September 2012
Intermediate to advanced
391 pages
12h 39m
English
Content preview from Cloudonomics: The Business Value of Cloud Computing, + Website
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Unit Cost
If both the customer and the service provider have similar competencies, unit cost can be an important differentiator. Unit cost advantages can be due to a variety of causes such as scale economies or preferential access to resources. As an example of the difference, consider running your own natural gas generator versus getting electricity generated from the Hoover Dam. The Hoover Dam’s generators are larger than you might have in your backyard; they’re probably larger than the backyard itself. This size surely drives economies of scale. If these larger generators were not more efficient, they would have been replaced long ago with many smaller ones.
Moreover, while you have to pay for the natural gas that powers your generator, they get their Colorado River water—and the kinetic and potential energy contained in it—for free.
In any case, if the cloud can do something more cheaply, it clearly can create value.
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