Value is generally something that a user derives when off-setting the benefits of a service by its cost. The sum total of the benefits can be thought of as those that you should specify or receive as part of the SLA. If you were to sub-tract the costs of cloud computing from the sum total of the benefits, you would arrive at a tangible sum that con-notes value. Value, therefore, encompasses a cost–benefit analysis as it essentially computes as benefits minus costs.In various disciplines, different types of value models exist. Just to name a few, there are the user expectancy value model, the place value model, and the customer value model. For our purposes in cloud computing, however, a value model is a standard pattern that defines value to you, as a user of cloud computing, and that is common to a number of users in similar situations. Considering the various benefits of cloud computing, let us examine seven cloud computing value models: (1) operating expense, (2) user demand flexibility, (3) price flexibility, (4) agility for time to market, (5) location flexibility, (6) asset optimiza-tion, and (7) profit margin as depicted by figures 12 to 18.
In order to provide a computing service, your IT depart-ment would need to spend capital up-front in order to create and maintain the service. And for that service to remain within the bounds of your SLAs, the IT department would need to create extra capacity. All this capital expen-diture represents an opportunity cost to you as the capital could have been employed elsewhere to pursue a business opportunity. Conversely, should the actual demand exceed the compute capacity that you have invested capital in, the extra demand will either not be met or will translate to degraded SLAs. The end result will be an opportunity loss to your business, since the unmet demand will cause loss of business to you. The operating expenditure model of cloud computing, as depicted by figure 12, uses elasticity to avoid opportunity costs and losses. The upwardly slanting curve for computing capac-ity of figure 12 is based on two assumptions that arenot mutually exclusive: that business demand will grow, and that more automation (i.e., elasticity and resources) will be made available over time via cloud computing .