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The Rise of Cloud Computing: Minding your Ps, Qs and Ks

David Byrne, Carol Corrado, Daniel Sichel


This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book Measuring and Accounting for Innovation in the 21st Century, Carol Corrado, Jonathan Haskel, Javier Miranda, and Daniel Sichel, organizers
Conference held March 10–11, 2017
Forthcoming from University of Chicago Press
in NBER Book Series Studies in Income and Wealth

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 highlight 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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This chapter first appeared as NBER working paper w25188, The Rise of Cloud Computing: Minding Your P’s, Q’s and K’s, David Byrne, Carol Corrado, Daniel E. Sichel
 
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