Cloudonomics: The Business Value of Cloud Computing, + Website

CHAPTER 8

Demand Dilemma

Many businesses have come to accept an endemic problem: the fundamental disparity between the capacity to produce products and deliver services—which is fixed in the short term—and the demand for those products and services—which is almost always variable at any time scale.

By “demand,” we mean users’ and customers’ needs and desires to acquire or consume Chinese take-out meals, Lamborghinis, plane tickets, electricity, Web content, and the millions of other products and services for sale every day, whether online or offline. By “capacity,” we mean the resources that enable businesses to meet those needs: woks, tables, tablecloths, servers (as in waiters), servers (as in computers), and the millions of other resources that are required, singly or in combination. Often demand and capacity use different measures: One may measure demand for food in platefuls, but capacity is measured in woks and cooks. Sometimes they are the same: A toaster needs electricity, and a power company delivers it. Here we will keep things simple and assume that demand and capacity are in the same units.

Like a broken watch that indicates the correct time twice a day, capacity may coincidentally correspond to demand for a short while, but generally it is too high or too low, causing economic loss. Customer demand—at its heart—is volatile. Although tactical measures such as queuing and demand shaping can ameliorate the issue, only the cloud can truly solve it.

Variability and unpredictability ...