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Economy of Scale - IT Business

I am trying to better understand the definition of "Economies of scale" as it relates the IT business and more specifically as it relates to cloud hosting and other cloud based providers.

I understand the basic definition "As a business size increases it, costs less to make the same things" however how does that fit into the IT business, Cloud hosting providers etc.

For instance if a cloud hosting provider can offer a customer 20 VM's, it doesn't get cheaper for the provider to then offer that same customer 100 VM's?

Thanks,

Robert
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David Johnson, CD
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I see what you guys mean. So its basically the same thing as the regular definition. Where when you scale up your "VMs" while its true that does "Cost" more in terms of CPU/Memory/Storage, you've pretty much already spent that anyway, and an additional 80 VMs will not cost what the original 20 cost. and of course you would be making more money per VM.

Now, it seems that Economy of scale also works well for the customer? Is that an accurate statement? It seems like it would fit here. meaning as the customer scales out his VM purchases, does the price drop? if not for each VM, then surely for each server that they the customer no longer has to upgrade, license etc. Do I have that right ?

Thanks,
Robert
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