☁️ Ch. 09: Cloud Computing, SaaS, and Amazon

Ishika Kothari's Comprehensive Study Guide

📚 Vocabulary & Keywords

Amazon Web Services (AWS) A cloud computing platform by Amazon that provides on-demand IT resources (like storage, computing power, and databases) over the internet using a pay-as-you-go model. (Information Systems: A Manager's Guide to Harnessing Technology, section 9.7, page 242)

Cloud computing The delivery of computing services (servers, storage, databases, networking, and software) over the internet, allowing users to access and scale resources without owning physical infrastructure. (Information Systems: A Manager's Guide to Harnessing Technology, section 9.2, page 223)

Consumerization of technology The trend where technology that originates in the consumer market (like smartphones or apps) becomes adopted in the workplace, influencing business IT decisions and expectations.

Infrastructure as a Service (IaaS) Bare-bones set of services that are an alternative to buying its own physical hardware. (Information Systems: A Manager's Guide to Harnessing Technology, section 9.5, page 232)

Platform as a service (PaaS) Delivers tools (a platform) so an organization can develop, test, and deploy software in the cloud. (Information Systems: A Manager's Guide to Harnessing Technology, section 9.5, page 232)

Service Level Agreement (SLA) Between the customer and vendor- specifies the levels of availability, serviceability and other commitment requirements to ensure a guaranteed uptime and ability to meet demand spikes. (Information Systems: A Manager's Guide to Harnessing Technology, section 9.3, page 225)

Software as a Service (SaaS) Firm subscribes to a third-party software-replacing service that’s delivered online. (Information Systems: A Manager's Guide to Harnessing Technology, section 9.3, page 225)

Virtualization Software that allows a single or cluster computer to function as if they were different computers running their own operating system and software. Benefit: firms stop buying separate servers for each application. Efficient!

Total Cost of Ownership (TCO) All of the costs associated with the design, development, testing, implementation, documentation, training and maintenance of a software system.

Vertical Niches Sometimes referred to as vertical clouds. Software packages that are designed for a specific industry (e.g., software specifically for dentists or high-end clothing retailers).

Cloudbursting Providing excess capacity from a third-party cloud provider during lightning-fast spikes in demand. It's an overflow service.

Black Swans Unpredictable but highly impactful events. Scalable computing helps firms survive these "unforecastable" surges in traffic.

💡 Key Analysis Questions

Why would a firm choose to use SaaS? What are the benefits? What are the risks? Benefits:

Lower costs by eliminating or reducing software, hardware, maintenance, and staff expenses.
Financial risk mitigation since startup costs are low.
Potentially faster deployment times compared with installed packaged software or in-house systems.
Variable operating expenses rather than large, fixed capital expenses.
Scalable systems that make it easier to ramp up during high use.
Higher quality/service levels through instantly available upgrades and vendor expertise.
Remote access via any web browser or mobile device.

Risks:

Dependence on a single vendor and their long-term viability.
Forced migrations to new versions (possibly incurring training costs).
Reliance on network connections (which may be slower, less stable, and less secure).
Data assets stored off-site (potential security and legal concerns).
Limited configuration, customization, and system integration options.
User interface may lack the richness of most desktop alternatives.
Shadow IT: ease of adoption leads to unauthorized IT pockets in the firm.

Internet Citation: IBM Cloud Education (2023), "SaaS: A Complete Guide to Software as a Service."

How do SaaS providers make money? Why would a software company choose SaaS vs. a traditional model? Providers typically use subscription models or usage-based pricing. They choose SaaS because:

Development Efficiency: Limits development to a single platform instead of many OS versions.
Tighter Feedback Loop: Helps fuel innovation and responsiveness to client needs.
Instant Updates: Ability to instantly deploy bug fixes and enhancements to all users.
Lower Costs: Reduced distribution costs and accessibility to anyone with an internet connection.
Piracy Protection: Greatly reduced risk of software piracy compared to distributed code.

Why do certain entry barriers decrease as a result of cloud computing? What is the effect on entrants and competitors? Barriers decrease because firms don't need huge upfront capital for hardware, server rooms, or massive IT staff.

How: Entrants can pay-as-you-go, scale resources instantly, and access world-class infrastructure on a startup budget.
On New Entrants: It levels the playing field, allowing "two guys in a garage" to have the same computing power as a Fortune 500 company.
On Existing Competitors: It increases the threat of new entrants and intensifies competition, forcing incumbents to be more agile.

Internet Citation: AWS Executive Insights (2024), "How Cloud Economics Lowers the Cost of Innovation."

What are some examples of the products offered by AWS?

EC2 (Elastic Compute Cloud): Virtual servers (instances) on demand so companies can scale computing power.
AWS Lambda: A serverless service that runs code without requiring users to manage infrastructure.
Workspaces: Virtual desktop computers accessible from any device.
S3 (Simple Storage Service): Scalable cloud storage that acts like an "unlimited hard drive" for data.

Internet Citation: AWS Documentation (2024), "Cloud Product Overviews."

📝 MIS 301 Scenario Questions

1. A group of UT students is launching a new app that helps students find local study spots. They don't have much money, but they expect a massive spike in users during finals week and very few users during summer break.

Which benefit of cloud computing is MOST critical for this startup's financial survival?

A. Higher quality hardware than traditional servers.

B. Scalability to handle fluctuating demand levels.

C. Sophisticated user interfaces for mobile browsers.

D. Reduced need for a stable network connection.

Correct answer: B

Explanation: Scalability allows the startup to handle "demand spikes" (like finals week) without paying for extra capacity during slow periods. Distractor A is a general benefit but not the most critical for survival. Distractor C is incorrect because SaaS interfaces are often less sophisticated than desktop versions. Distractor D is incorrect because cloud services actually require more reliance on network stability.

2. A small boutique in West Campus currently uses an old version of Excel installed on a single back-office PC to track inventory. The owner wants to switch to a SaaS-based inventory system so employees can update stock levels from their phones anywhere in the shop.

What is one major risk the boutique owner should consider before making this switch?

A. Increased upfront capital expenses for software licenses.

B. The high cost of hiring an army of IT consultants.

C. Dependence on a single vendor's long-term viability.

D. Having to develop different versions for iOS and Android.

Correct answer: C

Explanation: Vendor dependence is a primary risk of SaaS; if the provider goes out of business, the boutique loses its system. Distractors A and B are incorrect because SaaS usually lowers upfront costs and reduces the need for consultants. Distractor D is incorrect because the SaaS provider, not the boutique, handles platform development.

3. A student organization wants to build a custom website for its members. They decide to use a service where they can write their own code and manage their data, but they don't want to worry about maintaining the underlying servers, operating systems, or networking.

Which cloud service model are they looking for?

A. Infrastructure as a Service (IaaS)

B. Platform as a Service (PaaS)

C. Software as a Service (SaaS)

D. Traditional On-Premise Computing

Correct answer: B

Explanation: PaaS provides the tools (platform) for developers to build applications without managing the OS or hardware. IaaS (Option A) would require them to manage the OS. SaaS (Option C) provides a finished software they wouldn't build themselves. Traditional (Option D) would require managing everything, including physical hardware.

4. A large tech firm is deciding whether to keep their customer database on their own physical servers (on-premise) or move it to a cloud host like AWS. The CEO is worried because the company deals with highly sensitive government data that has strict regulatory constraints.

Why might this firm choose to keep their database as TRADITIONAL software on-premise?

A. To take advantage of faster deployment times.

B. To reduce the total cost of ownership (TCO).

C. To satisfy specific regulatory and security requirements.

D. To eliminate the need for system maintenance.

Correct answer: C

Explanation: Traditional software is often preferred when there are unique business processes or regulatory constraints regarding data security. Options A and D are benefits of SaaS, not traditional software. Option B is incorrect because traditional software typically has a higher TCO over time due to maintenance and hardware costs.

5. A new social media startup is able to launch its platform in just two weeks because they used AWS to rent computing power instead of buying and setting up their own server farm.

How does this scenario illustrate the impact of cloud computing on the competitive landscape?

A. It increases switching costs for the startup's users.

B. It creates a higher barrier to entry for new firms.

C. It lowers the barrier to entry for new entrants.

D. It forces existing competitors to lower their service levels.

Correct answer: C

Explanation: By reducing the need for large upfront investments, cloud computing lowers entry barriers, making it easier for new firms to enter the market. Option A is unrelated. Option B is the opposite of what happened. Option D is incorrect as competition usually forces service levels to rise, not fall.