Price Elasticity in the Enterprise Computing Resource Market

Pricing is an important product property in that it significantly affects customer's purchasing behavior. In this article, the authors describe their study of the supply and demand relationship in the global enterprise computing resource market, including the server sales, server rental, and public cloud sectors. Their study shows that consumers in different market segments aren't equally sensitive to prices changes, leading to significantly different purchasing behaviors. This price elasticity is extremely inelastic for server sales and server rental business and modestly elastic for public clouds. In server sales, the three biggest vendors - IBM, Hewlett Packard, and Dell - dominate, giving them market power over pricing in their respective fine-grained market segments. The authors also found that, when prices are inelastic, price reduction is an ineffective way to win market share.