۱- Introduction

۲- The Model and its simulation results

۳- Policy measures of industry and government for cloud computing market

۴- Conclusions

References

Abstract

The cloud computing market is rapidly expanding and changing the nature of ICT across all sectors; cloud computing transforms ICT from a tool dependent upon investment and physical ownership to one that can easily make use of outside resources. On the other hand, cloud computing services are being provided not only for simple data storage, but for many purposes through several different service models, such as SaaS (Software as a Service), PaaS (Platform as a Service) and IaaS (Infrastructure as a Service). Due to, among other factors, the nature of its network externalities, the market seems to be gradually shifting to a market with oligopolistic characteristics in which the services are provided by a limited number of big-name firms. In this paper, the impact of the shift of the cloud computing market to a market with oligopolistic characteristics on utility-based social welfare is quantitatively estimated and analyzed utilizing DSGE (Dynamic Stochastic General Equilibrium) model-based simulation. The main objectives of the paper, rather than to ascertain the exact change of utility-based social welfare, are (1) to determine whether there is a (realistic) shifting path of macroeconomic variables in Japan’s case, under the shift and (2) to illustrate the dynamic interaction of the macroeconomic variables. Utility-based social welfare is chosen, because for the purpose of evaluating policy measures it would be more suitable than GDP. Also, several kinds of policy measures for the sound development of the cloud computing market that the industry and government can take are discussed in a sense related to a market with oligopolistic characteristics.

Cloud computing and its market in Japan

In September 2011, the U.S. Department of Commerce’s (U.S. DOC) National Institute of Standards and Technology (NIST) released “The NIST Definition of Cloud Computing” and identified five important aspects of cloud computing, namely (1) on-demand self-service, (2) broad network access, (3) resource pooling, (4) rapid elasticity and (5) measured service.1 Given these characteristics, firms that choose to introduce cloud computing can operate on a platform provided by external cloudservice providers and accessed through digital networks. Because their operations were previously performed with their own hardware, software and data, all of which were self-owned, operated and maintained, an increase in efficiency is expected across all ICT-using sectors. As for cost, fixed costs, most of which have to be paid initially (initial cost), can be transformed to variable costs on a pay-as-you-go basis, and thus, financial efficiency is also expected to improve. In this respect, a firm that introduces cloud computing may save more, because if it procures its own system, it is likely that the specifications of that system would match the expected maximum workload in its product life of use rather than the specifications needed at the time of procurement. Moreover, because cloud computing lowers market entry costs, the number of market entrants is expected to increase. This would be especially true for Small and Medium-sized Enterprises (SMEs).2 3 Table 1 tabulates some of the published market forecasts related to cloud computing in Japan. The cloud computing market still occupies a small portion of the ICT market. However, it is expected to grow rapidly in the near future. According to the MM Research Institute, from 2016 through 2021, the domestic cloud market is expected to grow at the annual compounded rate of 20.6%, while ICT investment is expected to remain at the same level.