Journal of Management Information Systems

Volume 35 Number 3 2018 pp. 813-836

Harnessing the Power of the Cloud: Revenue, Fairness, and Cloud Neutrality

Joe-Wong, Carlee and Sen, Soumya


Cloud computing is a transformational technology that reduces upfront infrastructure costs, democratizes access to computing and storage capacity, and helps businesses innovate and compete in the digital economy. However, the distribution of these significant social and economic benefits among the various stakeholders in the cloud ecosystem will critically depend on pricing and resource allocation decisions made by cloud providers. These decisions impact not only the provider revenue, but also the fairness of resources allocated among cloud users and the overall social welfare. Several unique features of cloud computing (e.g., the presence of multiple, nonfungible resources and heterogeneous users) make the interplay between these competing objectives hard to understand. To truly harness the power of cloud computing and to establish regulatory benchmarks, there is a need for frameworks that quantify how resource allocation and pricing choices affect different objectives. In this work, we introduce an analytical model that incorporates user utility, endogenous pricing, fairness among heterogeneous users, social welfare, and cloud provider revenue. We identify conditions under which there is a tradeoff between fairness and revenue, and quantify the extent of this tradeoff by formulating an optimization problem in which a cloud provider maximizes its revenue, subject to constraints on the desired level of fairness. Our work provides an initial step toward developing regulatory policies for cloud neutrality to ensure an equitable distribution of the transformative benefits of the cloud.

Key words and phrases: cloud computing, fairness, revenue distribution, social welfare, resource allocation, cloud neutrality, IT regulation