Scaling and Economics of Scale for the Cloud

The advantages of moving your computing needs into the cloud is for some an obvious move and for others an important question to consider. The simple explanation is that the market is designed to be more efficient, in this case by moving separate databases to a central location. With new technologies there is a market for unused storage that the economy of scale allows us to free up and eliminate waste by a centralized server. Now pricing isn’t the only motivating factor one might use the Cloud; wether you are outsourcing a whole IT department to the Cloud, a few simple tasks, the hardware systems of your operation, or some combination taking into account waste becomes a vital part of any entrepreneur’s job.

For most new entrepreneurs they are growing their operations and want to keep costs as lean as possible, and as scalable as possible, to keep the business growing according to needs that may not be predictable. So you may be shopping for a Paas operation to meet your particular needs, now one thing to consider is what do you want to keep in house and what services do you want to pay for xxx. Your Paas provider is going to be able to provide a number of services that when you started would have been generally wasted resources. And in the future you have the capacity to move into a different system depending on one’s needs. This flexibility is the essence of the scalability of the information economy in general, it gives a whole new model to the information that wasn’t available in the past.

Economies are run by many factors, one such factor can be scaling, which is what having a dedicated server allows for. By hosting one large server and being able to adjust how the data is stored between computers allows for the Cloud provider to eliminate waste that might be collecting by each company hosting their own dedicated server. The advantages to this model is that it saves start up money for the client, and gives them greater flexibility for their needs, and provides a third party to profit in a new way. This process is one factor in driving our economy, in fact Adam Smith isolated this phenomenon. Adam Smith gave an example of separating tasks between three different individuals, and by doing this he found they were able to produce more; this is an example of an economy of scale. In a more industrial world we see this process going on in factories and all over our economy. The scale of the Cloud provider’s servers allows for them to make more profit than is lost by each client individually.

There are by some standards two ways to scale your operation using Cloud resources, that is horizontal scaling and vertical scaling. Vertical scaling is the ability to add more hardware resources and horizontal scaling is the codes ability to utilize those increased resources. On the one hand you may have more need for a more robust network of memory, and then on the other you may have to scale your operation to be able to handle an increase in RAM usage. The usage of greater quantities of RAM demand a more agile program that can convert between sources of data. An operation that is scalable in these two ways are able to effectively utilize the Cloud to its potential. Different Cloud providers are able to utilize these scaling effects differently. Fore-instance a Paas Cloud service will handle both horizontal scaling and vertical scaling; while a Iaas Cloud provider may only help you to scale your operation vertically.