Chapter 15 Notes Flashcards
How have low marginal costs, network effects, and switching costs combined to help create a huge and important industry?
- zero marginal costs = attractive and successful
- network effects = as more people use it, the more positive feedback, attracts more users, then create market dominance and customer retention
- switching costs = ability to retain its customers even while raising prices due to data stored, learning curve, inbility to replicate customizations and setups
How have several increasingly adopted technologies, like open source software, cloud computing, and software as a service, brought about significant and broadly impactful change for the software industry?
Open source software, cloud computing, and software as a service have allowed smaller firms access to computing power that only leading tech firms had. This means startup costs are less and that large firms can now reduce their costs. This also makes it easier for companies to outsource their software.
How does Microsoft benefit from its software?
Windows (OS) and Office alone generate $1.5B a month.
What are marginal costs and how does it relate to software?
- the costs associated with each additional unit produced
- software products have zero marginal costs, a reason why the business is successful and attractive
Who did the business of software place at the top as among the wealthiest people?
Microsoft’s Bill Gates and Oracle’s Larry Ellison
How do network effects and switching costs help a software firm?
It offers a degree of customer preference and lock-in that can establish a firm as a standard and in many cases, create a winner-take-all market.
What is open source software and why is it a problem?
- Free software where anyone can look and potentially modify the code
- challenges assets and advantages of market leaders
“how can we compete with free? how can we make money and fuel innovation on free?”
What is cloud computing?
Replacing computing (hardware or software) with services provided over the internet, on other’s hardware
What is software as a service (SaaS)?
a form of cloud computing where a firm subscribes to a third-party software and receives a service delivered online. no burden of owning (buying, managing and maintaining) or installing the program. users access a vendor’s software over the internet.
delivering end-user software to a firm over the Internet instead of on the organization’s own computing resources.
what is virtualization?
technology that can make a single computer behave like many separate computers. helps consolidate computing resources and creates additional savings and efficiencies (Ex. VMWare)
what firms are pioneering these efforts?
Not tech giants like HP, Microsoft, or Sun; contributors to the most widely used open source efforts or providers of widely used cloud infrastructure are other major players: Amazon (retailer), Netflix (entertainment company), Google (advertiser), LinkedIn (resume site), and Facebook (social network).
what poses a threat to packaged software?
the introduction of app stores challenges packaged software, which usually requires a one-time buy. app stores provide instant access to more than just phones but smart tech as well (TV’s, speakers, etc.). this reduces distribution costs, offers a new revenur stream through in-app purchases/subscriptions, and enable the rise of new business models–companies like Uber, Spotify, and social media networks leverage the app’s accessibility and scalability.
what trends are impacting the software industry?
open source software (OSS), cloud computing, software as a service (Saas) and virtualization create challenges and opportunities across tech markets.
smaller firms have access to the computing power that only giants had access to in the past. startups can scale quickly and start with less investment capital. existing firms can reduce costs.
who created Linux and how was it created?
Linus Torvalds, during a marathon 6-month coding session. He gave the open source software operating system away instead of selling it.
what is Linux?
an open source software that powers everything from cell phones to stock exchanges to supercomputers and supports most Web servers (inlcuding those at Google, Amazon, and Facebook).
Powers servers in AWS, Azure Coud, and TiVO, and is even on mars, powering spacecrafts and rovers.
what does it mean when OSS is described as free?
not only is it mostly free to download over the Internet, but the source code for OSS products is openly shared. anyone can look at, modify, and redistribute the code.
who saw OSS as a problem and why?
OSS was freely distributing code, while software firms treat their intellectual property as secrets. Software industry executives were enraged by the threat undermining their economic model.
SAP former president called it socialism. Microsoft CEO called Linux a “cancer.”
how are other companies (those not finding OSS as a threat) responding to the open source movement?
Most people who work on efforts like Linux are now paid to do so. Nearly every major hardware firm and tech giants (Apple, Facebook Google, IBM, LinkedIn, Netflix, and Twitter; FLIGANT) have paid staff contributing to open source projects. Firms also fund foundations that set standards and coordinate the release of product revisions to ensure various versions of products can work alike and operate together.
what is LAMP?
Linux, Apache, MySQL, and PHP/Python/Perl; a software stack (bundle) that developers use to power websites (like Facebook and Youtube). All are open-source softwares, that are free and community supported/written.
Linux = OS
Apache = web server software that receives requests and delivers web content
MySQL = database to store and manage data
Perl/Python/PHP = generates dynamic content
what are the 5 main reasons why firms choose open source?
low cost, increased reliability, improved security and auditing, system scalability, and helping a firm improve its time to market
what happened with the Heartbleed bug?
Many open source projects are well maintained by well-funded professionals. Red Hat > Linux; Google > Python. But some products were neglected and exposed due to the Heartbleed bug.
Heartbleed was an error in the OpenSSL security toolkit, a product used by Internet websites to send secure information over the internet. The product was undersourced, and had a routine coding error that opened a hole that could have been used to gather passwords, encryption keys, and other sensitive information, triggering the largest security breach.
How was the heartbleed bug addressed?
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; backed by Google, IBM, Facebook, and Microsoft.
What was the lesson learned from the Heartbleed bug?
Just because a tool is widely used does not mean its software products shouldn’t be auditited to understand the strength of support and potential risks associated with use.
Explain cost as a reason to choose open source.
cost - free alternatives vs. costly ccommercial code (conventional software charges for every copy and for running on powerful hardware). Banking giant, Barclays, reduced software costs by 90%. Online broker E*TRADE and Amazon saved tens of millions of dollars. No need to spend on developing own OS or license from a vendor like Microsoft.
