Forecast Uncertainty in Procurement Decisions for Cloud Storage

In public vs. private solutions (i.e. Cloud vs. In-house, or leased vs. Owned) for storage, both alternatives have their pros and cons. Cloud storage can easily adapt to the company needs, but exhibits a higher unit cost than in-house solutions. On the other hand, if the company relies on its own storage equipment, it must periodically purchase it on the basis of forecasts, which may prove imprecise and lead to idle equipment. In this paper, we propose a comparative evaluation tool for the two procurement approaches, where the cloud can play the role of either exclusive storage medium or supplement to in-house equipment (in the case of underestimation of storage needs). The tool considers the impact of equipment acquisition intervals and forecast accuracy over a long time horizon, adopting a Geometric Brownian Motion model for the evolution of storage capacity needs, it can be employed as a decision support tool for procurement decisions.