Rapid provision of cloud services, with minimal management efforts, have largely motivated for customers to adopt cloud. Although the rapid provision is a big advantage, it needs to be handled carefully.
It defines cloud computing as “a model for enabling convenient, on- demand network access to a shared pool of configurable computing resources (for example, networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service-provider interaction” (:2). The most adopted cloud computing definition is the one provided by the National Institute of Standards and Technology (NIST). Finally, cloud has high ‘transaction frequency’, which compensates for the needed investments triggered by ‘uncertainty’ and ‘asset specificity’.Ĭloud computing has been massively booming in the last decade. Cloud also has a considerable level of ‘uncertainty’ asking for managing contracts, investing in cloud-specific monitoring solutions and consciously reviewing of the legal compliance. Findings of this research indicate that cloud has high ‘asset specificity’ due to change management costs, meta services costs and business process reengineering costs. Findings were validated through a case study. Expert interviews with vendor, customer and consultancy sides were conducted to understand costs associated with cloud computing. This paper applies transaction cost theory to cloud computing through a 360-degree industry analysis. The aim of this paper is to study transaction costs of cloud computing from the customer perspective to make the cloud journey less cloudy, i.e. Such costs may not be known to cloud customers, leading to unmet expectations and implementation challenges. However, according to institutional and transaction cost economics, cloud customers should estimate other costs beyond the price. Looking merely from the neoclassical perspective, cloud computing is price effective.
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