The Shifts of Fortune Test the Reliability of Friends - The Brittle Nature of Signal Reliability in Cloud Service Markets

Signaling theory has compellingly demonstrated that embedding internet signals (i.e., web assurance seals, privacy policies, consumer feedback) by cloud service providers can be considered as credible indicators of provider’s attributes, thereby reducing uncertainties and information asymmetries in cloud service markets. However, cloud service providers are operating in a dynamic environment characterized by fast technology life cycles, ongoing service improvements, and a steady emergence of new environmental vulnerabilities. Those dynamics might threaten the long-term reliability of embedded internet signals. We believe that traditional assumptions of signaling theory might not be necessarily applicable to cloud service markets, and thus try to investigate how signal reliability can be ensured in the long run in dynamic environments. In particular, we argue that signal reliability will decline over time as cloud service providers constantly have to cope with emerging changes in the market environment resulting in a low signaling fit or low signaler’s honesty.