Navigating the Clouds: An Examination of Market Structures in Cloud Computing. : A Comparative Analysis of Pricing Strategies Among AWS, Azure, and GCP.

Sammanfattning

Cloud computing has become a cornerstone of the modern digital economy, with Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) leading the market. This thesis explores the oligopolistic tendencies and lock-in effects in the cloud computing market. It examines how strategic pricing and market behaviors by these major providers influence competitive dynamics and industry structure using established economic models like Cournot and Stackelberg. The research integrates theoretical analysis with an empirical case study of Ericsson's cloud service adoption, highlighting how theoretical pricing strategies are applied in practice. Ericsson's case study revealed that AWS is the most cost-effective for pay-as-you-go pricing, while Azure offers lower costs for reserved and spot pricing models. The study also indicates that the market is highly concentrated, as shown by the Three-Firm Concentration Ratio and the Herfindahl-Hirschman Index, suggesting a decrease in competition over time. A significant finding of this study is the strong lock-in effect experienced by customers due to high switching costs, including data migration, retraining, and system reconfigurations. These costs effectively discourage customers from switching providers, reinforcing the dominant positions of the leading cloud service providers. The findings reveal how market leaders strategically react to competition and influence market structure. This study provides valuable insights for businesses and policymakers on fostering a competitive environment that encourages innovation and fair pricing practices. It contributes to understanding the complexities of market dynamics, the strategic decision-making process, and the significant impact of vendor lock-in in oligopolistic markets.