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Storage Buy-or-Lease decisions in cloud computing under price uncertainty

Storage Buy-or-Lease decisions in cloud computing under price uncertainty,10.1109/NGI.2011.5985868,Loretta Mastroeni,Maurizio Naldi

Storage Buy-or-Lease decisions in cloud computing under price uncertainty   (Citations: 1)
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Cloud computing allows to lease computational resources on demand on the network instead of buying them. Storage is a major computational resource that may be leased under the cloud computing approach. An economical model is provided for the analysis of the Buy-or-Lease decision for storage in cloud computing. The model introduces a probabilistic approach to evaluate future prices and the replacement needs for disk arrays (in contrast to the current literature which considers deterministic prices and fixed replacement rates). The median Differential Net Present Value is proposed as the decision variable. A simulation analysis is conducted that shows that the cloud computing approach appears more profitable for medium-sized companies with longer investment plans. The risks associated to wrong decisions is evaluated through the Value-at- Risk tool.
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    • ...Those shortcomings have been removed in [3], where a probabilistic model has instead been proposed, where the median Differential Net Present Value is employed as a decision variable...
    • ...For that purpose we introduce a number of refinements with respect to the probabilistic model introduced in [3]...
    • ...That principle has been employed both in [2] and [3]...
    • ...In [2] and [3] the overall size of data stored by the company was assumed to grow linearly over time...
    • ...Unlike the assumption of a fixed disk capacity in [2] and [3], we assume here that the capacity of disks grows exponentially...
    • ...In [3] a probabilistic model has been introduced, where all the disks have the same probability to fail during a year, and fail independently...
    • ...Here, as in [3], we abandon the deterministic model, and assume instead that the future price is described by a random process with expected value defined by expr...
    • ...Those two relevant shortcomings of that model have been removed in [3], where it has been shown that the leasing price Lt may be expected to be proportional to the market price for the storage devices, as in the equation...
    • ...As in [2] and [3], we assume that the sale is accomplished at the end of the analysis period, and the salvage value is a fixed percentage of the market price for a new disk of the same capacity, regardless of the actual age of the disk sold on the secondary market...
    • ...In [3] the median Med( NPV) was chosen, so that the decision criterion was to opt for the Buy decision when Med( NPV) > 0. This choice implies that the decision will be right in at least 50% of the cases, the limit case corresponding to Med( NPV) = 0. The most useful property of the median is that it is quite insensitive to outliers...
    • ...The two cases follow those considered in [2] and [3]...

    Loretta Mastroeniet al. Long-range Evaluation of Risk in the Migration to Cloud Storage

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