Cloudonomics: The Business Value of Cloud Computing, + Website

CHAPTER 10

Significance of Scale

One significant aspect of today’s leading providers is their scale and scope. They may support millions or even hundreds of millions of users each month, often have global reach, and can exploit the economics of large facilities. This scale can shift relative costs, and can also offer unique advantages beyond cost.

If we are considering using the cloud, one factor impacting our choice is surely the cost relative to the do-it-yourself option. The major cloud computing providers have outdone themselves in building large multi-football-field-size data centers. Author and futurist George Gilder called these “the Information Factories,” and as he put it, “[W]e’re all petaphiles now, plugged into a world of petabytes, petaops, petaflops.”1 The art and science of designing and siting these data centers involves many different insights and best practices in a variety of areas: property acquisition; tax incentives; power and cooling engineering; regional electric power cost differentials; immunity from earthquakes, floods, and other disasters; and high-bandwidth network connectivity, to name a few. A major reason to build such enormous facilities is to exploit economies of scale.

According to economics textbooks, “economies of scale” are “increases in productivity, or decreases in average cost of production, that arise from increasing all the factors of production in the same proportion.”2 The conventional wisdom regarding economies of scale in the cloud ...