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The cloud will cost you, but you'll be happy to pay

The good news is that you're not going to mind that your cloud computing budget will be higher than what you're paying now for IT, because you'll be able to do more. And here's why.

So when it comes to the cloud, we will likely continue to spend more each year on IT. But, with spending shifting into cloud computing as opposed to traditional forms of IT, this rise will be accompanied by a mutatis mutandis greater increase in economic benefit. This is an important point: Jevons' Paradox has two forces at work. The increase in consumption results from increased application of the innovation to new problems, and this only happens if those new applications are economically viable. And "economically viable" is code for "makes you money."

So, the number of projects is increasing, which is leading to increased aggregate spending, however with in like manner greater revenue. Furthermore, the savings associated with projects that would have been feasible even previously costs dropped can be plowed back into application development to put it more exactly than sunk on infrastructure.

The effects of the Jevons' Paradox

It's important to note that any individual firm may or may not see the effects of the Jevons' Paradox. That is, the effects will be distributed across the economy in a lumpy fashion. Some enterprises are "IT intensive," using IT as a primary input into the business process. Those firms will see the greatest effect from Jevons' Paradox associated with cloud computing.

But there are other enterprises that are IT insensitive. These firms need some information research capabilities, however IT is not a primary driver of project-level business cases. Increasing IT efficiency is unlikely to allow them to pursue additional projects. In doing so, any IT cost savings can drop more directly to the bottom line and IT spending in these firms will go down.

So, Jevons' Paradox predicts that with increased IT efficiency in the form of cloud computing, actual spending will continue to increase. Nevertheless with that increased spending will come greater economic return for everybody as new projects that were earlier unviable can now be pursued. In the same way that Jevons saw coal use increasing, fueling the industrial revolution, cloud computing is poised fuel a 21st century computing revolution.

More information: Gigaom