CHAPTER 5 notes for the exam 2.docx

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University of Massachusetts Amherst
Operations & Info Management
OIM 210
Ryan Wright

CHAPTER 5  Open source software (OSS) offerings—free alternatives where anyone can look at and potentially modify a program’s code—pose a direct challenge to the assets and advantages cultivated by market leaders.  Cloud Computing: - “The provisioning of services in a timely (near on instant), on- demand manner, to allow the scaling up and down of resources”; Replacing computing resources—either an organization’s or individual’s hardware or software—with services provided over the Internet.  a service (SaaS), users access a vendor’s software over the Internet, usually by simply starting up a Web browser. With SaaS, you don’t need to own the program or install it on your own computer. Hardware clouds can let firms take their software and run it on someone else’s hardware—freeing them from the burden of buying, managing, and maintaining the physical computing that programs need.  Virtualization: The ability to run multiple operating systems on a single physical system and share the underlying hardware resources; makes a single computer behave like many separate machines. This function helps consolidate computing resources and creates additional savings and efficiencies.  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), hardware clouds, software as a service (SaaS), and virtualization are creating challenges and opportunity across tech markets.  There are many reasons why firms choose open source products over commercial alternatives: o using OSS include low cost; increased reliability; improved security and auditing; system scalability; and helping a firm improve its time to market. o Free OSS has resulted in cost savings for many large companies in several industries. o OSS often has fewer bugs than its commercial counterparts due to the large number of persons who have looked at the code. o The huge exposure to scrutiny by developers and others helps to strengthen the security of OSS. o “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. o OSS can be easily migrated to more powerful computers as circumstances dictate, and it also can balance workload by distributing work over a number of machines. o 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. o Examples of Open Source Software Firefox; OpenOffice; GimpVS-Photoshop; ZimbraVS-outlook o There are thousands of open source products available, covering nearly every software category. Many have a sophistication that rivals commercial software products. o 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  Why Give It Away? The Business of Open Source: o By lowering the cost of computing, open source efforts make more computing options accessible to smaller firms. o More reliable, secure computing also lowers costs for all users. o OSS also diverts funds that firms would otherwise spend on fixed costs, like operating systems and databases, so that these funds can be spent on innovation or other more competitive initiatives o Business models for firms in the open source industry are varied, and can include selling services, licensing OSS for incorporation into commercial products, and using OSS to fuel hardware sales. o 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. o MySQL is the dominant open source database software product.Adoption of the SQL standard eases some issues with migrating from commercial products to MySQL. o Disadvantages/Cons - 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. (disadvantages) o Disadvantages: no maintenance; no support (unless purchased); no warranties (viruses; performance); license terms are not standard)  Cloud Computing: Hype or Hope? o Managers and techies use the term cloud computing to describe computing services provided over a network/ over the Internet by a third party that can replace or offload tasks that would otherwise run on a user or organization’s existing hardware or software. o Software as a service (SaaS) refers to a third-party software-replacing service that is delivered online. o Private Clouds - Pools of computing resources that reside inside an organization and that can be served up for specific tasks as need arrives. o Utility Computing - Aform of cloud computing where a firm develops its own software, and then runs it over the Internet on a service provider’s computers. o Hardware cloud computing services replace hardware that a firm might otherwise purchase. o Estimated to be a thirty-six-billion-dollar industry, cloud computing is reshaping software, hardware, and service markets, and is impacting competitive dynamics across industries.  The Software Cloud: Why Buy When You Can Rent? o SaaS firms may offer their clients several benefits including the following: PROS:  lower costs by eliminating or reducing software, hardware, maintenance, and staff expenses  financial risk mitigation since start-up 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 o Vendors of SaaS products benefit from the following:PROS  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.  SaaS: Not without Risks o The risks associated with SaaS include the following: CONS  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
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