Thomas Meinl

Cloud Computing – A Classification, Business Models, and Research Directions

Lately, a new computing paradigm has emerged: “Cloud Computing”. It seems to be promoted as heavily as the “Grid” was a few years ago, causing broad discussions on the differences between Grid and Cloud Computing. The first contribution of this paper is thus a detailed discussion about the different characteristics of Grid Computing and Cloud Computing. This technical classification allows for a well-founded discussion of the business opportunities of the Cloud Computing paradigm. To this end, this paper first presents a business model framework for Clouds. It subsequently reviews and classifies current Cloud offerings in the light of this framework. Finally, this paper discusses challenges that have to be mastered in order to make the Cloud vision come true and points to promising areas for future research.

Advance Reservation of Grid Resources via Real Options

While grid market schedulers have recently received a lot of attention and have been accepted not only in economic but also in purely computer science areas as well, technical grid schedulers are being modified to support advance reservation of resources, too. This prompts questions on how to model grid markets and how to handle grid resource reservation in a reasonable economic fashion. This paper introduces a real options approach together with a basic model to address those issues.

Enabling Cloud Service Reservation with Derivatives and Yield Management

Since the cloud computing advent a few years ago this paradigm has proved itself to be extremely successive in the industrial sector. IT and business managers agree that this form of highly-dynamic provision of IT services will play a major role in the IT world during the next decades. Several business models have already been developed and implemented, including also dynamic pricing schemes. Given that, we analyze in this work two distinct reservation system approaches from related areas and how they can be applied to the cloud computing scenario. We state the different requirements and set up a realistic implementable model in order to enable cloud vendors to improve their revenues.

Web service derivatives

Web service development and usage has shifted from simple information processing services to high-value business services that are crucial to productivity and success. In order to deal with an increasing risk of unavailability or failure of mission-critical Web services we argue the need for advanced reservation of services in the form of derivatives. The contribution of this paper is twofold: First we provide an abstract model of a market design that enables the trade of derivatives for mission-critical Web services. Our model satisfies requirements that result from service characteristics such as intangibility and the impossibility to inventor services in order to meet fluctuating demand. It comprehends principles from models of incomplete markets such as the absence of a tradeable underlying and consistent arbitrage-free derivative pricing. Furthermore we provide an architecture for a Web service market that implements our model and describes the strategy space and interaction of market participants in the trading process of service derivatives. We compare the underlying pricing processes to existing derivative models in energy exchanges, discuss eventual shortcomings, and apply Wavelets to analyze actual data and extract long- and short-term trends.

Business Aspects of Web Services

Driven by maturing Web service technologies and the wide acceptance of the service-oriented architecture paradigm, the software industrys traditional business models and strategies have begun to change: software vendors are turning into service providers. In addition, in the Web service market, a multitude of small and highly specialized providers offer modular services of almost any kind and economic value is created through the interplay of various distributed service providers that jointly contribute to form individualized and integrated solutions. This trend can be optimally catalyzed by universally accessible service orchestration platforms service value networks (SVNs) which are the underlying organizational form of the coordination mechanisms presented in this book.Here, the authors focus on providing comprehensive business-oriented insights into todays trends and challenges that stem from the transition to a service-led economy. They investigate current and future Web service business models and provide a framework for Web service value networks. Pricing mechanism basics are introduced and applied to the specific area of SVNs. Strategies for platform providers are analyzed from the viewpoint of a single provider, and so are pricing mechanisms in service value networks which are optimal from a network perspective. The extended concept of pricing Web service derivatives is also illustrated. The presentation concludes with a vision of how Web service markets in the future could be structured and what further developments can be expected to happen.This book will be of interest to researchers in business development and practitioners such as managers of SMEs in the service sector, as well as computer scientists familiar with Web technologies. The books comprehensive content provides readers with a thorough understanding of the organizational, economic and technical implications of dealing with Web services as the nucleus of modern business models, which can be applied to Web services in general and Web service value networks specifically..

A Real Options Model for Risk Hedging in Grid Computing Scenarios

The acquisition of remote IT resources via Grid or Cloud Computing for a certain amount of time, instead of setting up a proprietary IT infrastructure, has attracted much attention during the last years, as technical obstacles are overcome. In order to reduce their maintenance cost of internal IT clusters, many hard- and software providers reconsider to offer these resources in grid and cloud markets. However, participants in these markets bear some uncertainties and risks which can be hedged against by resource reservation. In this work we analyze the use of real options traded at an additional contract market, to efficiently manage economical issues arising from the realization of a flexible resource reservation scheme. We derive the necessary conditions that even risk neutral agents have incentives to participate in such a market, as it increases their expected utility.

Services vs. Web Services

Without doubts, services have become the major driver of value creation in the last decades. This manifests in official statistics showing that services make up the largest part of the gross domestic product (GDP) in industrialized countries. In 2009, the share of the GDP within the European Union amounted to 71.9% and in the United States to 76.9% increasing steadily over last years. This trend is further amplified by the “servicification” of traditional products in many industries. According to Vargo and Lusch (2004), the major shift towards a service-centered view is driven by changes in society and markets that lead to exchanges of services rather than goods. It is not only stagnant product demand in many domains, but also the customers’ demand for customized and sophisticated goods which has pushed economic value downstream – away from manufacturing and toward the offering of services, both in preparing and customizing sales and in aftersales (Baumgartner and Wise 1999; Oliva and Kallenberg 2003). Driven by advancing Web service technologies, servicification in the software industry is a fundamental trend that tremendously changes the companies’ strategies and business models: software vendors become service providers (Dubey and Wagle 2007). The growing importance of automated service provision over the Web is impressively documented by the rise of platforms like Salesforce.

Coordination and Pricing in Service Value Networks: A Mechanism Design Approach

Weinhardt et al. (2003) and Neumann (2004) state that there is no general mechanism available to fit any possible market setting. In accordance with this statement, it is necessary to present a suitable mechanism designed to fit the underlying field of application. The adequacy of a mechanism depends, amongst others, on the properties of the trading objects. In SVNs, the latter are modular Web service components as well as the composed complex services resulting thereof – whose characteristics were discussed in detail in Chap. 3.

The Vision of Web Service Markets

Services become a central building block of value creation in today’s society. Novel technical, economic, and organizational challenges arise from their unique nature as services’ provision and consumption coincide in time (Hill 1977). Recognizing and understanding the importance of an efficient design, production, and provision of services under the presence of their special characteristics is inevitable for individuals and the society to compete in today’s global economy. Especially, rapid service innovation driven by the power of modularity that is inherent in the concept of services (Baldwin and Clark 2000) embodies the success factor in service-centric environments. However, when composing distributed service activities, the question of an efficient form of coordination comes to light and turns out to be fundamental to govern distributed value creation. As Web services are living artifacts that generally exist under the ownership of different economic entities which are self-interested in nature, system-wide goals are hard to achieve as they mostly collide with individual objectives and are therefore not intrinsically pursued (Parkes 2001).

Pricing Foundations and Implications on Web Service Pricing

One of the key building parts of a market is its market mechanism. This mechanism encloses the rules for allocation and pricing and thus regulates and, in some cases, enforces the procedures of trading on a specific market. In general, both issues of allocation and pricing are intrinsically tied to one another. Neumann et al. (2007) and Buyya et al. (2008) treat online trading platforms. For example, such as Grid and Cloud service exchanges. Yet, since allocation procedures are often directly connected to technical conditions, in the following the focus is mostly on the pricing mechanisms that are used in today’s markets. Basically, one can distinguish between static, flexible, and dynamic pricing, which can be further subdivided into concrete pricing schemes.