Two-stage game theoretical framework for IaaS market share dynamics

Abstract In this paper, we consider the problem of cloud market share among Infrastructure as a Service (IaaS) providers in a competitive setting. The public cloud market is dominated by few large providers, which prevents a healthy competition that would benefit the end-users. We argue that to make the cloud market more competitive, new providers, even small ones, should be able to inter this market and find a share. This problem of deeply analyzing the cloud market and providing new players with mechanisms allowing them to have a market share has not been addressed yet. In fact, to make the cloud market open and increase the cloud service demand, we show in this paper that the cloud providers have to compete not only over price, but also quality. Most of the research performed in the cloud market competition focus only on pricing mechanisms, neglecting thus the cloud service quality and user’s satisfaction. However, to be consistent with the new era of cloud computing, Cloud 2.0, providers have to focus on providing value to businesses and offer higher quality services. As a solution to the aforementioned problem, we propose a conceptual, user-centric game theoretical framework that includes a two-stage game: 1) to capture the user demand preferences (optimal capacity and price), a Stackelberg game is used where IaaS providers are leaders and IaaS users are followers; and 2) to enhance the service ratings given by users in order to improve the provider position in the market and increase the future users’ demand, a differential game is proposed, which allows IaaS providers to compete over service quality (e.g., QoS, scalability and adding extra features). The proposed two-stage game model allows the new IaaS providers, even if they are small, to have a share in the market and increase user’s satisfaction through providing high quality and added-value services. To validate the theoretical analysis, experimental results are conducted using a real-world cloud service quality feedback, collected by the CloudArmor project. This research reveals that due to the fact that service customization tends to enhance the customers loyalty in today’s subscription cloud economy, the best strategy for small IaaS providers is to increase the service cost and improve the quality of their added-value solutions to prevent customers’ defection. This not only elevates the provider’s profit, but also increases the quality equilibrium that leads to a higher user satisfaction. Consequently, higher satisfaction enhances the provider’s rating and future users demand.