IT Infrastructure and Emerging Technologies

Chapter 5IT Infrastructure and Emerging Technologies

Learning Objectives

1. What is IT infrastructure and what are its components?

2. What are the stages and technology drivers of IT infrastructure evolution?

3. What are the current trends in computer hardware platforms?

4. What are the current trends in software platforms?

5. What are the challenges of managing IT infrastructure and management solutions?

Chapter Outline

5.1 IT Infrastructure

Defining IT InfrastructureEvolution of IT InfrastructureTechnology Drivers of Infrastructure Evolution

5.2 Infrastructure ComponentsComputer Hardware PlatformsOperating System PlatformsEnterprise Software ApplicationsData Management and StorageNetworking/Telecommunications PlatformsInternet PlatformsConsulting and System Integration Services

5.3 Contemporary Hardware Platform TrendsThe Emerging Mobile Digital PlatformGrid ComputingConsumerization of IT and BYODVirtualizationCloud ComputingGreen ComputingHigh-Performance and Power-Saving ProcessorsAutonomic Computing

5.4 Contemporary Software Platform TrendsLinux and Open-Source SoftwareSoftware for the Web: Java, HTML, and HTML5Web Services and Service Oriented ArchitectureSoftware Outsourcing and Cloud Services

5.5 Management IssuesDealing with Platform and Infrastructure ChangeManagement and GovernanceMaking Wise Infrastructure Investments

5-1Copyright © 2014 Pearson Education, Inc.

Key Terms

The following alphabetical list identifies the key terms discussed in this chapter. The page number for each key term is provided.

Android, 177 Open-source software, 189

Application server, 170 Operating system, 177

Apps, 195 Outsourcing, 194

Autonomic computing,188 Private cloud, 185

Blade servers, 177 Public cloud, 185

Chrome OS, 177 SaaS (Software as a Service), 194

Client/server computing, 169 Scalability, 196

Clients, 169 Server, 169

Cloud computing, 170 Service level agreement (SLA), 194

Consumerization of IT, 180 Service-oriented architecture (SOA), 191

Extensible markup language (XML), 191 Software package, 193

Green computing, 186 Storage area networks (SANs), 178

Grid computing, 181 Tablet computers, 180

HTML5, 190

Hybrid cloud, 186

Hypertext markup language (HTML), 190

Technology standards, 175

iOS, 178 Total cost of ownership (TCO), 197

Java, 189 UNIX, 177

Legacy systems, 179 Utility computing, 185

Linux, 177 Virtualization, 181

Mainframe, 167 Web browser, 190

Mashup, 195 Web hosting service, 179

Minicomputers, 167 Web server, 169

Moore’s Law, 171 Web services, 191

Multicore processor, 186 Windows, 170

Multitiered (N-tier) client/server architecture, 169

Windows 8, 178

Multitouch, 178 Wintel PC, 167

Nanotechnology, 172

On-demand computing, 185


Teaching Suggestions

Your students’ knowledge and comfort level with technology is likely to vary, making this chapter difficult to teach and test. The technically-adept know most of this material, and some of the nontechnical types may not find the chapter’s contents particularly interesting. You may want to approach the chapter from a business standpoint—the role of technology in the success of an organization.

One way to begin the chapter discussion is to present several horror stories. (Your students may even be able to provide stories of their own.) For example, many firms have found moving to a client/server architecture is not the dream they were led to believe. The shortage of support, programming, and management tools, as well as the shortage of staff who understands the technology and programs in such an environment, have doomed many such changes to client/server architecture. Also, you should mention to your students that programming problems have cost organizations millions of dollars and provide examples of programming projects that simply failed.

The opening case about “The Army Recasts Its IT Infrastructure,” demonstrates that sooner or later every information system needs a major overhaul to keep up with the changes and advances in hardware and software. Experts believe that many of the federal government data centers are underutilized and over budget. The Army was ordered to close 185 of its data centers as were several of the other military branches. The Army has also been instructed to eliminate 50 percent of existing software applications. Those numbers point to gross duplication of both hardware and software capabilities. But first, the Army had to count its data centers and computing equipment. They also had to identify applications and resources that could be shared among all branches of the military

There are very few businesses or organizations that use 100 percent of their server computing capacity 100 percent of the time. Many of the Army’s servers only handled one application. Virtualization allows more than one application to run on a server at the same time. Using cloud computing and virtualization, the Army was able to reduce the number of hardware pieces and software applications they once used. It has been able to reduce costs without compromising operational effectiveness.

Section 5.1, “IT Infrastructure” Introduces students to essential computer hardware terminology and concepts. The trek through the five evolutionary stages in computing platforms provides a backdrop for explaining how we got to the current phase of computing. Moore’s Law, usually misstated, helps explain how the technology industry has been able to continually produce new, faster, and cheaper products year-after-year. Building products upon technology standards that ensure product compatibility has been another important driver. Ask students to imagine how difficult it would be if those standards had been ignored and they had to continually worry about purchasing non-compatible products. A good example of this is the often incompatibility between Apple Computers and PCs.


Section 5.2, “Infrastructure Components” Explains seven major components that make up an IT infrastructure. These include: computer hardware platforms, operating systems platforms, enterprise software applications, networking and telecommunications technology, consultants and system integrators, data management and storage, and Internet platforms (see Figure 5-9, page 176). Each component is briefly explained in this section with a broader explanation provided in later parts of the text. What’s important here is that students understand there’s more to a firm’s IT infrastructure than merely hardware and software.

Because most of their experience is with PCs, students probably don’t realize that mainframe computers still exist. Even though IBM is the only manufacturer, mainframes have taken on a new life as massive data storage and processing needs have grown, thanks to the Internet. Segue that into a discussion about the tremendous data storage capacity students now have in small devices like iPods or flash memory drives. Students probably don’t realize that consulting and system integration services are an important and separate component of an organization’s IT infrastructure. There’s simply no way a large company can provide all of its own IT support in today’s complex world.

Section 5.3 “Contemporary Hardware Platform Trends” Consider spending most of your time on the newest hardware trends: netbooks, grid computing, cloud computing, autonomic computing, virtualization, and multicore processors. That’s where many businesses are headed and students are likely to bump into these trends when they enter the workforce. All of these technologies are designed to help businesses reduce their IT overhead costs while making their hardware more efficient. In particular, cloud computing is becoming a hot trend in the business world because it offers small and medium-size businesses access to computing capacity they otherwise would not be able to afford. Explain that many of these trends are possible because of the proliferation of networking/telecommunications platforms and the Internet platform.

Although the advantages of cloud computing may seem overwhelming because the technology allows users to access programs and data from virtually anywhere, for many large businesses it can create problems based on security risks and the transfer of IT responsibilities to third parties.

Interactive Session: People: Should You Use Your iPhone for Work?

Case Study Questions

1. What are the advantages and disadvantages of allowing employees to use their personal smartphones for work?

Advantages: Employees using their own smartphones would allow companies to enjoy all of the same benefits of a mobile workforce without spending company funds on the devices. Mobility experts can help a company leverage mobility more effectively.


Disadvantages: IT departments need to overcome several logistical hurdles before allowing employees to use their own smartphones, including security, inventory management, support, integrating mobile devices into pre-existing IT functions and systems, and measuring return on investment. When employees are not able to access critical data or encounter other problems with their mobile devices, they will need assistance from the information systems department.

2. What management, organization, and technology factors should be addressed when deciding whether to allow employees to use their personal smartphones for work?

Management: When employees make changes to their personal phone, such as switching cellular carriers, changing their phone number, or buying a new mobile device, companies will need to quickly and flexibly ensure that their employees are still able to remain productive.

Organization: A significant portion of corporate IT resources is dedicated to managing and maintaining a large number of devices within an organization. In the past, companies tried to limit business smartphone use to a single platform, making it easier to keep track of each mobile device and to roll out software upgrades or fixes. Firms need an efficient inventory management system that keeps track of which devices employees are using, where the device is located, whether it is being used, and what software it is equipped with. For unprepared companies, keeping track of who gets access to what data could be a nightmare.

Technology: The most popular employer-issued smartphone was Research in Motion’s BlackBerry, which is considered the most secure mobile platform available. The mobile digital landscape is now much more complicated, with a variety of devices and operating systems on the market that do not have well-developed tools for administration and security. To access company information, the company’s networks must be configured to receive connections from a device. Virtualization helps companies manage mobile devices easier.

3. Allowing employees to use their own smartphones for work will save the company money. Do you agree? Why or why not?

Allowing employees to use their own smartphones, won’t necessarily save money when you consider the TCO and the extra efforts required on the part of the IT staff, especially if the smartphone becomes a point of entry for malware. There are significant concerns with securing company information accessed with mobile devices.

By using virtualization, employees can access their entire desktop on their smartphones and mobile handhelds and thus are able to use the same programs on the road that they use in the office. Placing virtualization software on employees’


personal tablets is less expensive than outfitting them with company-purchased laptops.

One of the biggest worries that managers have about mobility is the difficulty of measuring their return on investment.

Interactive Session: Organizations: Green Data Centers: Good for Business?

Case Study Questions

1. What business and social problems does data center power consumption cause?

Excessive power consumption uses vast amount of electricity that must be generated through hydroelectric plants or coal-fired power plants. While hydroelectric generation plants are less stressful on the environment than coal-fired, nevertheless, they do pull resources from more useful purposes. Coal-fired power plants generate huge amounts of carbon dioxide into the atmosphere, which some scientists and politicians claim is a major cause of global warming. Social implications of increased power consumption point to global warming.

Businesses must pay to power their servers and then pay again to keep them cool and operational. Cooling a server requires roughly the same number of kilowatts of energy as running one.

2. What solutions are available for these problems? Are they management, organizational, or technology solutions? Explain your answer.

Some of the solutions to cut power consumption discussed in the case study are a good beginning.

Management: Employee telecommuting; users understanding and abiding by policies in which they turn PCs off when not in use.

Organizational: Building data centers that take advantage of hydroelectric power generation rather than coal-fired power plants; renewable energy projects; alternative energy; better management of computing resources.

Technology: Thin client computers, software that automatically turns computers off; more efficient chips. Perhaps the most environment-friendly solutions are those that control the hardware and software, thereby controlling the problem at its source. Virtualization holds great promise as a way to reduce power requirements by reducing the number of servers required to run applications.

3. What are the business benefits and costs of these solutions?


Even though it may cost a business up-front money to install hardware and software that reduces power requirements, it will save a business a lot of money in the long run by reducing the amount it pays for electricity to run the equipment and cool it at the same time. Businesses that reduce their power needs help the environment and can promote themselves as environment-friendly.

4. Should all firms move toward green computing? Why or why not?

All firms should make some effort to reduce their power requirements and promote green computing. From a business standpoint it makes sense to reduce costs, both short term and long term.

Section 5.4, “Contemporary Software Platform Trends” introduces students to emerging software platforms that they probably are not familiar with. Most of these software programs focus on Internet and Web applications. Open-source software is a good discussion point. Most students may think because it is developed by an open community of programmers that it’s not “safe or secure.” You should try to dispel this myth by reviewing the Mozilla Firefox Web browser. Because most students probably use Windows operating systems on their own computers, they may not be familiar with the Linux OS. If any of your students use Linux ask them to explain the difference between it and the Windows OS.

Most students use the Web and Internet daily so have them explore how new software technologies are making their experiences richer and more efficient. Have them research mashups and apps on the Web sites they use the most. If any students use MySpace, Facebook, or other social networking sites, ask them to demonstrate how they use these new technologies.

Perhaps the most important point of this section is to show how these technologies are designed to make computing more seamless between applications and between computing hardware platforms. Increasingly, software is taking on three major characteristics: it’s available over the Internet; components are interchangeable; and applications freely integrate with other applications. These characteristics are critical towards making computing easier, faster, and cheaper.

Outsourcing is always a hot topic because most people associate it with job losses in the U.S. Software outsourcing is more than just moving jobs to foreign countries. It also includes commercial software packages and software-as-a-service from online providers. These software sources provide jobs in many new ways for U.S.-based technology workers.

Section 5.5 “Management Issues.” This section helps students understand that there is more to managing IT infrastructure than just deciding which hardware and software components to purchase and use. Ask students how difficult it is for them to keep up with all the new options coming out. Then ask them to expand that to a typical mid-size company. Many students will work in business units that want to manage their own IT.


Discuss the pros and cons of centralized vs. decentralized forms of IT management. Porter’s Competitive Forces Model discussed in Chapter 3 is a solid foundation on which to make many IT infrastructure decisions because it’s grounded in the realities of running a business. Table 5-3 will help students understand all the hidden costs of technology ownership.

Review Questions

1. What is IT infrastructure and what are its components?

Define IT infrastructure from both a technology and a services perspective.

Technical perspective is defined as the shared technology resources that provide the platform for the firm’s specific information system applications. It consists of a set of physical devices and software applications that are required to operate the entire enterprise.

Service perspective is defined as providing the foundation for serving customers, working with vendors, and managing internal firm business processes. In this sense, IT infrastructure focuses on the services provided by all the hardware and software. IT infrastructure is a set of firm-wide services budgeted by management and comprising both human and technical capabilities.

List and describe the components of IT infrastructure that firms need to manage.

IT infrastructure includes hardware, software, and services: Computing platforms: Includes mainframes, midrange computers, desktop and

laptop computers, and mobile handheld devices—anything that connect employees, customers, and suppliers into a coherent digital environment.

Telecommunications services: Data, voice, and video connectivity between employees, customers, and suppliers.

Data management: Store, manage and analyze data. Application software: Includes enterprise resource planning, customer

relationship management, supply chain management, and knowledge management systems.

Physical facilities management: Develop and manage the physical installations for computing, telecommunications, and data management.

IT management:Planning and developing the infrastructure, coordinate IT services among business units, managing accounting for IT expenditures, and provide project management.

IT standards: Policies that determine which information technology will be used, when, and how.

IT education: Employee training in system use and management training for IT investments.

IT research and development: Research future IT projects and investments that


can help the firm differentiate itself from competitors.

2. What are the stages and technology drivers of IT infrastructure evolution?

List each of the eras in IT infrastructure evolution and describe its distinguishing characteristics.

Five stages of IT infrastructure evolution include: General-purpose mainframe and minicomputer era (1959 to present): Consists of

a mainframe performing centralized processing that could be networked to thousands of terminals and eventually some decentralized and departmental computing using networked minicomputers.

Personal computer era (1981 to present): Dominated by the widespread use of standalone desktop computers with office productivity tools.

Client/server era (1983 to present): Consists of desktop or laptop clients networked to more powerful server computers that handle most of the data management and processing.

Enterprise computing era (1992 to present): Defined by large numbers of PCs linked together into local area networks and the growing use of standards and software to link disparate networks and devices into an enterprise-wide network so that information can flow freely across the organization.

Cloud and mobile computing era (2000 to present): A model of computing where firms and individuals obtain computing power and software applications over the Internet, rather than purchasing their own hardware and software.

Define and describe the following: Web server, application server, multitiered client/server architecture.

Web server: Software that manages requests for Web pages on the computer where they are stored and that delivers the page to the user’s computer.

Application server: Software that handles all application operations between browser-based computers and a company’s back-end business applications or databases.

Multitiered client/server architecture: Client/server network in which the work of the entire network is balanced over several different levels of servers.

Describe Moore’s Law and the Law of Mass Digital Storage

Moore’s Law: The number of components on a chip with the smallest manufacturing costs per component (generally transistors) had doubled each year. Moore later reduced the rate of growth to a doubling every two years.

Law of Mass Digital Storage: The amount of digital information is roughly doubling every year. The cost of storing digital information is falling at an exponential rate of 100 percent a year.

Both of these concepts explain developments that have taken place in computer processing, memory chips, storage devices, telecommunications and networking


hardware and software, and software design that have exponentially increased computing power while exponentially reducing costs.

Describe how network economics, declining communications costs, and technology standards affect IT infrastructure.

Network economics: Metcalfe’s Law helps explain the mushrooming use of computers by showing that a network’s value to participants grows exponentially as the network takes on more members. As the number of members in a network grows linearly, the value of the entire system grows exponentially and theoretically continues to grow forever as members increase.

Declining communication costs: Rapid decline in communication costs and the exponential growth in the size of the Internet is a driving force that affects the IT infrastructure. As communication costs fall toward a very small number and approach zero, utilization of communication and computing facilities explodes.

Technology standards: Growing agreement in the technology industry to use computing and communication standards that define specifications that establish the compatibility of products and the ability to communicate in a network. Technology standards unleash powerful economies of scale and result in price declines as manufacturers focus on the products built to a single standard. Without economies of scale, computing of any sort would be far more expensive than is currently the case.

3. What are the current trends in computer hardware platforms?

Describe the evolving mobile platform, grid computing, and cloud computing.

Mobile platform: More and more business computing is moving from PCs and desktop machines to mobile devices like cell phones and smartphones. Data transmissions, Web surfing, email and instant messaging, digital content displays, and data exchanges with internal corporate systems are all available through a mobile digital platform. Netbooks, small low-cost lightweight subnotebooks that are optimized for wireless communication and Internet access, are included. The mobile platform is expanding to include tablet computers (iPad) and digital e-book readers.

Grid computing: Connects geographically remote computers into a single network to create a “virtual supercomputer” by combining the computational power of all computers on the grid. Because most computers use their central processing units only about 25 percent of the time, they can be used for other tasks.

Cloud computing: A model of computing where firms and individuals obtain computing capacity, data storage, and software applications over the Internet, rather than purchasing their own hardware and software. Data are stored on powerful servers in massive data centers, and can be accessed by anyone with an Internet connection and standard Web browser. Public clouds are maintained by external


service providers while private clouds are restrained inside a proprietary network or a data center.

Explain how businesses can benefit from autonomic computing, virtualization, green computing, and multicore processors.

Autonomic computing Benefits of autonomic computing include systems that automatically do the following: Configure themselves Optimize and tune themselves Heal themselves when broken Protect themselves from outside intruders and self-destruction Reduce maintenance costs Reduce downtime from system crashes

Virtualization Benefits of server virtualization include: Run more than one operating system at the same time on a single

machine. Increase server utilization rates to 70 percent or higher. Reduce hardware expenditures. Higher utilization rates translate into

fewer computers required to process the same amount of work. Mask server resources from server users. Reduce power expenditures. Run legacy applications on older versions of an operating system on the

same server as newer applications. Facilitates centralization of hardware administration.

Green computing

Businesses can minimize their impact on the environment by adopting better practices and technologies for designing, manufacturing, using, and disposing of computers, servers, and other computing devices. Reducing power consumption in data server centers is the leading practice in the green computing movement.

Multicore processorsBenefits of multi-core processors: Cost savings by reducing power requirements and hardware sprawl. Less costly to maintain as fewer systems need to be monitored. Performance and productivity benefits beyond the capabilities of today’s

single-core processors. Run applications more efficiently than single-core processors—giving

users the ability to keep working even while running the most processor intensive task in the background.

4. What are the current trends in software platforms?


Define and describe open source software and Linux and explain their business benefits.

Open-source software provides all computer users with free access to the program code so they can modify the code, fix errors in it, or to make improvements. Open-source software is not owned by any company or individual. A global network of programmers and users manage and modify the software. By definition, open-source software is not restricted to any specific operating system or hardware technology.

Linux is the most well-known open-source software. It’s a UNIX-like operating system that can be downloaded from the Internet, free of charge, or purchased for a small fee from companies that provide additional tools for the software. It is reliable, compactly designed, and capable of running on many different hardware platforms, including servers, handheld computers, and consumer electronics. Linux has become popular during the past few years as a robust low-cost alternative to UNIX and the Windows operating system.

Thousands of open-source programs are available from hundreds of Web sites. Businesses can choose from a range of open-source software including operating systems, office suites, Web browsers, and games. Open-source software allows businesses to reduce the total cost of ownership. It provides more robust software that’s often more secure than proprietary software.

Define Java and HTML5 and explain why they are important.

Java is used for building applications that run on the Web and HTML is used for creating Web pages. Java is an operating system that is processor-independent. Its object-oriented programming language has become the leading interactive programming environment for the Web. Java enables users to manipulate data on networked systems using Web browsers, reducing the need to write specialized software.

Hypertext markup language (HTML) is a page description language for specifying how text, graphics, video, and sound are placed on a Web page and for creating dynamic links to other Web pages and objects. HTML programs can be custom written, but they also can be created using the HTML authoring capabilities of Web browsers or of popular word processing, spreadsheet, data management, and presentation graphics software packages. HTML editors are more powerful HTML authoring tool programs for creating Web pages.

HTML5 makes it possible to embed images, audio, video, and other elements directly into a document without processor-intensive add-ons. It also makes it easier for Web pages to function across different display devices, including mobile devices as well as desktops, and it will support the storage of data offline for apps that run over the Web. Web pages will execute more quickly, and look like smartphone apps.


Define and describe Web services and the role played by XML.

Web services offer a standardized alternative for dealing with integration across various computer platforms. Web services are loosely coupled software components based on XML and open Web standards that are not product specific and can work with any application software and operating system. They can be used as components of Web-based applications linking the systems of two different organizations or to link disparate systems of a single company. Web services are not tied to a particular operating system or programming language. Different applications can use them to communicate with each other in a standard way without time-consuming custom coding.

Businesses use Web services to tie their Web sites with external Web sites creating an apparently seamless experience for users. The benefit derives from not having to re-create applications for each business partner or specific functions within a single company.

XML provides a standard format for data exchange, enabling Web services to pass data from one process to another. It performs presentation, communication, and storage of data whereas HTML simply describes how data is presented on Web pages. XML allows computers to manipulate and interpret data automatically and perform operations on data without human intervention.

Name and describe the three external sources for software.

Software packages and enterprise software: Prewritten commercially available set of software programs that eliminates the need for a firm to write its own software program for certain functions like payroll processing or order handling. Large-scale enterprise software systems provide a single, integrated, worldwide software system for firms at a cost much less than they would pay if they developed it themselves.

Cloud-based software services and tools: A business that delivers and manages applications and computer services from remote computer centers to multiple users using the Internet or a private network. Instead of buying and installing software programs, subscribing companies can rent the same functions from these services. Users pay for the use of this software either on a subscription or a per-transaction basis. The business must carefully assess the costs and benefits of the service, weighing all people, organizational, and technology issues. It must ensure it can integrate the software with its existing systems and deliver a level of service and performance that is acceptable for the business.

Outsourcing custom application development: An organization contracts its custom software development or maintenance of existing legacy programs to outside firms, frequently firms that operate offshore in low-wage areas of the world An outsourcer often has the technical and management skills to do the job better, faster,


and more efficiently. Even though it’s often cheaper to outsource the maintenance of an IT infrastructure and the development of new systems to external vendors, a business must weight the pros and cons carefully.

Define and describe software mashups and apps.

Mashups are new software applications and services based on combining different online software applications. Users create new software applications and services by combining different online software applications into a new application. The idea is to take different sources and produce a new work that is “greater than” the sum of its parts. Web mashups combine the capabilities of two or more online applications to create a kind of hybrid that provides more customer value than the original sources alone.

Apps are small pieces of software programs that are downloaded to computers or cell phones. Apps turn mobile handheld devices into general-purpose computing tools. They cost much less than full-fledged software programs and perform one particular task. They tie customers to a specific hardware platform like the Apple iPhone or Android operating system and increase switching costs. Business-related apps allow users to create and edit documents, connect to corporate systems, schedule and participate in meetings, track shipments, and dictate voice messages.

Businesses benefit most from these new tools and trends by not having to re-invent the wheel. Apps have already been developed by someone else and a business can use them for its own purposes. Mashups let a business combine previously developed Web applications into new ones with new purposes. They don’t have to re-invent the previous applications from scratch—merely use them in the new processes.

5. What are the challenges of managing IT infrastructure and management solutions?

Name and describe the management challenges posed by IT infrastructure.

Creating and maintaining a coherent IT infrastructure raises multiple challenges including:

Dealing with platform and infrastructure change: As firms grow, they can quickly outgrow their infrastructure. As firms shrink, they can get stuck with excessive infrastructure purchased in better times. Scalability refers to the ability of a computer, product, or system to expand to serve a larger number of users without breaking down. Businesses that bring mobile computing and cloud computing platforms into the mix need new policies and procedures for managing them.

Management and governance: Involves who will control and manage the firm’s IT infrastructure. Will the IT infrastructure be centrally controlled and managed or


divided among departments and divisions? How will infrastructure costs be allocated among business units?

Making wise infrastructure investments: IT infrastructure is a major capital investment for the firm. If too much is spent on infrastructure, it lies idle and constitutes a drag on firm financial performance. If too little is spent, important business services cannot be delivered and the firm’s competitors will outperform the underinvesting firm. The organization needs to determine if it will buy or rent all or portions of its IT infrastructure.

Coordinating infrastructure components: Firms create IT infrastructures by choosing combinations of vendors, people, and technology services and fitting them together so they function as a coherent whole.

Explain how using a competitive forces model and calculating the TCO of technology assets help firms make infrastructure investments

The competitive forces model can be used to determine how much to spend on IT infrastructure and where to make strategic infrastructure investments. What is the market demand for the organization’s services? What is the organization’s business strategy? What is the organization’s information technology (IT) strategy, infrastructure, and costs? Has the organization performed an IT assessment? What technology services do competitors offer to their customers, suppliers, and employees? How much does the organization’s competitors spend on IT infrastructure?

The total cost of owning technology resources includes not only the original cost of acquiring and installing hardware and software, but it also includes the ongoing administration costs for hardware and upgrades, maintenance, technical support, training, and even utility and real estate costs for running and housing the technology. The TCO model can be used to analyze these direct and indirect costs to help firms determine the actual cost of specific technology implementations.

Discussion Questions

1. Why is selecting computer hardware and software for the organization an important management decision? What management, organization, and technology issues should be considered when selecting computer hardware and software?

As computer hardware and software significantly impact an organization’s performance, the selection of IT assets is critical to the organization’s operations and ultimate success. Issues, include capacity planning and scalability, making decisions regarding the required computer processing and storage capabilities, computer and computer processing arrangements, kinds of software and software tools needed to


run the business, determining the criteria necessary to select the right software, the acquisition and management of the organizations hardware and software assets, and what new technologies might be available and beneficial to the firm.

2. Should organizations use software service providers for all their software needs? Why or why not? What management, organization, and technology factors should be considered when making this decision?

The answer to the first question is very dependent upon the organization and its processing, storage, and business needs. When evaluating software service providers, the organization should examine such factors as availability and reliability, technology, fees and how the fees are assessed, and available applications. Managers should compare the costs and capabilities of using software service providers to the organization’s costs and capabilities of operating and owning its own hardware and software assets. The organization should examine how using the service will impact organizational culture and how using an outside vendor addresses organizational and business needs. The technology factors include examining how well usage of the service fits with the firms IT infrastructure, as well as examining the appropriateness of using a software service provider to address the current problem.

3. What are the advantages and disadvantages of cloud computing?

Cloud computing is the idea of making computing resources available based on what a user really needs instead of what they might need.

The advantages include: Not dependent on physical location of either resources or users. Users access computing resources on their own not necessarily dependent on

IT staff. Based on standard network and Internet devices. Resources serve multiple users with computing virtually assigned according to

need. Resources are increased or decreased according to demand. Charges are based on the amount of resources actually used. Large investments in IT infrastructure are not necessarily needed or

investments are significantly reduced. Firms can shift additional processing requirements to cloud computing during

peak business periods. It allows a more flexible IT infrastructure.

The disadvantages include: Responsibility for data storage and control is transferred away from the

organization to a third party. Security risks and chances of data compromises are increased. Risk diminishing system reliability.


Increase dependency on a third party making everything work. Huge investments in proprietary systems supporting unique business

processes may be at risk.

Hands-On MIS Projects

Management Decision Problems

1. University of Pittsburgh Medical Center: Demand for additional servers and storage technology was growing by 20 percent each year. UPMC was setting up a separate server for every application; servers and other computers were running different operating systems; it was using technologies from many different vendors.

This case provides an excellent example of how a business can inadvertently create a quagmire with technology. UPMC should consider virtualization as a way to manage its server situation. Virtualization would allow the organization to consolidate many different applications on just a few servers. It could also allow the organization to run different operating systems on a single server. UPMC could consider outsourcing its IT infrastructure so it could concentrate on its core processes. Sometimes an organization must use third-party vendors who specialize in technology, rather than trying to do everything itself.

2. Quantas Airways: Needs to keep costs low while providing a high level of customer service. Management had to decide whether to replace its 30-year-old IT infrastructure with newer technology or outsource it. What factors should be considered in the outsourcing decision? List and describe points that should be addressed in an outsourcing service level agreement.

Quantas should use the competitive forces model to help determine how much it should spend on its IT infrastructure. Then it should determine its total cost of ownership of technology assets. It should assess the costs and benefits of software-as-a-service outsourcing, weighing all the management, organizational, and technology issues, including the ability to integrate with existing systems and deliver a level of service and performance that is acceptable for the business. If it chooses to outsource its technology infrastructure, the service level agreement should define the specific responsibilities of the service provider and the level of service expected by Quantas. The SLA specifies the nature and level of services provided, criteria for performance measurement, support options, provisions for security and disaster recovery, hardware and software ownership and upgrades, customer support, billing, and conditions for terminating the agreement.

Improving Decision Making: Using a Spreadsheet to Evaluate Hardware and Software Options

Software skills: Spreadsheet formulasBusiness skills: Technology pricing


This project requires students to use their Web research skills to obtain hardware and software pricing information, and then use spreadsheet software to calculate costs for various system configurations. Answers may vary, depending on when students accessed the vendors’ Web sites to obtain pricing information. The sample solution files provided are for purposes of illustration and may not reflect the most recent prices for desktop hardware and software products.

An example solution file can be found in the Microsoft Excel file named: MIS13ch05solutionfile.xls.

Improving Decision Making: Using Web Research to Budget for a Sales Conference

Software skills: Internet-based softwareBusiness skills: Researching transportation and lodging costs

The students will likely find hotels that interest them personally. The template that has been provided has a checklist for all of the hotel requirements to help keep them on track. You can show this in class or distribute it for your students to use. They should also write a brief report detailing why they chose the hotel they did and price should not be the only issue. Several airlines’ Web sites are available now and the students will choose various ones based on their knowledge of airlines. Some will go directly to the airline site and others will go to discounters. Ask them to rate the use of the Web site in their report as well.

An example template can be found in the Microsoft Excel file named: MIS13ch05 electronic business project template.xls.

Video Case Questions

You will find video cases illustrating some of the concepts in this chapter on the Laudon Web site at www.pearsonhighered.com/laudon along with questions to help you analyze the cases.

Collaboration and Teamwork: Identifying Management Decisions and Systems

Form a group with three or four of your classmates. Choose server or mobile operating systems to evaluate. You might research and compare the capabilities and costs of Linux versus the most recent version of the Windows operating system or UNIX. Alternatively, you could compare the capabilities of the Android mobile operating system with the most recent version of the iPhone operating system (IPhone OS). If possible, use Google Sites to post links to Web pages, team


http://www.pearsonhighered.com/laudon

communication announcements, and work assignments; to brainstorm; and to work collaboratively on project documents. Try to use Google Docs to develop a presentation of your findings for the class.

Answers for this project will vary as students will select different sources from which to gather the information. Information is readily available on the Web to help students complete this project.

Elements students should consider in their evaluation include:

Is the software restricted to one type of hardware or computing device? If so, what are the ramifications of that?

What are the costs for the system? Even if the software is free, are there associated costs to consider?

How well does the software connect with other pieces of software or user apps? How well does the system allow users to migrate or sync data and apps between

devices? How reliable and scalable is the system? How much drain and strain does the system place on hardware resources? Where are the programs and data stored—on in-house servers, cloud computing

services, individual computing devices? What is the impact of that on users and IT staff?

Case Study: Should Businesses Move to the Cloud?

1. What business benefits do cloud computing services provide? What problems do they solve?

Eliminates need for large up-front capital investments in systems. Eliminates lengthy implementations on corporate computers. Low cost subscriptions; no expensive licensing and maintenance fees. No hardware for subscribers to purchase, scale, and maintain. No operating systems, database servers or applications servers to install. No consultants and staff. Accessible via standard Web browser with behind-the-scene software updates. Better scalability, eliminate cost and complexity of managing multiple layers

of hardware and software.

2. What are the disadvantages of cloud computing?

The disadvantages include: Responsibility for data storage and control is transferred away from the

organization to a third party. Security risks and chances of data compromises are increased. Risk diminishing system reliability.


Increase dependency on a third party making everything work. Huge investments in proprietary systems supporting unique business

processes may be at risk. The platform may not be attractive to larger companies for their application

needs.

3. How do the concepts of capacity planning, scalability, and TCO apply to this case? Apply these concepts both to Amazon and to subscribers of its services.

Businesses should assess the costs and benefits of the service, weighing all people, organization, and technology issues. Does the software-as-a-service applications integrate well with the existing systems? Does it deliver a level of service and performance that’s acceptable for the business? Does the SaaS fit with the business’s overall competitive strategy and allow the company to focus on core business issues instead of technology challenges?

Capacity planning predicts when a computer hardware system becomes saturated and how that affects performance measures such as minimum response time for processing business transactions. Business managers need to determine acceptable levels of computer response time and availability for the firm’s mission-critical systems to maintain the level of business performance they expect.

Scalability requires businesses to determine how well a computer, product, or system can expand to serve a large number of users without breaking down.

Many large firms are saddled with redundant, incompatible hardware and software because of poor planning. These firms could reduce their TCO through greater centralization and standardization of their hardware and software resources and also by using cloud computing.

4. What kinds of businesses are most likely to benefit from using cloud computing? Why?

Small to medium-size businesses are probably the most likely ones to switch to cloud computing because of cost factors and the lack of having in-house resources to provide the same level of computing capacity. Businesses that are trying to increase the sophistication of their computing capabilities could also benefit from switching to cloud computing as long as the two are compatible. Also companies that have small sales and marketing teams can benefit from the software-as-a-service business model.

As the case study points out, companies like Zynga are good candidates for cloud computing. The company needs to scale up when it releases a new game but it can't determine exactly how much capacity it needs to make available. Rather than purchase hardware that it may not need, or not purchase enough, it relies on cloud providers to give it just the right amount of capacity.

