The Limits to Cloud Price Reduction

Abstract

Although public clouds benefit from economies of scale from massive and centralized data centers with high utilization, and continuous improvements in cost per unit of processing capacity from Moore's law, they're unlikely to be able to drop prices more than 15 percent annually over the long haul, barring some massive technology discontinuity such as free electric power or disruptive new computing paradigms. The simple reason is that even if CPUs were free, there would still be infrastructure capital expenditures, such as for data centers, and ongoing operating expenses, such as for power. These cost elements don't follow Moore's Law.