Cloud Goliath Versus a Federation of Cloud Davids: Survey of Economic Theories on Cloud Federation

Cloud computing, which can be described as a technology for provisioning computing infrastructure as a service, runtime platform as a service, and software as a service, is considered as a keystone for innovation in the IT area. However, a limiting factor to innovation through cloud computing could be the economies of scale and network externalities that give more benefits to larger cloud providers. Due to the economies of scale and network externalities in an oligopolistic environment, a giant cloud provider can offer resources at lower cost than smaller providers. To overcome the disadvantage of small clouds, some research proposes architectures, in which small clouds can federate through common virtual interfaces. Therefore, academy and industry ask whether the federation of small cloud providers is economically feasible and can compete with a giant cloud provider. However, it is hard to solve those problems because the specifications of a cloud federation and the conditions of cloud market are unclear. To fill this gap, in this paper, we survey the conceptual background of cloud computing and the federation of small cloud providers. The results of this paper are expected to guide how to define the economic problems on cloud federation and provide constraints to the problems.