The Advantages and Disadvantages of Monopolistic Competition in Cloud Computing

Typically, consumers in the end would stand to gain with larger cloud networks, which means more computing power for less cost. However, there remains two possible disadvantages for consumers when monopolies permeate into the cloud service industry. One disadvantage is security, and the second is unfair pricing resulting from unfair competition. A detailed overview of the advantages of cloud computing will first be discussed, followed by the disadvantages in a monopolistic environment. 

Cloud computing is made possible by mostly one feature, virtualization. (Ruparelia 5) Although, one important question to answer regarding the benefits of cloud computing to users is, what came before cloud computing and virtualization? Before cloud computing, there was the traditional server structure, which consisted of the hardware, software, OS, and the applications all in one location. (Ukessays 2015) The downsides of the traditional server structure was basically the converse of what makes up a cloud service, this being lack of elasticity, high maintenance costs, and also a lack of continuity (if one aspect of the server breaks down the rest follows). (Ukessays 2015)

  In contrast, a virtual server separates the software from the hardware, allowing seamless maintenance across multiple hosts, and consists of multiple servers whether these be data or email servers etc. The ability to scale down or up in a cloud service is also a key aspect, whereas in the traditional server structure, a maintainer would need to buy more physical hardware in the event of an overtaxed server, in the cloud, hosts are migrated to the more heavily trafficked servers. (Ruparelia 18) This is what makes cloud computing unique, and why the consumer benefits from larger networks. 

As for the disadvantages in the case of monopolistic competition, the security aspect is perhaps the most substantial concern. The malware threat to cloud services is unique in its scale, as cloud services are also unique in their scale, and this is referred to as “excessive access scope.” (Zalkind, 2016) Excessive access scope is when applications require credential authentication from three parties in a cloud network, these being the user, a third party entity, and the corporate environment. (Zalkind, 2016) This credential access gives the third party entity (in this case an application) access to the system even while the user is not actively using it, and through one user, the whole system is compromised. Some applications are built to be malware, while other legitimate applications are hijacked by malicious software, creating more avenues for hackers to gain access to a cloud system.  

As for the consideration of price gouging and unfair competition, a combination of both economic and technical understanding is required. Cloud services operate on economies of scale, and AWS is currently the largest cloud service provider by a substantial margin. (Gartner Magic Quadrant for Cloud, 2021.) Cloud service providers tend to offer multiple qualities of service based on computational time usage. (Kilcioglu & Rao, 2016, 1) As a result of most service providers utilizing the same hardware, the only way to adjust profit margins is by lowering the quality of service rather than charging higher prices for better performance, which is a potential setback for consumers. (Kilcioglu & Rao, 2016, 2) Additionally, in some regions, there is only one cloud provider who charges significant fees for switching, this allows for unhealthy monopolistic tendencies and creates the “locked in” customer dynamic. (Kilcioglu & Rao, 2016, 2)


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