ability. If a customer really needs five-nines of uptime, a 10% discount is not going to even come close to the cost of lost revenue, breach of end-user service levels, or loss of market share due to credibility issues.

Another trick the service providers play on their customers is to compute the SLA on an annualized basis. This means that customers are only eligible for a service credit after one year has passed. Clearly the end user should pay close attention to the details of the SLA being provided and weigh that against what business impact it will have if the service provider misses the committed SLA. From what we have seen in the last four years of providing IaaS and PaaS, most customers do not have a strong understanding of how much downtime their businesses can tolerate or what the costs are for such downtime. This creates a carnival atmosphere in the cloud community where ever higher SLAs are offered at lower prices without the due diligence needed to achieve them…another race to the bottom.

Taking advantage of the low prices of Cloud 1.0 requires an honest assessment by the end customer of the level of reliability they actually need.

Performance is almost never discussed. One of the hazards of shared infrastructure is that one customer’s usage patterns may affect other customers’ performance. While this interference between customers can be engineered out of the system, addressing this problem is an expense that vendors must balance against the selling price. As a result, repeatable benchmarks of cloud performance are few and far between because they are not easily achieved, and Cloud 1.0 infrastructure is rarely capable of performance levels that the enterprise is accustomed to.

While it makes intuitive sense to
quiz the cloud provider on the design
of their infrastructure, the universe
of possibilities for constraining per-
formance to achieve a $0.03/hour in-
stance price defies easy analysis, even
for the hardware-savvy consumer. At
best, it makes sense to ask about per-
formance SLAs, though at this time we
have not seen any in the industry. In
most cases, the only way to determine
if the service meets a specific applica-
tion need is to deploy and run it in pro-
duction, which is prohibitively expen-
sive for most organizations.

the advent of cloud 2.0:
the Value-Based cloud
The current myopic focus on price has