns
- Lock-in: moving data between providers can be costly.
- Egress fees for moving data out.
- Regulators in the UK and EU have examined cloud competition.
India’s cloud
Indian government services use approved cloud providers; the MeghRaj initiative promotes government cloud.
Outages
When a big cloud provider fails, thousands of services can go down at once.
During a big online sale, an e-commerce site rents extra cloud servers for a few days, then releases them, paying only for what it used.
Renting can be cheaper and more flexible, especially for variable demand.
- The cloud rents computing on demand.
- Pay-as-you-go turns fixed costs into variable costs.
- AWS, Azure and Google Cloud dominate.
- Lock-in and outages are concerns.
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