Reserved or On-Demand Instances? a Revenue Maximization Model for Cloud Providers

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Executive Summary

The authors examine the problem of managing a server farm in a way that attempts to maximize the net revenue earned by a cloud provider by renting servers to customers according to a typical Platform-as-a-Service model. The Cloud provider offers its resources to two classes of customers: 'Premium' and 'Basic'. Premium customers pay upfront fees to reserve servers for a specified period of time (e.g. a year). Premium customers can submit jobs for their reserved servers at any time and pay a fee for the server-hours they use. The provider is liable to pay a penalty every time a 'Premium' job can not be executed due to lack of resources.

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