Elastic Demand: Cloud + Mobile + Big Data

The amount spent on IT increases every year. Does this mean the tech industry¬†is not succeeding at driving down the cost of IT? Here’s the seemingly paradoxical answer: it’s the exact opposite – driving down the cost of IT can cause greater spending on IT.

When IT is very expensive, only the highest revenue projects have the money to spend on IT. When inexpensive, we can get value from IT over the whole range of projects that would otherwise be too expensive to pursue. Clear as mud? If the only technology option was purchasing a mainframe, fewer projects warrant the cost, and less money would be spent. In macroeconomics, total spending increases as prices drop is called an elastic demand curve.

Cloud, mobile, and big data all have this in common. With the cost of data center resources, pocket computing, and storage all dropping; we are seeing new use cases pop up all over the place.

For more on this seeming paradox, here’s some light reading: the Jevons Paradox.

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