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Why do cloud providers prefer renting to selling? A supply side perspective

Author

Listed:
  • Fujisawa, Chieko
  • Kasuga, Norihiro

Abstract

Expansion of the cloud computing market, a major reform in information and communication technology (ICT), has attracted wide attention. From the perspective of companies that need cloud services, if access to cloud spreads is available on rent instead of sales, initial investment cost will decline and the number of companies currently adopting the cloud system in the form of renting servers will increase. From the supply side perspective, what are the advantages of renting cloud services? To analyze this question, we consider a duopoly cloud market under licensing and examine the optimal strategy for providers. We find that in a two-part licensing contract, which includes high royalty and fixed fee charged upfront, when the cost-saving effect is high, both firms prefer renting to increase their revenue, but when the effect is low, each firm makes a different choice.

Suggested Citation

  • Fujisawa, Chieko & Kasuga, Norihiro, 2019. "Why do cloud providers prefer renting to selling? A supply side perspective," 30th European Regional ITS Conference, Helsinki 2019 205177, International Telecommunications Society (ITS).
    • Handle: RePEc:zbw:itse19:205177
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    More about this item

    Keywords

    Durable goods; Licensing contract; Selling; Renting; Cloud market;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables

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