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Cloud Infrastructure as a Service (IaaS) offers immense flexibility to users.2 Customers can subscribe to on-demand, computing and storage resources via a utility-based pricing model. However, the level of flexibility provided by most public IaaS offerings is limited by the provider’s pre-defined configurations.
The key components of the cloud—CPU, RAM, storage, and bandwidth—are all pre-configured in pre-defined instances. Customers can choose from the various instances based on the application they wish to run. For example, AWS’s general purpose medium instance comes with 1 CPU core, GB of RAM and GB of block storage; and the large instance comes with 2 CPU cores, GB of RAM and GB of storage. If customers need GB of RAM and CPU core, they are forced to choose the large instance, and pay for the extra, unused processing power. Hence, although customers’ perception about cloud is that they can select and pay for what they use, in reality, they end up paying for some of the components that come with the pre-defined instances, even though they never use them.

With that said, the cloud market has been anything but constant since its inception. Cloud provider offerings continue to evolve in terms of packaging, pricing and delivery. CloudSigma is a Zurich, Switzerland based provider that allows its public cloud IaaS customers to define their own server configurations. The company offers unbundled computing resources (CPU, RAM, storage), which allow users to choose precisely the configuration they want. Hence, there is no need to pay for unused resources that get bundled in pre-configured instances. Customers truly pay for exactly the resources they use.
In this SPIE, Stratecast examines the concept of unbundled infrastructure components, and the flexibility it brings to the public cloud IaaS market. Finally, we look at CloudSigma’s strategy in the market, and how the company is creating value in a highly commoditized market through service differentiation.

The Concept of Unbundled Computing Resources: Customization over Scale

If the public cloud purchase model can be compared to a sandwich buying process, the AWS cloud model is equivalent to the leading nationwide fast food chain, McDonald’s. McDonald’s offers an exhaustive sandwiches menu; but the composition of each of these sandwiches—bread, meat, cheese and veggies—is pre-defined. For example, the Premium Crispy Chicken Sandwich comes with white meat chicken breast filet with leaf lettuce, a tomato slice and mayonnaise, all served on a bakery-style whole grain bun. If a customer wants the bakery-style whole grain bun and a slice of tomato with their Buffalo Ranch McChicken sandwich, that’s not an option. Similarly, most cloud IaaS providers offer a choice of pre-configured instances in which the CPU, RAM and storage components are fixed.

An alternative experience is provided by Dallas-based sandwich shop Which Wich. At Which Wich, patrons customize their sandwiches from a list of options for meat, cheese, veggies, and dressings. In this model, customers gain benefit from full flexibility and control, as well as higher perceived value for their money.
The Which Wich model is similar to the type of customization that CloudSigma offers to its public cloud customers by unbundling its computing resources (i.e., sandwich ingredients). Customers choose precisely the configuration of CPU, RAM and storage that suits their requirements. CloudSigma is one of very few providers who offer this granular level of flexibility.

McDonald’s and Which Wich business models are targeted at different segments of the market. The former thrives on the scale of its operations—more than locations globally—and caters to a larger customer base that wants fast and affordable sandwiches; while the latter thrives on its customization experience for a relatively smaller base of customers—who know exactly what they want—with its limited reach of stores in the United States.
As in the sandwich market, the economic benefits and operational efficiencies derived from large scale operations in the cloud market are immense. AWS (the McDonald’s of cloud computing) has mastered large scale operations to reduce its internal and external operating costs. These benefits get translated to the customers in terms of reduced pricing. But, not every cloud provider in the market can achieve the scale of AWS.

The U.S. IaaS market revenues were over $3 billion in 2012. AWS controls more than percent of the IaaS market revenues. Even the nearest competitors of AWS—Rackspace in second place with percent share, and Verizon-Terremark in third place with five percent share—do not come close to the share held by AWS. Very similar to the fast food market, in which McDonald’s has roughly seven times the sales of its closest competitors, Burger King and Wendy’s, combined.

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Redefining Public Cloud Flexibility: A Look at CloudSigma%s IaaS Offering

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