Understanding Management Information System - Essay Example

RUNNING HEAD: CASE STUDY: AMAZON’S NEW STORE Case Study: Amazon’s New Store Name: Management Information System Institution: Date: Word Count: 1499 words (Including references) 1. Amazon provides utility and cloud computing through Amazon Web Services (AWS). Through Simple Storage Service (S3) and Elastic Compute Cloud (EC2), Amazon essentially utilizes its excess computing capacity to provide on-demand computing services to its clients-similar to the provision of other utilities such as water, gas and electricity (Laudon and Laudon 2011, Rappa 2004). Through provision of these services, Amazon is able to utilize its excess capacity in computing, to generate additional revenue. This has enabled Amazon to make the most of what is considered one of the most robust computing infrastructures globally by offering its excess capacity to many small businesses on a pay as you go basis (Laudon and Laudon 2011). For its subscribers, Amazon provides the advantage of simple and easy-to use, cost effective and flexible computing services and low TCO. This provides economies of scale as it implies little or no start up costs, no minimal fees or overhead expenditures in software and hardware purchase, upgrades, training and maintenance and excess capacity. AWS also absorbs the risks associated with investing in hardware such as underinvestment or overinvestment. EC2 also provides both small and large businesses with an opportunity to conduct large scale operations such as testing new software without incurring the costs of upgrading their systems and hardware. (Laudon and Laudon 2011). EC2 is also estimated to be ten times cheaper than similar services provided. Amazon’s flexible pricing model also provides a source of competitive advantage over providers of similar services. However, AWS’s relative inexperience in hosted storage and dodgy track record in handling technological crises, such as shown by various outages in 2007 and 2008, may deter large companies from subscribing to its utility computing services. And while its competitive pricing model may attract small businesses, medium and large businesses may be reluctant to subscribe to a service that does not offer a Service Level Agreement (SLA) which guarantees a contracted delivery time of the service (uptime) (Laudon and Laudon 2011). Customers may opt for larger companies which guarantee no downtime. These also pose disadvantages to many small businesses as they are left vulnerable to incidents such as the outages without the safety of SLAs. Concerns have also been raised over AWS’s capacity to handle increases in demand which would deflect business to larger and more established competitors as well as threatening its other businesses such as its retail line. S3 and EC2 can provide benefits to both small and large businesses. Micro-businesses and web start ups can benefit from the low TCO. These include businesses that archive data such as e-mail, photos or audio-visual material (such as SmugMug and Webmail), web-hosting services or search engines (such as Powerset) (Laudon and Laudon 2011). Large businesses such as Microsoft and Linden Lab can also use S3 and EC2 as auxiliary units to accommodate increased capacity during software updates to reduce downloading times for customers without increasing costs due to hardware upgrades and keeping TCO low. 2. The concept of capacity planning and scalability applies to both Amazon and subscribers of its services. Capacity planning implies that both Amazon and its subscribers must accurately predict when their computer hardware systems are saturated and subsequently plan to ensure adequate computing capacity exists for its current and future needs. Subscribers could use AWS in their capacity planning while AWS must ensure it has enough computing resources to accommodate its subscriber’s changing demands while making sure it does not threaten the operation of Amazon retail services. Overestimation would lead to wastage of AWS’s assets while underestimation may lead to rejection of the business by clients. Interrelated to capacity planning is scalability. Amazon must uphold its claim to provide scalable services that can accommodate unexpected spikes in subscriber’s usage and growth in subscriber base. Scalability is dependent on proper and effective capacity planning. If Amazon does not provide reliable scalability, it risks losing business to larger and more established companies which have such capacity. The concept of Total Cost of Ownership (TCO) applies to both Amazon and subscribers of AWS’s services. Amazon must bear the TCO of its services and systems while minimizing the TCO of its subscribers. Subscribers to S3 and EC2 should benefit from the low TCO burden while Amazon should ensure profitability despite bearing the majority of the TCO (Laudon and Laudon 2011). 3. One of the other companies which provide a similar utility computing service is Google through its Google App Engine established in 2008. Google App is designed to help subscribers build and host web applications on the same systems that power Google applications (Google 2011). Like Amazon, it has a similar pay as you go cost structure and promises an identical 99.99% uptime guarantee. Google App targets website developers, mobile content sites, marketers and other consumer related groups who need innovative applications for advertising and marketing. A major distinction between Google App and Amazon is that Google offers a Platform-as-a-service package. While Google allows highly scalable applications to be built on widely available and open sourced languages such as Python, Java and Django, Amazon gives developers autonomy to use their preferred operating system and software. Google also imposes a limit on its web services as opposed to Amazon’s unlimited capacity offerings (Google 2011). Another larger and more established traditional utility computing company is Hewlett Packard (HP). Through HP Flexible Computing Services, it offers a variety of both public and private utility computing services such as Infrastructure Provisioning Service (IPS) which offer access to IT infrastructure, including server, storage, network, operating system, and associated HP management tools (Gilbert 2005). Like Amazon, it has a flexible cost structure of 55 cents to $ 1.50 per hour of CPU usage based on configuration for IPS. HP also offers Application Provision Service which offers computer aided engineering (CAE) for structural, crash, and fluid analysis. HP targets financial services and public utility companies in oil, electricity and gas that require workload and grid-management software (Gilbert 2005). A major advantage of HP Flexible Computing over Amazon is that it promises dedicated server time and uptime with a SLA. I would recommend Amazon over Google App Engine and HP if I were launching a web startup business. This is due to considerations of overhead costs and flexibility advantages over Google and HP as Amazon has a more competitive cost structure and is more user-friendly allowing the business to use its preferred operating system. Amazon also offers unlimited storage allowing the business to cope with cyclical demand. It also has cost advantages over HP. However, if working for a larger company, I would recommend HP based on the company’s superior track record in IT management, the uptime guarantee and the safety and reliability of its systems as HP can provide both public and private utility computing. 4. A good idea for a web-based start-up business would be an apartment-availability, locating and booking website named tenants.com or rent.com. The website would provide a service that allows subscribers to establish their own accounts, view and book currently and future available rental apartments in their local areas. For a fee, potential tenants could reduce the amount of time wasted physically locating a suitable apartment or making endless calls to agents. Instead, subscribers could search for or request notifications for apartments specifying location, price range and other details and then pay for or book them in advance. Agents and landlords could also use the site to advertise current vacant apartments and the future availability of currently occupied apartments such as whether their current occupants will renew their lease. The web-site could also include pictures of apartments or a graphic virtual tour and allow subscribers to bid for prime properties. Additional revenue could be generated by offering advertising space for related businesses such as groceries in the area, banks providing mortgages or loans and furniture stores. The business would use S3 to store and back-up the database on apartments. It is projected that the business would send and transfer up to 1 terabyte of data using S3 which includes subscriber correspondence, photos and other rich text. This would cost 14 cents per gigabyte for storage and 12 cents per gigabyte for transfers. The business would sign up for S3 and create a storage bucket. The business would also use up to about 200 hours of EC2 per week running on windows at a cost of 62 cents an hour and 50 cents an hour for Linux. References Amazon Web Services (AWS) (2011). Amazon Simple Storage Service (S3). Retrieved on September 21, 2011 from < http://aws.amazon.com/s3/#pricing> AWS a (2011). Amazon Elastic Cloud Compute (EC2). Retrieved on September 23, 2011 from < http://aws.amazon.com/ec2/> Google (2011). Google App Engine. Retrieved on September 22, 2011 from < http://www.google.com/enterprise/cloud/appengine/> Gilbert, A. (2005). HP introduces new utility-computing service. CNET News, November 29, 2005. Retrieved on September 22, 2011 from < http://news.cnet.com/HP-introduces-new- utility-computing-service/2100-1007_3-5975660.html> Laudon, K. & Laudon, J. (2011). Management Information Systems. London: Prentice. Rappa, M.A. (2004). The utility business model and the future of computing services. IBM Systems Journal, 43 (1): 32-42. Read More