MIS 7,8,13,14,15,17 Key Takeaways

15.1 Data and Competitive Advantage: Databases, Analytics, AI and Machine Learning Intro

The amount of data being created doubles every two years. In many organizations, available data is not exploited to advantage. However new tools supporting big data, business intelligence, analytics, and machine learning are helping managers make sense of this data torrent. Data is oftentimes considered a defensible source of competitive advantage; however, advantages based on capabilities and data that others can acquire will be short-lived.

13.7 Beyond the Price Tag: Total Cost of Ownership and the Cost of Tech Failure

The care and feeding of information systems can be complex and expensive. The total cost of ownership of systems can include software development and documentation, or the purchase price and ongoing license and support fees, plus configuration, testing, deployment, maintenance, support, training, compliance auditing, security, backup, and provisions for disaster recovery. These costs are collectively referred to as TCO, or a system's total cost of ownership. Information systems development projects fail at a startlingly high rate. Failure reasons can stem from any combination of technical, process, and managerial decisions. System errors that aren't caught before deployment can slow down a business or lead to costly mistakes that could ripple throughout an organization. Studies have shown that errors not caught before deployment could be 100 times more costly to correct than if they were detected and corrected beforehand. Firms spend 70 percent to 80 percent of their IS budgets just to keep their systems running. IS organizations can employ project planning and software development methodologies to implement procedures and to improve the overall quality of their development practices. IS organizations can leverage software development methodologies to improve their systems development procedures, and firms can strive to improve the overall level of procedures used in the organization through models like CMMI. However, it's also critical to engage committed executive leadership in projects, and to frame projects using business metrics and outcomes to improve the chance of success. A combination of managerial and technical issues conspired to undermine the rollout of HealthCare.gov. While the website was effectively unusable at launch, a systematic effort of management authority, communication, coordination, and expertise rescued the effort, allowing the site to exceed enrollment projections.

14.13 Make, Buy, or Rent

The make, buy, or rent decision may apply on a case-by-case basis that might be evaluated by firm, division, project, or project component. Firm and industry dynamics may change in a way that causes firms to reassess earlier decisions, or to alter the direction of new initiatives. Factors that managers should consider when making a make, buy, or rent decision include the following: competitive advantage, security, legal and compliance issues, the organization's skill and available labor, cost, time, and vendor issues. Factors must be evaluated over the lifetime of a project, not at a single point in time. Managers have numerous options available when determining how to satisfy the software needs of their companies: purchase packaged software from a vendor, use OSS, use SaaS or utility computing, outsource development, or develop all or part of the effort themselves. If a company relies on unique processes, procedures, or technologies that create vital, differentiating, competitive advantages, the functions probably aren't a good candidate to outsource.

14.3 Why Open Source?

The most widely cited benefits of using OSS include low cost; increased reliability; improved security and auditing; system scalability; and helping a firm improve its time to market. Free OSS has resulted in cost savings for many large companies in several industries. OSS often has fewer bugs than its commercial counterparts due to the large number of software developers who have looked at the code. The huge exposure to scrutiny by developers and other people helps to strengthen the security of OSS. "Hardened" versions of OSS products often include systems that monitor the integrity of an OSS distribution, checking file size and other indicators to be sure that code has not been modified and redistributed by bad guys who have added a back door, malicious routines, or other vulnerabilities. OSS can be easily migrated to more powerful computers as circumstances dictate, and also can balance workload by distributing work over a number of machines. Vendors who use OSS as part of product offerings may be able to skip whole segments of the software development process, allowing new products to reach the market faster.

13.2 Operating Systems

The operating system (OS) controls a computer's hardware and provides a common set of commands for writing programs. Most computing devices (enterprise-class server computers, PCs, phones, set-top boxes, video games, cars, the Mars Rover) have an operating system. Some products use operating systems provided by commercial firms, while others develop their own operating system. Others may leverage open source alternatives (see Chapter 14 "Software in Flux: Open Source, Cloud, Virtualized, and App-Driven Shifts" "Software in Flux: Partly Cloudy and Sometimes Free"). Embedded systems are special-purpose computer systems designed to perform one or a few dedicated functions, and are frequently built into conventional products like thermostats, door locks, cars, air conditioners, industrial equipment, and elevators. Embedded systems can make products and services more efficient, more reliable, and more functional, and can enable entire new businesses and create or reinforce resources for competitive advantage.

14.8 SaaS: Not without Risks

The risks associated with SaaS include the following: dependence on a single vendor concern about the long-term viability of partner firms users may be forced to migrate to new versions—possibly incurring unforeseen training costs and shifts in operating procedures reliance on a network connection—which may be slower, less stable, and less secure data asset stored off-site—with the potential for security and legal concerns limited configuration, customization, and system integration options compared to packaged software or alternatives developed in-house The user interface of Web-based software is often less sophisticated and lacks the richness of most desktop alternatives. Ease of adoption may lead to pockets of unauthorized IT being used throughout an organization.

14.1 Software in Flux: Open Source, Cloud, Virtualized, and App-Driven Shifts Intro

The software business is attractive due to near-zero marginal costs and an opportunity to establish a standard—creating the competitive advantages of network effects and switching costs. New trends in the software industry, including open source software (OSS), cloud computing, software as a service (SaaS), and virtualization are creating challenges and opportunities across tech markets. Understanding the impact of these developments can help a manager make better technology choices and investment decisions.

15.4 Data Rich, Information Poor

A major factor limiting business intelligence initiatives is getting data into a form where it can be used (i.e., analyzed and turned into information). Legacy systems often limit data utilization because they were not designed to share data, aren't compatible with newer technologies, and aren't aligned with the firm's current business needs. Most transactional databases aren't set up to be simultaneously accessed for reporting and analysis. In order to run analytics the data must first be ported to a data warehouse or data mart.

7.5 Amazon's Disruptive Consumer Hardware Businesses: Kindle, Fire, Alexa, and More

About one-quarter of Amazon revenues come from the sale of media businesses that are rapidly shifting from atoms to bits. Moore's Law has allowed Amazon to radically drop the price of Kindle offerings while increasing device functionality. Amazon does not make money by selling Kindle hardware; instead, it seeks to fuel media and e-commerce sales as well as side businesses such as on-Kindle and in-app advertising. It is estimated that 20 percent of Amazon's US customers own at least one Kindle device. The dominance of the platform potentially creates several advantages, including network effects (more Kindle users attract more Kindle-compatible titles and products), switching costs, and user data. The firm's Kindle Fire, Fire TV, and Echo are additional platforms for delivering digital content, sales, and data gathering. These platforms face significant challenges in growing market share, and none has seen the success of the firm's e-book readers. Fire tablets and Fire TV have prompted Amazon to accelerate gaming efforts. Fire Phone provides a cautionary tale to late-movers. A high price, entrenched rivals, consumer switching costs, and a lack of compatible apps all contributed to the device's failure. Amazon has upended the publishing value chain and significantly changed the cost structure of the industry. Amazon has also become a force in sponsoring original film and video series and creating video games, and has spent over $1 billion in the acquisition of the extremely popular Twitch video game broadcasting service. Amazon and partners have also been victims of channel conflict, stopping the sale of Kindles and blocking the sale of books published through Amazon imprints. But when channel conflict occurs, the winner will likely be the channel that offers the greatest aggregate value to its partners. Amazon's dominance of publishing, 41 percent of new US book sales and 61 percent of online sales, suggests inordinate market influence. The firm will need to be careful how aggressively it uses its bargaining power, as this could prompt domestic and international regulation and sanctions.

7.4 Beyond Clicks: More Bricks

Amazon is expanding into the university bookstore business: providing a hub for free textbook delivery and rental, and a link to customer acquisition and retention among college students. Amazon Books is a real-world bookstore chain that offers website prices to Prime members, and that also sells the firm's growing line of consumer electronics. The grocery market is massive and could fuel significant Amazon growth. The firm's tech-fueled logistics model, and other advantages in leveraging tech for customer service and enhanced shopping convenience, are influencing several models, including Amazon Fresh delivery, Fresh "click and collect" pick-up centers, and even the firm's purchase of Whole Foods Markets. The Amazon Go concept store shows how machine learning influences computer vision, AI, and other techniques to eliminate cash registers. A shopping experience without lines is potentially far more attractive for consumers, and would offer any retailer benefits such as more shelf space, stores in a smaller real estate footprint, and perhaps even a smaller staff size.

7.1 Amazon: An Empire stretching from cardboard box to kindle to cloud Intro

Amazon is the largest online retailer and has expanded to dozens of categories beyond books. As much of the firm's media business (books, music, video) becomes digital, the Kindle business (which has expanded to tablet, set-top box, and smartphone) is a conduit for retaining existing businesses and for growing additional advantages. And the firm's AWS cloud computing business is the largest player in that category. The firm has even begun investing in physical retail locations, including opening Amazon Books stores, pioneering the no-checkout Amazon Go concept, and buying Whole Foods and gaining over 430 grocery stores. Amazon takes a relatively long view with respect to investing in initiatives and its commitment to growing profitable businesses. The roughly seven-year timeline is a difficult one for public companies to maintain amid the pressure for consistent quarterly profits. Amazon's profitability has varied widely, and analysts continue to struggle to interpret the firm's future. However, after years of investing in new businesses and in building scale advantage, Amazon is now solidly and reliably profitable. Studying Amazon will reveal important concepts and issues related to business and technology.

7.6 Amazon and the Cloud: From Personal Storage to AWS

Amazon offers personal cloud storage options for all forms of media, including books, games, music, and video. It even offers file storage akin to Dropbox and Google Drive. These personal cloud offerings allow users to access files from any app, browser, or device with appropriate access. Amazon Web Services (AWS) allows anyone with a credit card to access industrial-strength, scalable computing resources. Services include computing capability, storage, and many operating systems, software development platforms, and enterprise-class applications. Firms using cloud providers lose control of certain aspects of their infrastructure, and an error or crash caused by the cloud provider could shut off or scale back vital service availability. Amazon and other vendors have experienced outages that have negatively impacted clients. Despite these challenges, most firms believe they lack resources and scale to do a higher-quality or more cost-effective job than specialized cloud providers. AWS and competing cloud services offer several advantages, including increased scalability, reliability, security, lower labor costs, lower hardware costs, and the ability to shift computing from large, fixed-cost investments to those with variable costs. Since Amazon also uses products developed by AWS, the firm's e-commerce and Kindle operations also benefit from the effort. AWS provides the majority of Amazon's corporate profit and is significantly ahead of rivals in terms of market share and available infrastructure.

7.2 The Emperor of e-Commerce

Amazon's sophisticated fulfillment operations speed products into and out of inventory, reinforcing brand strength through speed, selection, and low prices. Rapid inventory turnover and long payment terms enable Amazon to consistently post a negative cash conversion cycle. The firm sells products and collects money from customers in most cases before it has paid suppliers for these products. The cost structure for online retailers can be far less than that of offline counterparts that service similarly sized markets. Savings can come from employee costs, inventory, energy usage, land, and other facilities-related expenses. Amazon's scale is a significant asset. Scale gives Amazon additional bargaining leverage with suppliers, and it allows the firm to offer cheaper prices in many categories than nearly every other firm, online or off. Scale through multiple warehouses allows Amazon to offer more products, a greater product selection, and same-day delivery for urban areas near warehouses. Amazon financials suggest that the firm is deferring profitability due to its increased investment in capital expenditures such as its warehouse and data center buildout. Around 40 percent of products sold on Amazon are offerings sold through Amazon Marketplace by third parties. Amazon gets a cut of each sale, maintains its control of the customer interface, and retains the opportunity to collect customer data that would be lost if users went elsewhere for a purchase. Amazon takes advantage of the long tail, a concept where firms can profitably offer a selection of less popular products. Amazon's enormous product selection—with offerings from the firm and from third parties—reinforces its position as the first-choice shopping destination. Amazon's ability to acquire and leverage data further allows the firm to enhance customer experience and drive sales. Internet retailers have a greater ability to gather personal data on consumers than do offline counterparts. Data is used in personalization and in innovation fueled by the result of A/B experiments.

17.3 Where Are Vulnerabilities? Understanding the Weaknesses Learning Objectives

An organization's information assets are vulnerable to attack from several points of weakness, including users and administrators, its hardware and software, its networking systems, and various physical threats. Social engineering attempts to trick or con individuals into providing information, while phishing techniques are cons conducted through technology. While dangerous, a number of tools and techniques can be used to identify phishing scams, limiting their likelihood of success. Social media sites may assist hackers in crafting phishing or social engineering threats, provide information to password crackers, and act as conduits for unwanted dissemination of proprietary information. Most users employ inefficient and insecure password systems; however, techniques were offered to improve one's individual password regime. Viruses, worms, and Trojans are types of infecting malware. Other types of malware might spy on users, enlist the use of computing assets for committing crimes, steal assets, destroy property, serve unwanted ads, and more. Examples of attacks and scams launched through advertising on legitimate Web pages highlight the need for end-user caution, as well as for firms to ensure the integrity of their participating online partners. SQL injection and related techniques show the perils of poor programming. Software developers must design for security from the start—considering potential security weaknesses, and methods that improve end-user security (e.g., in areas such as installation and configuration). Encryption can render a firm's data assets unreadable, even if copied or stolen. While potentially complex to administer and resource intensive, encryption is a critical tool for securing an organization's electronic assets.

13.3 Application Software: Apps, Desktop Products, and Enterprise Systems

Application software focuses on the work of a user or an organization. Desktop applications are typically designed for a single user. Enterprise software supports multiple users in an organization or work group. Popular categories of enterprise software include ERP (enterprise resource planning), SCM (supply chain management), CRM (customer relationship management), and BI (business intelligence) software, among many others. These systems are used in conjunction with database management systems, programs that help firms organize, store, retrieve, and maintain data. ERP and other packaged enterprise systems can be challenging and costly to implement, but can help firms create a standard set of procedures and data that can ultimately lower costs and streamline operations. The more application software that is available for a platform, the more valuable that platform becomes. The DBMS stores and retrieves the data used by the other enterprise applications. Different enterprise systems can be configured to share the same database system in order to share common data. Firms that don't have common database systems with consistent formats across their enterprise often struggle to efficiently manage their value chains, and often lack the flexibility to introduce new ways of doing business. Firms with common database systems and standards often benefit from increased organizational insight and decision-making capabilities. Enterprise systems can cost millions of dollars in software, hardware, development, and consulting fees, and many firms have failed when attempting large-scale enterprise system integration. Simply buying a system does not guarantee its effective deployment and use. When set up properly, enterprise systems can save millions of dollars and turbocharge organizations by streamlining processes, making data more usable, and easing the linking of systems with software across the firm and with key business partners. Efficient enterprise systems may also make it easier for firms to partner with other organizations, and can give it advantages when considering mergers and acquisitions.

15.7 Artificial Intelligence, Big Data and Machine Learning: It's Now Everywhere!

Artificial intelligence refers to software that can mimic or improve upon functions that would otherwise require human intelligence. Machine learning is a type of AI often broadly defined as software with the ability to learn or improve without being explicitly programmed. Deep learning is a subcategory of machine learning. The "deep" in deep learning refers to the layers of interconnections and analysis that are examined to arrive at results. Neural networks are a category of AI used to identify patterns by testing multilayered relationships that humans can't detect on their own. Neural network techniques are often used in machine learning and are popular in data mining. Expert systems are AI systems that leverage rules or examples to perform a task in a way that mimics applied human expertise. Genetic algorithms are model-building techniques where computers examine many potential solutions to a problem, iteratively modifying (mutating) various mathematical models, and comparing the mutated models to search for a best alternative function. The explosion of machine learning is due to several factors, including open source tools; cloud computing for low-cost, high-volume data crunching; tools accessible via API or as part of software development kits; and new chips specifically designed for the simultaneous pattern hunting and relationship testing used in neural networks and other types of AI. AI can now be found in all sorts of consumer products—it is enabling the first generation of autonomous vehicles; it's influencing soft-skill disciplines like human resources; it improves the efficiency of modern, complex operations; it's is a key component in many customer service initiatives; and it's even being used in medical diagnosis and research. Incorporating AI and machine learning remains challenging. Organizations require technical skills and must reeducate the workforce impacted by AI decision-making tools. Firms need a clean, deep, and accurate dataset. Predictions require a tight relationship between historical data and new data used for prediction. Legal issues may prohibit the use of machine learning and "black box" algorithms in industries requiring exposure of the decision-making process. Varying international laws may allow techniques in one region of the globe that are prohibited in others. AI and machine learning have exposed the possibility of unintended consequences, including the possibility of introducing unintended bias, discrimination, and violations of privacy.

14.5 Why Give It Away? The Business of Open Source

Business models for firms in the open source industry are varied, and can include selling support services and add-on products, offering hosting to run and maintain customer projects "in the cloud," licensing OSS for incorporation into commercial products, and using OSS to fuel hardware sales. Many firms are trying to use OSS markets to drive a wedge between competitors and their customers. Linux has been very successful on mobile devices and consumer electronics, as well as on high-end server class and above computers. But it has not been as successful on the desktop. The small user base for desktop Linux makes the platform less attractive for desktop software developers. Incompatibility with Windows applications, switching costs, and other network effects-related issues all suggest that Desktop Linux has an uphill climb in more mature markets. OSS also has several drawbacks and challenges that limit its appeal. These include complexity of some products and a higher total cost of ownership for some products, concern about the ability of a product's development community to provide support or product improvement, and legal and licensing concerns.

15.6 The Business Intelligence Toolkit

Canned and ad hoc reports, digital dashboards, and OLAP are all used to transform data into information. OLAP reporting leverages data cubes, which take data from standard relational databases, calculating and summarizing data for superfast reporting access. OLAP tools can present results through multidimensional graphs, or via spreadsheet-style cross-tab reports. Modern datasets can be so large that it might be impossible for humans to spot underlying trends without the use of data mining tools. Businesses are using data mining to address issues in several key areas including customer segmentation, marketing and promotion targeting, collaborative filtering, and so on. Models influenced by bad data, missing or incomplete historical data, and over-engineering are prone to yield bad results. One way to test to see if you're looking at a random occurrence in your data is to divide your data, building your model with one portion of the data, and using another portion to verify your results. Analytics may not always provide the total solution for a problem. Sometimes a pattern is uncovered, but determining the best choice for a response is less clear. A competent business analytics team should possess three critical skills: information technology, statistics, and business knowledge.

13.4 Distributed Computing, Web Services, and APIs: The Platform Builders

Client-server computing is a method of distributed computing where one program (a client) makes a request to be fulfilled by another program (a server). Server is a tricky term and is sometimes used to refer to hardware. While server-class hardware refers to more powerful computers designed to support multiple users, just about any PC or notebook can be configured to run server software. Many firms choose to have their server software hosted "in the cloud" on the computers of third-party firms. Web servers serve up websites and can perform some scripting. Most firms serve complex business logic from an application server. Isolating a system's logic in three or more layers (presentation or user interface, business logic, and database) can allow a firm flexibility in maintenance, reusability, and in handling upgrades. Web services and APIs allow different applications to communicate with one another. The terms are imprecise and you'll often hear them used interchangeably. Web services and APIs define the method to call a piece of software (e.g., to get it to do something), and the kind of response the calling program can expect back. APIs and Web services make it easier to link applications as distributed systems, and can make it easier for firms to link their systems across organizations. Expedia uses APIs to expand its reach and bring in some $2 billion from revenue-sharing partners that use its technology. Popular messaging standards include EDI (older), XML, and JSON. Sending messages between machines instead of physical documents can speed processes, drastically cut the cost of transactions, and reduce errors. Distributed computing can yield enormous efficiencies in speed, error reduction, and cost savings and can create entirely new ways of doing business. When computers can communicate with each other (instead of people), this often results in fewer errors, time savings, cost reductions, and can even create whole new ways of doing business.

14.6 Defining Cloud Computing

Cloud computing refers to replacing computing resources—of either an organization or individual's hardware or software—with services provided over the Internet. Software as a service (SaaS) refers to a third-party software-replacing service that is delivered online. Platform as a service (PaaS) delivers tools (a.k.a., a platform) so an organization can develop, test, and deploy software in the cloud. These could include programming languages, database software, and product testing and deployment software. Infrastructure as a service (IaaS) offers an organization an alternative to buying its own physical hardware. Computing, storage, and networking resources are instead allocated and made available over the Internet and are paid for based on the amount of resources used. IaaS offers the most customization, with firms making their own choices on what products to install, develop, and maintain (e.g., operating systems, programming languages, databases) on the infrastructure they license. SaaS typically requires the least amount of support and maintenance; IaaS requires the most, since firms choose the tech they want to install, craft their own solution, and run it on what is largely a "blank canvas" of cloud-provided hardware. Cloud computing is reshaping software, hardware, and service markets and is impacting competitive dynamics across industries.

14.10 Clouds and Tech Industry Impact

Cloud computing's impact across industries is proving to be broad and significant. Clouds can lower barriers to entry in an industry, making it easier for startups to launch and smaller firms to leverage the backing of powerful technology. Clouds may also lower the amount of capital a firm needs to launch a business, shifting power away from venture firms in those industries that had previously needed more VC money. Clouds can shift resources out of capital spending and into profitability and innovation. Hardware and software sales may drop as cloud use increases, while service revenues will increase. Cloud computing can accelerate innovation and therefore changes the desired skills mix and job outlook for IS workers. Tech skills in data center operations, support, and maintenance may shrink as a smaller number of vendors consolidate these functions. Demand continues to spike for business-savvy technologists. Tech managers will need even stronger business skills and will focus an increasing percentage of their time on strategic efforts. These latter jobs are tougher to outsource, since they involve an intimate knowledge of the firm, its industry, and its operations. The market for expensive, high-margin, server hardware is threatened by companies moving applications to the cloud instead of investing in hardware. Server farms require plenty of cheap land, low-cost power, and ultrafast fiber-optic connections, and benefit from mild climates. Google, Oracle's Sun, Microsoft, IBM, and HP have all developed rapid-deployment server farm modules that are preconfigured and packed inside shipping containers.

17.2 Why Is This Happening? Who Is Doing It? And What's Their Motivation?

Computer security threats have moved beyond the curious teen with a PC and are now sourced from a number of motivations, including theft, leveraging compromised computing assets, extortion, espionage, warfare, terrorism, national security, pranks, protest, and revenge. Threats can come from both within the firm as well as from the outside. Cybercriminals operate in an increasingly sophisticated ecosystem where data harvesters and tool peddlers leverage robust online markets to sell to cash-out fraudsters and other crooks. Technical and legal complexity make pursuit and prosecution difficult. Government surveillance efforts can put citizens and corporations at risk if poorly executed and ineffectively managed. Many law enforcement agencies are underfunded, underresourced, and underskilled to deal with the growing hacker threat.

15.2 Data, Information, and Knowledge

Data includes raw facts that must be turned into information in order to be useful and valuable. Databases are created, maintained, and manipulated using programs called database management systems (DBMS), sometimes referred to as database software. Relational database management systems (RDBMS) are the most common database standard by far, and SQL (or structured query language) is the most popular standard for relational database systems. In relational database systems, several data fields make up a data record, multiple data records make up a table or data file, and one or more tables or data files make up a database. Files that are related to one another are linked based on a common field (or fields) known as a key. If the value of a key is unique to a record in a table, and that value can never occur in that field while referring to another record in that table, then it is a primary key. If a key can occur many times over multiple records in a table but relates back to a primary key in another table, then it is a foreign key.

15.5 Data Warehouses, Data Marts, and Technology behind "Big Data"

Data warehouses and data marts are repositories for large amounts of transactional data awaiting analytics and reporting. Large data warehouses are complex, can cost millions, and take years to build. The open source Hadoop effort provides a collection of technologies for manipulating massive amounts of unstructured data. The system is flexible, scalable, cost-effective, and fault-tolerant. Hadoop grew from large Internet firms but is now being used across industries.

17.4 Taking Action

End users can engage in several steps to improve the information security of themselves and their organizations. These include surfing smart, staying vigilant, updating software and products, using a comprehensive security suite, managing settings and passwords responsibly, backing up, properly disposing of sensitive assets, and seeking education. Frameworks such as ISO27k can provide a road map to help organizations plan and implement an effective security regime. Many organizations are bound by security compliance commitments and will face fines and retribution if they fail to meet these commitments. The use of frameworks and being compliant is not equal to security. Security is a continued process that must be constantly addressed and deeply ingrained in an organization's culture. Security is about trade-offs—economic and intangible. Firms need to understand their assets and risks in order to best allocate resources and address needs. Information security is not simply a technical fix. Education, audit, and enforcement regarding firm policies are critical. The security team is broadly skilled and constantly working to identify and incorporate new technologies and methods into their organizations. Involvement and commitment is essential from the boardroom to frontline workers, and out to customers and partners.

15.3 Where Does Data Come From?

For organizations that sell directly to their customers, transaction processing systems (TPS) represent a source of potentially useful data. Grocers and retailers can link you to cash transactions if they can convince you to use a loyalty card which, in turn, requires you to give up information about yourself in exchange for some kind of financial incentive such as points or discounts. Enterprise software (CRM, SCM, and ERP) is a source for customer, supply chain, and enterprise data. Survey data can be used to supplement a firm's operational data. Data obtained from outside sources, when combined with a firm's internal data assets, can give the firm a competitive edge. Data aggregators are part of a multibillion-dollar industry that provides genuinely helpful data to a wide variety of organizations. Data that can be purchased from aggregators may not in and of itself yield sustainable competitive advantage since others may have access to this data, too. However, when combined with a firm's proprietary data or integrated with a firm's proprietary procedures or other assets, third-party data can be a key tool for enhancing organizational performance. Data aggregators can also be quite controversial. Among other things, they represent a big target for identity thieves, are a method for spreading potentially incorrect data, and raise privacy concerns. Firms that mismanage their customer data assets risk lawsuits, brand damage, lower sales and fleeing customers, and can prompt more restrictive legislation. Further raising privacy issues and identity theft concerns, recent studies have shown that in many cases it is possible to pinpoint users through allegedly anonymous data, and to guess Social Security numbers from public data. New methods for tracking and gathering user information are raising privacy issues, which possibly will be addressed through legislation that restricts data use.

8.3 One-Sided or Two-Sided Markets?

In one-sided markets, users gain benefits from interacting with a similar category of users (think messaging apps, where everyone can send and receive messages to and from one another). In two-sided markets, users gain benefits from interacting with a separate, complementary class of users (e.g., in the mobile payment business, payment app-wielding consumers are attracted to a platform because there are more merchants offering convenient payment, while merchants are attracted to a payment system that others will actually use and that yields clear benefits over cash).

17.1 Information Security: Barbarians at the Gateway (and Just About Everywhere Else) Intro

Information security is everyone's business and needs to be made a top organizational priority. Firms suffering a security breach can experience direct financial loss, exposed proprietary information, fines, legal payouts, court costs, damaged reputations, plummeting stock prices, and more. Information security isn't just a technology problem; a host of personnel, operational, and procedural factors can create and amplify a firm's vulnerability.

14.9 Understanding Cloud Computing Models: PaaS, IaaS, and Motivations and Risks

It's estimated that 80 percent of corporate tech spending goes toward data center maintenance. Cloud computing helps tackle these costs by allowing firms to run their own software on the hardware of the provider, paying only for services that are used. Amazon, Google, IBM, Microsoft, Oracle/Sun, Rackspace, Salesforce.com, and VMware are among firms offering cloud computing services. Cloud computing varieties include platform as a service (PaaS), where vendors provide a platform (e.g., the operating system and supporting software like database management systems, a software development environment, testing, and application service) but where client firms write their own code; and infrastructure as a service (IaaS), where cloud vendors provide and manage the underlying infrastructure (hardware, storage, and networking), while clients can create their own platform, and choose operating systems, applications, and configurations. Some firms use cloud computing technology on hardware they own or lease as a sole customer. This is referred to as a private cloud. Other firms allocate resources between their own systems (the private cloud) and the public cloud (where resources may be shared with other clients). This is referred to as a hybrid-cloud strategy. Amazon provides software and services, helping the CIA build and maintain its own private cloud. Users of cloud computing run the gamut of industries, including publishing (the New York Times), finance (NASDAQ), and cosmetics and skin care (Elizabeth Arden). Benefits and risks are similar to those discussed in SaaS efforts. Benefits include the use of the cloud for handling large batch jobs or limited-time tasks, offloading expensive computing tasks, and cloudbursting efforts that handle system overflow when an organization needs more capacity. Most legacy systems can't be easily migrated to the cloud, meaning most efforts will be new efforts or those launched by younger firms. Cloud (utility) computing doesn't work in situations where complex legacy systems have to be ported or where there may be regulatory compliance issues. Some firms may still find TCO and pricing economics favor buying over renting—scale sometimes suggests an organization is better off keeping efforts in-house.

8.5 Competing When Network Effects Matter

Moving early matters in network markets—firms that move early can often use that time to establish a lead in users, switching costs, and complementary products that can be difficult for rivals to match. Additional factors that can help a firm establish a network effects lead include subsidizing adoption; leveraging viral marketing, creating alliances to promote a product or to increase a service's user base; redefining the market to appeal to more users; leveraging unique distribution channels to reach new customers; seeding the market with complements; encouraging the development of complements; and maintaining backward compatibility. Established firms may try to make it difficult for rivals to gain compatibility with their users, standards, or product complements. Large firms may also create uncertainty among those considering adoption of a rival by preannouncing competing products.

8.1 Platforms, Network Effects, and Competing in a Winner-Take-All World Intro

Network effects are among the most powerful strategic resources that can be created by technology-based innovation. Many category-dominating organizations and technologies, including Microsoft, Apple, NASDAQ, eBay, Facebook, and Visa, owe their success to network effects. Network effects are also behind the establishment of most standards, including Blu-ray, Wi-Fi, and Bluetooth.

14.2 Open Source

OSS is not only available for free, but also makes source code available for review and modification (for the Open Source Initiatives list of the criteria that define an open source software product, see http://opensource.org/docs/osd). While open source alternatives are threatening to conventional software firms, some of the largest technology companies now support OSS initiatives and work to coordinate standards, product improvements, and official releases. The flagship OSS product is the Linux operating system, now available on all scales of computing devices from cell phones to supercomputers. The LAMP stack of open source products is used to power many of the Internet's most popular websites. Linux can be found on a large percentage of corporate servers; supports most Web servers, smartphones, tablets, and supercomputers; and is integral to TiVo and Android-based products. The majority of people who work on open source projects are paid by commercially motivated employers.

14.12 Apps and App Stores: Further Disrupting the Software Industry on Smartphones, Tablets, and Beyond

Over one billion smartphones are sold a year, providing a rich platform for app deployment. Compared with packaged software, apps lower the cost of software distribution and maintenance. Apps offer a richer user interface and integrate more tightly with a device's operating system, enabling more functionality and services such as app-delivered alerts. Several billion-dollar firms have leveraged smartphone apps as their only, or primary, interface with consumers. Mobile apps do provide additional challenges for developers, especially when compared against browser-based alternatives. Among them, more challenging updates, version control, and A/B testing. Critics of apps say they force consumers into smartphone-walled gardens and raise consumer-switching costs. While development and distribution costs are cheaper for apps than packaged software, discovery poses a problem, and it can be increasingly difficult for high-quality firms to generate consumer awareness among the growing crowd of app offerings.

8.2 Platforms Are Powerful, But Where Does All That Value Come From?

Products and services subject to network effects get their value from exchange, perceived staying power, and complementary products and services. Tech firms and services that gain the lead in these categories often dominate all rivals. Many firms attempt to enhance their network effects by creating a platform for the development of third-party products and services that enhance the primary offering.

13.5 Writing Software

Programs are often written in a tool called an IDE, an application that includes an editor (a sort of programmer's word processor), debugger, and compiler, among other tools. Compiling takes code from the high-level language that humans can understand and converts them into the sets of ones and zeros in patterns representing instructions that microprocessors understand. Popular programming languages include C++, C#, Visual Basic, and Java. Most software is written for a platform—a combination of an operating system and microprocessor. Java was originally designed to be platform independent. Computers running Java have a separate layer called a Java Virtual Machine that translates (interprets) Java code so that it can be executed on an operating system/processor combination. In theory, Java written using the standards of the virtual machine should be "write once, run everywhere," as opposed to conventional applications that are written for an operating system and compiled for an OS/processor combination. Some environments use the Java programming language, but "break" the write-once-run-anywhere promise by including proprietary code. This is the case with Java used for Android development. Google has its own standards for coding for the Android user interface and interacting with hardware that stand apart from what is available in the JVM, so an Android app won't run on other devices. Java is popular on mobile phones and enterprise computing, and is widely used to make websites more interactive. Java has never been a successful replacement for desktop applications, largely because user interface differences among the various operating systems are too great to be easily standardized. Scripting languages are interpreted languages, such as Python, R, VB Script and Java Script. Many scripting languages execute within an application (like the Office programs, a Web browser, or to support the functions of a Web server). They are usually easier to program, but are limited in scope (e.g., usually not used for desktop applications) and execute more slowly than compiled languages.

14.7 Software in the Cloud: Why Buy When You Can Rent?

SaaS firms may offer their clients several benefits including the following: lower costs by eliminating or reducing software, hardware, maintenance, and staff expenses financial risk mitigation since startup costs are so low potentially faster deployment times compared with installed packaged software or systems developed in-house costs that are a variable operating expense rather than a large, fixed capital expense scalable systems that make it easier for firms to ramp up during periods of unexpectedly high system use higher quality and service levels through instantly available upgrades, vendor scale economies, and expertise gained across its entire client base remote access and availability—most SaaS offerings are accessed through any Web browser, and often even by phone or other mobile device Vendors of SaaS products benefit from the following: limiting development to a single platform, instead of having to create versions for different operating systems tighter feedback loop with clients, helping fuel innovation and responsiveness ability to instantly deploy bug fixes and product enhancements to all users lower distribution costs accessibility to anyone with an Internet connection greatly reduced risk of software piracy SaaS (and the other forms of cloud computing) are also thought to be better for the environment, since cloud firms more efficiently pool resources and often host their technologies in warehouses designed for cooling and energy efficiency.

7.3 The Lord of Logistics

Shipping represents a large portion of Amazon's expense for each order, and the firm leverages several approaches to bring down this cost. In the United States, Amazon can choose to deliver products to consumer homes via the US Postal Service, UPS, FedEx, or itself. Algorithms decide which path is most effective from both a cost and customer service perspective. Local delivery is coordinated in several ways, including Amazon's Uber-style recruitment of contract drivers. Amazon owns its own trucking fleet to handle long- and medium-haul product transit, when appropriate. The firm has also leased 40 cargo planes, allowing it to funnel the most cost-effective shipping to its own fleet, and giving it more time to accept orders for next-day shipment. Planes utilize underserved airports that are still near metro centers or other Amazon facilities. The company is also building its own air hub in the center of the US, to further improve cost and speed efficiency. Amazon also operates its own ocean freight for products from overseas (primarily East Asia), which it knows it will need in its warehouses, but which lack the immediacy of plane delivery. While Amazon is a customer of large shipping firms, it has also begun offering its own shipping option to third parties, making it both client and competitor to package delivery firms. Amazon's experience in shipping provides an opportunity to create a shipping and logistics business in the way that its expertise in computing allowed it to create a cloud computing business. Amazon has leveraged technology in ways that may make it a more attractive shipping partner, and which better serve consumers. Amazon Key is the firm's service for providing the option of in-home delivery, even when customers are not present. The acquisition of Ring smart home products gives Amazon a supplier of this tech, vertically integrating components of the solution offering. The firm has also partnered with GM and Volvo to offer app- and OnStar-powered delivery to customer automobiles.

13.6 Software Development Methodologies: From Waning Waterfall to Ascending Agile, plus a Sprint through Scrum

Software development methodologies seek to bring planning and structure to software development projects. When methodologies are applied to projects that are framed with clear business goals and business metrics, and that engage committed executive leadership, success rates can improve dramatically. The waterfall methodology is a relatively linear sequential approach to software development (and other projects). Benefits include surfacing requirements up front and creating a blueprint to follow throughout a project. Waterfall is often criticized for being too rigid, slow, and demanding project forethought that's tough to completely identify early on. The agile development approach (and variants) tackles work continually and iteratively, with a goal of more frequent product rollouts and constant improvement across smaller components of the larger project. Teams tackle smaller, targeted tasks with the hope of building products more quickly, with greater user input. Scrum is an approach to organizing and managing agile projects and is worth mentioning due to its popularity. Scrum breaks projects up into tasks called sprints that are meant to be completed in one to six weeks. Scrum teams are self-organizing and work cross-functionally, with managers, developers, designers, and users in regular contact.

13.1 Understanding Software: A Primer for Managers Intro

Software refers to a computer program or collection of programs. It enables computing devices to perform tasks. You can think of software as being part of a layer cake, with hardware at the bottom; the operating system controlling the hardware and establishing standards; the applications executing one layer up, and the users at the top. How these layers relate to one another has managerial implications in many areas, including the flexibility in meeting business demand, costs, legal issues, and security. Software is everywhere—not just in computers, but also in cell phones, cars, cameras, and many other technologies.

14.4 Examples of Open Source Software

There are thousands of open source products available, covering nearly every software category. Many have a sophistication that rivals commercial software products. Not all open source products are contenders. Less popular open source products are not likely to attract the community of users and contributors necessary to help these products improve over time (again we see network effects are a key to success—this time in determining the quality of an OSS effort). Just about every type of commercial product has an open source equivalent.

8.4 How Are These Markets Different?

Unseating a firm that dominates with network effects can be extremely difficult, especially if the newcomer is not compatible with the established leader. Newcomers will find their technology will need to be so good that it must leapfrog not only the value of the established firm's tech, but also the perceived stability of the dominant firm, the exchange benefits provided by the existing user base, and the benefits from any product complements. For evidence, just look at how difficult it's been for rivals to unseat the dominance of Windows. Because of this, network effects might limit the number of rivals that challenge a dominant firm. But the establishment of a dominant standard may actually encourage innovation within the standard, since firms producing complements for the leader have faith the leader will have staying power in the market.

14.11 Virtualization: Software That Makes One Computer Act Like Many

Virtualization software allows one computing device to function as many. The most sophisticated products also make it easy for organizations to scale computing requirements across several servers. Virtualization software can lower a firm's hardware needs, save energy, and boost scalability. Data center virtualization software is at the heart of many so-called private clouds and scalable corporate data centers, as well as the sorts of public efforts described earlier. Virtualization also works on the desktop, allowing multiple operating systems (Mac OS X, Linux, Windows) to run simultaneously on the same platform. Virtualization software can increase data center utilization to 80 percent or more. While virtualization is used to make public cloud computing happen, it can also be used in-house to create a firm's own private cloud. While traditional virtualization acts as a software representation of hardware where each virtual machine requires its own operating system, a type of virtualization known as containers performs many of the functions of virtualization without requiring a separate operating system. This saves even more power and computer space, and helps resources execute even faster. A number of companies, including Microsoft and Dell, have entered the growing virtualization market. Container startup Docker is seeing widespread adoption across industries and leading firms.

15.8 Data Asset in Action: Technology and the Rise of Walmart

Walmart demonstrates how a physical product retailer can create and leverage a data asset to achieve world-class value chain efficiencies. Walmart uses data mining in numerous ways, from demand forecasting to predicting the number of cashiers needed at a store at a particular time. To help suppliers become more efficient, and as a result lower prices, Walmart shares data with them. Despite its success, Walmart is a mature business that needs to find huge markets or dramatic cost savings in order to boost profits and continue to move its stock price higher. The firm's success also makes it a high-impact target for criticism and activism. And the firm's data assets could not predict impactful industry trends such as the rise of Target and other upscale discounters.