viders competing to deliver very similar product in a highly price-competitive environment is termed perfect competition by economists. Perfectly competitive markets, such as those for milk, gasoline, airline seats, and cellphone service, are characterized by a number of supplier behaviors aimed at avoiding the downsides of perfect competition, including:

˲˲Artificially differentiating the product through advertising rather than unique product characteristics

˲ ˲ Obscuring pricing through the use of additional or hidden fees and complex pricing methodologies

˲ ˲Controlling information about the product through obfuscation of its specifications

˲ ˲ Compromising product quality in an effort to increase profits by cutting corners in the value delivery system

˲ ˲ Locking customers into long-term commitments, without delivering obvious benefits.

These factors, when applied to the cloud computing market, result in a product that does not meet the enterprise requirements for deterministic behavior and predictable pricing. The resulting price war potentially threatens the long-term viability of the cloud vendors. Let’s take a closer look at how perfect competition affects the cloud computing market.

Variable performance. We frequently see advertisements for cloud computing breaking through the previous price floor for a virtual server instance. It makes one wonder how cloud providers can do this and stay in business. The answer is that they over commit their computing resources and cut corners on infrastructure. The result is variable and unpredictable performance of the virtual infrastructure. 5

Many cloud providers are vague on the specifics of the underlying hardware and software stack they use to deliver a virtual server to the end customer, which allows for overcommitment. Techniques for overcommitting hardware include (but are not limited to):

˲ ˲Specify memory allocation and leave CPU allocation unspecified, allowing total hardware memory to dictate the number of customers the hardware can support;

˲ ˲ Quote shared resource maximums instead of private allocations;

the cloud
computing market
is becoming more
crowded with
large providers
entering the playing
field, each one of
which trying to
differentiate itself
from the already
established players.

˲ ˲ Offer a range of performance for a particular instance, such as a range of GHz; and

˲ ˲ Overallocate resources on a physical server, or “thin provisioning.” Commercial virtualization management software such as VMWare or Virtuozzo offer the ability to overallocate resources on the underlying hardware, resulting in reduced performance during peak loads.

Like overcommitment, limiting access to infrastructure resources or choosing lower-priced, lower-perfor-mance (and potentially older) infrastructure is used by vendors to make providing cloud computing at rock-bottom prices viable. We entered the cloud provider business after discovering we could not guarantee enterprise-grade performance to our customers by reselling other vendors’ cloud services due to their corner-cutting. Here is a list of some of the strategies the author has seen over the years:

˲ ˲ Traffic shaping. A new client asked us to move their existing VPDC to our infrastructure. Shortly after initiating the transfer, the data rate dropped from approximately 10Mbit/sec to 1Mbit, where it remained for the duration of the transfer. This behavior speaks pretty strongly of traffic shaping. Because the client based their downtime window for the data center move on the assumption that the connecting network was gigabit Ethernet, they missed their estimate by over a week.

˲ ˲ Using older gigabit or fast Ethernet networking. An ISP that was selling an Amazon-like cloud computing product connected their servers to the Internet using fast Ethernet switches. If a customer wanted faster connectivity, there was an up charge per port.

˲ ˲ Recycling failed disk drives. A client leased several servers in a private cloud from a very large ISP. He had previously experienced several drive failures with this ISP, so he decided to check up on the hardware by running smartctl to assess the health of the drives. What he found was shocking to him: the ‘new’ servers he had just received had disk drives in them that were over three years old! When he challenged the ISP, he was told their policy was to replace a drive only when it fails.

˲ ˲ Deploying older CPU technology. We were asked to manage a client’s ap-