Correcting a financial brokerage model for cloud computing: closing the window of opportunity for commercialisation

John P Cartlidge, Philip Clamp

Research output: Contribution to journalArticle (Academic Journal)peer-review

8 Citations (Scopus)
305 Downloads (Pure)

Abstract

In April 2012, Rogers and Cliff (R&C) demonstrated a theoretical financial brokerage model for cloud computing that is profitable for the broker, offers reduced costs for cloud users, and generates more predictable demand flow for cloud providers. Relatively cheap, long-term reserved instances (RIs) are bulk-purchased by the broker, and then re-packaged and re-sold as monthly options contracts at a price lower than a user can purchase “on-demand” from the provider. Thus, the broker risks exposure on purchase for margin on sales. R&C's result has generated significant interest in the cloud computing community and is currently the fifth most accessed research paper of all time in the Journal of Cloud Computing: Advances, Systems and Applications.
Here, we perform an independent replication of R&C's brokerage model using CReST, a discrete event simulation platform for cloud computing developed at the University of Bristol. We identify two implementation problems in R&C's original work: firstly, the broker buys fewer RIs than the model suggests; and secondly, the broker is undercharged for RIs used. We correct R&C's results accordingly: while broker's profits are not as high as R&C suggest, the model still supports the theoretical possibility of a profitable brokerage.
However, aggressive competition between cloud providers has reduced the cost of cloud services to users and led to the introduction of new secondary markets where users can buy and sell RIs between themselves. This has squeezed the opportunity for an intermediary brokerage. By recalibrating R&C's model to fit current market conditions, we conclude that the commercial viability of R&C's brokerage model has been eradicated. The window of opportunity has now closed.
Original languageEnglish
Article number2
Number of pages20
JournalJournal of Cloud Computing: Advances, Systems, and Applications
Volume3
DOIs
Publication statusPublished - 8 Apr 2014

Keywords

  • Cloud computing
  • Cloud brokerage
  • Replication
  • Simulation
  • CReST

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