Cloudonomics: The Business Value of Cloud Computing, + Website

A Diversity of Demands

Different types of demand require different management and operations strategies. Constant demand lies at one extreme but wildly varying demand lies at the other, with unpredictable timing, direction, and amplitude of gyrations and epochs of relative calm randomly punctuated by massive upheavals.

Constant demand—if there is such a thing—and equivalent fixed capacity would be a perfect fit for each other.

Periodic predictable variation is the next best scenario. A publicly traded firm knows that it needs to report earnings every quarter and can institutionalize financial data collection, aggregation, reporting, and communications processes that correspond to this cadence.

Aperiodic predictable variation is the next easiest scenario. Even if not on a regular cycle, repeatable processes, such as software upgrades or patches, can follow a standardized process. However, regardless of whether periodic or aperiodic variation is predictable, the mere existence of such demand variation can be a challenge to manage with fixed capacity.

The most challenging—and increasingly prevalent—characteristic of today’s world, however, is the existence of unpredictable variation: shocks, discontinuities, disruptions, black swans.1 Such variation may have unpredictable timing, unpredictable amplitude, or both. The date of the Barack Obama presidential inauguration or the 2008 Beijing Olympics was never in doubt, but the number of viewers certainly was. Retailers know that the month ...