Chapter 9: Cloud Computing & Virtualization

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The big idea: instead of owning computers and software, firms can rent computing power over the internet.

• Virtualization lets one machine act like many
• Cloud computing replaces owning hardware
• Firms pay for what they use
• Shifts costs from fixed → variable

This changes competition, lowers barriers to entry, and lets startups scale FAST.

Virtualization: One computer acts like multiple machines.
→ Saves cost, increases efficiency.

Containers: Lightweight virtualization without full OS.
→ Faster + more efficient.

Cloud Computing: Using computing services over the internet.
→ No need to own hardware :contentReference[oaicite:0]{index=0}

SaaS: Software delivered online.
→ Lowest effort for firms.

PaaS: Platform to build apps.
→ Firm controls apps, not infrastructure.

IaaS: Renting computing infrastructure.
→ Most control, most responsibility.

Latency: Delay in data transfer.
→ Important cloud risk.

Total Cost of Ownership (TCO): Full cost over time (not just purchase).
→ Cloud vs traditional decisions depend on this :contentReference[oaicite:1]{index=1}

AWS: Rent servers instead of buying hardware.
→ Startups can launch with almost no upfront cost :contentReference[oaicite:2]{index=2}

Netflix: Runs almost entirely on AWS.
→ Uses IaaS for flexibility :contentReference[oaicite:3]{index=3}

Canvas: Runs as SaaS.
→ Students access through browser :contentReference[oaicite:4]{index=4}

Virtualization in Data Centers:
→ Increases utilization to ~80%+
→ Saves energy + cost

Why not always cloud?

• Security concerns
• Latency issues
• Vendor dependence
• Limited customization

1.

A startup uses AWS instead of buying servers. As demand increases, it instantly scales its computing resources without major upfront investment.

Which concept BEST explains this advantage?

A. Switching costs
B. Capital intensity reduction
C. Network effects
D. Marginal cost increase

Correct answer: B

Cloud computing reduces capital intensity by eliminating large upfront investments in hardware. A is about lock-in, C is about users, and D is incorrect because costs become more flexible, not higher.

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2.

A firm moves to SaaS but later worries because all its data is stored with one provider and switching would be difficult.

What is the MOST significant risk?

A. Latency
B. Vendor lock-in
C. Marginal cost
D. Virtualization failure

Correct answer: B

Vendor lock-in occurs when switching providers is difficult due to data, systems, and integration. Latency is performance-related but not the main concern here.

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3.

A company uses containers instead of full virtual machines to run applications faster and with less overhead.

Which concept BEST explains this benefit?

A. Reduced need for separate operating systems
B. Increased switching costs
C. Stronger network effects
D. Higher marginal cost

Correct answer: A

Containers do not require full operating systems, making them lighter and faster. The other options do not relate to performance improvements.

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4.

A firm uses SaaS for its CRM system. It benefits from automatic updates and lower upfront costs but has fewer customization options.

Which tradeoff is MOST accurate?

A. Higher control but higher cost
B. Lower control but lower cost
C. Higher switching costs but faster speed
D. Lower scalability but higher flexibility

Correct answer: B

SaaS reduces cost and maintenance but also reduces control and customization. Other options mismatch the tradeoff.

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5.

A firm uploads large files between multiple cloud systems and experiences delays due to data traveling across networks.

Which concept BEST explains this issue?

A. Switching costs
B. Latency
C. Network effects
D. Virtualization

Correct answer: B

Latency refers to delays in data transmission across networks. This is a key cloud limitation discussed in class. :contentReference[oaicite:5]{index=5}

Information Systems: A Manager's Guide to Harnessing Technology – John Gallaugher

University of Texas MIS 301 Slides – Chapter 9 SaaS & Cloud Computing :contentReference[oaicite:6]{index=6}