Analyzing the picing models for outsourcing computing services

With the prompt emergence of cloud computing service in recent years, the business software outsourcing model is giving way to the service-oriented paradigm. From the economic point of view, the pay-by-demand characteristic of cloud computing has significant advantage over self-own software requiring tremendous upfront development cost and continuous maintaining effort. However, the public cloud computing service operated by external parties does have potential security risk the enterprises may face. In this paper, we utilize a game theoretic model to analyze the pricing strategies for computing services utilizing on-demand and built/licensed business models. We show that the price and revenue of computing service are significantly influenced by the market structure and technological parameters of computing service platform. Our analytical results provide useful business implications and operation strategies for the IT outsourcing computing service market.