Often-times, the three words: value, cost and price, are considered somewhat interchangeable and sometimes that might be correct. However, let’s make a distinction for now and look at cloud computing.
Value is tied to the utility rendered from a product, service or technology.
Cost is tied to the consumption of resources (financial resources, man hours, energy or other) needed to perform or produce a product or service.
Price is the, by the market, agreed upon amount needed to acquire a product or service. The price determines who of the market participants that will capture the value rendered.
There are surely more precise and correct distinctions of these three concepts to be found elsewhere, but the ones above will do for this analysis.
From fundamentals to market specifics
The order by which the three concepts were mentioned above was not random. When trying to determine the possible benefits of IT as a Service for the system of industries associated with IT, the analysis should start by determining the increased value it brings. Secondly, the cost implications needs to be considere. After looking at the big picture and establishing that the increased value outweighs the increased costs (if any), the next question is how the excess value is devided among the market participants. The following paragraphs will outline the main points of the value proposition, the drivers for decreased and increased costs and how that might affect the current and future price.
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