The Rise of Cloud Computing: Minding Your P’S, Q's and K's

48 Pages Posted: 29 Oct 2018 Last revised: 7 Nov 2018

See all articles by David M. Byrne

David M. Byrne

Board of Governors of the Federal Reserve System

Carol A. Corrado

The Conference Board; Georgetown University - Center for Business and Public Policy

Daniel E. Sichel

Wellesley College; NBER

Date Written: October 2018

Abstract

Cloud computing—computing done on an off-site network of resources accessed through the Internet—is revolutionizing how computing services are used. However, because cloud is so new and it largely is an intermediate input to other industries, it is difficult to track in the U.S. statistical system. Moreover, there is a paucity of systematic information on the prices of cloud services. To begin filling this gap, this paper does three things. First, we define the different segments of cloud computing and document its explosive expansion. Second, we develop new hedonic prices indexes for cloud services based on quarterly data for compute, database, and storage services offered by Amazon Web Services (AWS) from 2009 to 2016. These indexes fall rapidly over the sample period, with quickening (and double digit) rates of decline for all three products starting at the beginning of 2014. Finally, we highlight the puzzle of why investment in IT equipment in the NIPAs has been so weak while capital expenditures have exploded for IT equipment associated with cloud infrastructure. We suggest that cloud service providers are undertaking large amounts of own-account investment in IT equipment and that some of this investment may not be captured in GDP.

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Suggested Citation

Byrne, David M. and Corrado, Carol A. and Sichel, Daniel E., The Rise of Cloud Computing: Minding Your P’S, Q's and K's (October 2018). NBER Working Paper No. w25188. Available at SSRN: https://ssrn.com/abstract=3274414

David M. Byrne (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Carol A. Corrado

The Conference Board ( email )

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Georgetown University - Center for Business and Public Policy ( email )

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Daniel E. Sichel

Wellesley College ( email )

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NBER ( email )

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