Chapter 15 Open Source and Cloud PDF

Software in Flux: Open Source, Cloud, Virtualized, and App-Driven Shifts Dr. Bharti Motwani 1  Section 15.1: Learning Objectives 1. Understand how low marginal costs, network effects, and switching costs have combined to help create a huge...

Software in Flux: Open Source, Cloud, Virtualized, and App-Driven Shifts Dr. Bharti Motwani 1  Section 15.1: Learning Objectives 1. Understand how low marginal costs, network effects, and switching costs have combined to help create a huge and important industry. 2. Recognize that the software industry is undergoing significant and broadly impactful change brought about by several increasingly adopted technologies, including open source software, cloud computing, and software as a service.  Introduction Marginal costs: The costs associated with each additional unit produced. For software products , marginal cost is Zero. Software Business is very attractive. Microsoft Bill Gates and Oracle Larry ellson are among the wealthiest people in the world. Open source software (OSS): Software that is free and where anyone can look at and potentially modify the code. Giant’s Shudder: “How can we compete with free”  Introduction Cloud computing: Replacing computing with services provided over the Internet, on other’s hardware Software as a service (SaaS): A form of cloud computing where a firm subscribes to a third-party software and receives a service that is delivered online. No burden of buying, managing and maintaining. Virtualization: Technology that can make a single computer behave like many separate computers. Helps consolidate computing resources and creates additional savings and efficiencies. Example: VMWare  Section 15.2: Learning Objectives 1. Define open source software and understand how it differs from conventional offerings. 2. Provide examples of open source software and how firms might leverage this technology.  Open Source Linux: An open source software operating system. Source code for OSS products is openly shared. Powers cell phones to stock exchanges, set-up boxes to super computers. Can be changed and redistributed by anyone. Contrast to practice of conventional software firms who Treat their intellectual property as closely guarded secrets. Almost never provide the source code for their commercial software products. Seen by some firms as a threat that undermines their economic model. Former Microsoft CEO called Linux as Cancer Linux makes 92% of servers in AWS. 40% Linux in Azure Cloud  Turn on the LAMP—It’s Free! LAMP: Acronym for Linux, Apache Web server software, MySQL database, and any of the several programming languages that start with P (e.g., Perl/Python/PHP). LAMP is powering many of the sites today from Facebook to YouTube  Section 15.3: Learning Objectives 1. Know the primary reasons firms choose to use OSS. 2. Understand how OSS can beneficially impact industry and government.  Why Open Source? Cost—Free alternatives to costly commercial code can be a tremendous motivator. Banking giant Barclays is help to reduce cost by 90% by switching to OSS. Reliability—Open source community try to improve quality. The more people who look at a program’s code, the greater the likelihood that an error will be caught and corrected. Quality of OSS outperforms commercial competitors. Security—by allowing “many eyes” to examine the code, the security vulnerabilities come to light more quickly and can be addressed with greater speed and reliability. security-focused: Technology products that contain particularly strong security features. Checking file size and others like code has not been copied  Why Open Source? (cont’d) Scalability: Ability to either handle increasing workloads or to be easily expanded to manage workload increases. Allows a firm to grow from startup to blue chip without having to significantly rewrite their code. Agility and Time to Market—Vendors able to skip whole segments of the software development process, allowing new products to reach the market faster than if the entire software system had to be developed from scratch.  When the Open Source Army Doesn’t Show Up: Lessons from Heartbleed Many open source projects are very well maintained with tightly coordinated contribution armies overseen by well-funded, paid professionals. Red Hat helped to improve Linux ; Google efforts for Python In spring 2014, some open source products which had been woefully neglected were exposed to the Heartbleed bug. Heartbleed was an error in the OpenSSL security toolkit, a product used by some two-thirds of Internet websites, and underpinning security related when sending secure information over the Internet. A routine coding error opened a hole that could potentially have been used to allow hackers to gather passwords, encryption keys, and other sensitive information, triggering “the largest security breach in the history of the human race.”  When the Open Source Army Doesn’t Show Up: Lessons from Heartbleed (cont’d) The Linux Foundation developed a multimillion-dollar project called the Core Infrastructure Initiative, designed “to fund open source projects that are in the critical path for core computing functions.” Heartbleed provides a cautionary tale to managers: Just because a tool is used by many doesn’t mean one shouldn’t Source: Mimafoto/Shutterstock.com audit its software products to understand the strength of support and potential risks associated with use.  Section 15.4: Learning Objectives 1. Recognize that just about every type of commercial product has an open source equivalent. 2. Be able to list commercial products and their open source competitors.  Examples of Open Source Software WordPress—software for running a blog or website, powering about a third of websites Firefox—a Web browser that competes with Chrome, Safari, and Internet Explorer LibreOffice—a competitor to Microsoft Office Gimp—a graphic tool with features found in Photoshop Magento—e-commerce software TensorFlow—open source machine learning software  Examples of Open Source Software (cont’d) Alfresco—collaboration software that competes with Microsoft Sharepoint and EMC’s Documentum Marketcetera—an enterprise trading platform for hedge fund managers that competes with FlexTrade and Portware Zimbra—open source e-mail software that competes with Outlook server MySQL, Ingres, and PostgreSQL—open source relational database software packages that go head-to-head with commercial products from Oracle, Microsoft, SAP, and IBM MongoDB, HBase, and Cassandra—nonrelational distributed databases used to power massive file systems (used to power key features on Facebook, Twitter, LinkedIn, and Amazon)  Examples of Open Source Software (cont’d, 2) SugarCRM—customer relationship management software that competes with Salesforce.com and Siebel Docker—tools for “containerization,” an evolution beyond virtualization Asterisk—an open source implementation for running a PBX corporate telephony system that competes with offerings from Nortel and Cisco, among others Git—version control software, critical to managing most commercial software products Free BSD and Sun’s OpenSolaris—open source versions of the Unix operating system  Section 15.5: Learning Objectives 1. Understand the disproportional impact OSS has on the IT market. 2. Understand how vendors make money on open source.  Why Give It Away? The Business of Open Source Open source is a $60 billion industry, but it has disproportionate impact on trillion-dollar IT market Lowers the cost of computing and makes computing options accessible to smaller firms. Reliable, secure, and lowers computing costs for all users. Diverts funds that can be used for other competitive initiatives and encouraging innovation. Open source firms that are valued in excess of $1 billion: Hortonworks Cloudera MapR MongoDB Docker Red Hat, first open source firm has market cap of $30 billion  Why Give it Away? The Business of Open Source (cont’d) Vendors make money on OSS by selling support and consulting services. Red Hat brings $3 billion/year from customers subscribing to software services. Oracle provides linux for free: Firm makes more from services than from selling hardware and software Industry’s evolution (standards competition): Pre-Linux days: Almost every major hardware manufacturer made its own incompatible version of the Unix operating system. As such, they had difficulty attracting third-party vendors to write application software. Now all major hardware firms run Linux, resulting in a large, unified market attracting software developers.  Linux on the Desktop? Linux is common on mobiles, consumer electronics, and on enterprise solutions, but not on desktop computers: It is not easy to install. Its complexity can raise the total cost of ownership because no specific gains from free software Total cost of ownership (TCO): All of the costs associated with the design, development, testing, implementation, documentation, training, and maintenance of a software system. The small number of desktop users also dissuades third- party firms from porting popular desktop applications over to Linux.  Legal Risks and Open Source Software: A Hidden and Complex Challenge Open source software isn’t without its risks. Certain products are difficult to install and maintain. Adopters without support contracts may have to rely on an uncertain community of volunteers to support their problems and provide innovative upgrades. Another major concern is legal exposure. Firms adopting OSS may be at risk if they distribute code and aren’t aware of the licensing implications. Some commercial software firms have pressed legal action against the users of open source products when there is a perceived violation of software patents or other unauthorized use of their proprietary code. Also complicating issues are the varying open source license agreements (these go by various names, such as GPL and the Apache License), each with slightly different legal provisions— many of which have evolved over time. 23  Section 15.6: Learning Objectives 1. Understand the concept of cloud computing. 2. Identify the major categories of cloud computing, including SaaS, PaaS, and IaaS.  Defining Cloud Computing Two categories of cloud computing: Software as a service (SaaS)—Firm subscribes to a third-party software-replacing service that is delivered online. Utility computing: Firm develops its own software and then runs it over the Internet on a service provider’s computers. It includes: Platform as a service (PaaS)—Delivers tools including programming languages, databases , OS, product testing and deployment software so an organization can develop, test, and deploy software in a cloud. Infrastructure as a service (IaaS)—offers a more bare-bones set of services that are an alternative to buying its own physical hardware.  Defining Cloud Computing (cont’d) Some are developing their own private clouds (Virtualization)—pools of computing resources that reside inside an organization and that can be served up for specific tasks as need arrives. Evolution of cloud computing has huge implications across the industry: Financial future of hardware and software firms. Cost structure and innovativeness of adopting organizations. Skill sets likely to be most valued by employers.  Section 15.7: Learning Objectives 1. Know how firms using SaaS products can dramatically lower several costs associated with their information systems. 2. Know how SaaS vendors earn their money. 3. Be able to list the benefits to users that accrue from using SaaS. 4. Be able to list the benefits to vendors from deploying SaaS.  Software in the Cloud: Why Buy When You Can Rent? Firms using SaaS products can dramatically lower several costs associated with care like software licenses, IT staff, server hardware , system maintenance. SaaS- An assault on traditional software firms Most SaaS firms earn money via usage-based pricing model similar to monthly subscription. Other SaaS firms: Offer free services that are supported by advertising. Promote the sale of upgraded or premium versions for additional fees. Compete directly with the biggest names in software NetSuite ERP suite bought by Oracle Anti-software message is Workday launched by Peoplesoft for managing HR evident from the logo HubSpot provides marketing software Splunk SaaS based Analytical techniques ServiceNow manages firm’s IT infrastructure.  Benefits of SaaS Lower costs (S/W, H/W, IT staff). Faster deployment times Variable operating expense (because they never buy). Mitigate financial risk (reduce payment during slow season) Scalable systems (Meeting demand spikes). Higher quality and service levels(Huge customer case pushes). Remote access and availability.  Benefits of SaaS (Contd..) SaaS provider develops, tests and supports single platform Unlike SAP that provide different versions for Windows, Linux etc. Tighter feedback loop to understand why products fail. Ability to instantly deploy bug fixes and product enhancements. Lower distribution costs (30% of price of traditional s/w is for distribution cost – CD’s , Boxes, shipping to retail outlets). Less software piracy (impossible to make illegal copy of SaaS products)  Section 15.8: Learning Objective 1. Be able to list and appreciate the risks associated with SaaS.  SaaS: Not Without Risks Dependence on a single vendor. Concern about long-term viability of partner firms. Users may be forced to migrate to new versions— possibly incurring unforeseen training costs and shifts in procedures (Traditional software do not change). Reliance on a network connection, which may be: Slower Less stable Less secure  SaaS: Not Without Risks (cont’d) Firm allowing employees to view data from remote locations is potentially vulnerable to abuse and infiltration. Contractual or Legal issues from another country Limited configuration, customization, and system integration options compared to packaged software or alternatives developed in-house. Costs might be lower in homegrown solutions Staff could introduce the new tools in homegrown solutions User interface of Web-based software is 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.  Section 15.9: Learning Objectives 1. Distinguish between SaaS and hardware clouds. 2. Provide examples of firms and uses of hardware clouds. 3. Understand the concepts of cloud computing, cloudbursting, and black swan events. 4. Understand the challenges and economics involved in shifting computing hardware to the cloud.  Understanding Cloud Computing Models: PaaS, IaaS Sometimes a firm develops its own custom software but wants to pay someone else to run it for them—that’s where cloud offerings come in. Hardware and software exists “in the cloud” Only pay for amount of processing, storage, and telecommunications (Gartner - 80% of spend is on data maintenance). Cloud vendors typically host your software on their systems. Examples of hardware cloud services: Salesforce.com offers Force.com. Includes several cloud-supporting tools to write applications specifically tailored for Web-based delivery. Google’s App Engine offers developers several tools— including a database product called Bigtable. Microsoft offers Windows Azure.  Understanding Cloud Computing Models: PaaS, IaaS, and Motivations and Risks (cont’d) Platform as a service (PaaS): Cloud providers offer services for customers to build their own applications on the provider’s infrastructure. Provide one complete platform (operating system, database, tools, and hosting hardware) for clients to build their own applications. Infrastructure as a service (IaaS): Cloud providers offer services that include running the remote hardware, storage, and networking. Client firms can choose the software used. Good alternative for firms that want even more control. Offered by a wide variety of firms including Amazon, CSC, Rackspace, HP, IBM, and VMware. Figure 15.4: Estimated Monthly Costs to Run a Website with 50 Million Monthly Page Views  Clouds in Action: A Snapshot of Diverse Efforts Cloudbursting: Use of cloud computing to provide excess capacity during periods of spiking demand. It is a scalability solution that is provided as an overflow service, kicking in as needed (seamlessly shift part of the workload to IBM’s cloud). Black swans: Events that cannot be Source: dennizn/Shutterstock.com predicted but can cause an impact. Scalable computing resources can help a firm deal with spiking impact from Black swan events (ultra-rare and high impact events).  Challenges Remain Installing a complex set of systems on someone else’s hardware can be a brutal challenge, and in many cases is just about impossible. Firms considering cloud computing need to do a thorough financial analysis. System maintenance costs often include the need to clean up old files or put them on tape. Costs can add up if unlimited data is stored in the cloud. Firms should enter the cloud cautiously, particularly where mission-critical systems are concerned. If a cloud vendor fails, you and all your eggs are in one basket, then you’re down, too. Cloud firms argue that their expertise translates into less downtime and failure than corporate data centres, but no method is without risks. 40  Section 15.10: Learning Objectives 1. Understand how cloud computing’s impact across industries is proving to be broad and significant. 2. Know the effects of cloud computing on high-end server sales and the influence on the trend shifting from hardware sales to service. 3. Know the effects of cloud computing on innovation and the influence on the changes in the desired skills mix and job outlook for IS workers. 4. Know that by lowering the cost to access powerful systems and software, cloud computing can decrease barriers to entry. 5. Understand the importance, size, and metrics of server farms.  Clouds and Tech Industry Impact In past, firms seeking to increase computing capacity invested heavily in expensive high-margin server hardware. Now, IBM saw server sales fall from 20 to 30%. Shifting to cloud computing alters the margin structure for many in the computing industry. Server farm: A massive network of computer servers running software to coordinate their collective use. Provide the infrastructure backbone to SaaS, hardware cloud efforts, and many large-scale Internet services. Cloud computing can accelerate innovation. Changes the desired skills mix and job outlook for IS workers. Enables organizations to spend less on hardware infrastructure and reinvest in strategic efforts and innovation. Firms need to think about the strategic advantages that can be created.  So What’s It Take to Run This Thing? The area surrounding the Columbian River in the Pacific Northwest is tailor-made for creating the kinds of massive data installations needed for cloud computing: Cheap land Low-cost power Ultrafast fiber-optic connections Mild climates. Google, Sun, Microsoft, IBM, and HP have all developed rapid-deployment server farm modules.  Figure 15.5: Server Farms This Microsoft Data Center in Middenmeer, Holland, gives you a sense of the size of server farms used to power the cloud. The facility is over 27 acres in size and is estimated to have cost over €2 billion.  Section 15.11: Learning Objectives 1. Know what virtualization software is and its impact on cloud computing. 2. Be able to list the benefits to a firm from using virtualization.  Virtualization: S/W that Makes One Computer Act Like Many Virtualization: A type of software that allows a single computer or cluster of connected computers to function as if it were several different computers. Can be used to reduce an organization’s hardware needs Create A a firm’s TYPEownOF private SOFTWAREcloud THAT ALLOWS of scalable assets A SINGLE Cut energyCOMPUTER OR lower consumption and CLUSTER carbonOF CONNECTED footprint. COMPUTERS TO FUNCTION AS IF IT WERE SEVERAL Containers: A typeDIFFERENT of virtualization that allows for shared COMPUTERS operating systems for more resource savings and faster execution. Virtual desktops: Running an instance of a PC’s software on another machine and delivering the image of what is executing to the remote device. Allow firms to scale, back up, secure, and upgrade systems far more easily than if they had to maintain each individual PC. VMware owned by Dell is current leader in virtualization software.  Section 15.12: Learning Objective 1. Understand the benefits and challenges of app stores, and how these products are also changing the way we conceive software and the opportunities for firms to offer value-added services to consumers.  Apps and App Stores: Further Disrupting the Software Industry on Smartphones, Tablets, and Beyond 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. Huge firms have leveraged smartphone apps as their only, or primary interface with consumers. Critics say apps force consumers into smartphone walled gardens and raise consumer switching costs.  Section 15.13: Learning Objectives 1. Know the options managers have when determining how to satisfy the software needs of their companies. 2. Know the factors that must be considered when making the make, buy, or rent decision.  Make, Buy, or Rent - Key Variables to Consider: To satisfy the software needs of the companies, manager need to consider these variables: Competitive Advantage—Do we rely on unique processes, procedures, or technologies that create vital, differentiating competitive advantage? Security—Are there unacceptable risks associated with using the packaged software, OSS, cloud solution, or an outsourcing vendor? Are we convinced that the prospective solution is sufficiently secure and reliable? Can we trust the prospective vendor with our code, our data, our procedures and our way of doing business? Are there noncompete provisions for vendor staff that may be privy to our secrets? For off-site work, are there sufficient policies in place for on-site auditing?  Make, Buy, or Rent - Key Variables to Consider Legal and Compliance—Is our firm prohibited outright from using technologies? Are there specific legal and compliance requirements related to deploying our products or services? Skill, Expertise, and Available Labor—Can we build it? Cost—Is this a cost-effective choice for our firm? Time—Do we have time to build, test, and deploy system? Vendor Issues—Is the vendor reputable and in a sound financial position? Can the vendor guarantee the service levels and reliability we need? What provisions are in place in case the vendor fails or is acquired? Is the vendor certified via the Carnegie Mellon Software Institute or other standards organizations in a way that conveys quality, trust, and reliability? 53