IT Infrastructure and Platforms Chapter Six (9th ed)

Chapter 6 and Our Questions 4. Why are technology infrastructures so important to modern organizations? Explain the nature of, and organizational dependence on, technology and business platforms Compare open versus proprietary architectures Recognize total cost of ownership for technology investments, (e.g., desk top computing) Understand the problems in justifying investments in infrastructure

Chapter Six Outline

Significance of IT Infrastructure IT infrastructure (ITI) is the foundation for Serving customers Working with suppliers and Managing internal business processes An example: If you are a bank and you want to sell banking services (savings, checking, car loans, home loans, brokerage accounts, etc) to all of your customers on a global level, your choices of ITI will make or break you. ITI is critical component of any business strategy

The Connection between the Firm, IT Infrastructure, and Business Capabilities Figure 6-1

Definitions of ITI (1) ITI is the shared technology resources that provide the platform for the firm’s specific information system applications. These technology resources include hardware, software, and services (consulting, education, and training) (2) ITI is a set of firm wide services budgeted by management and comprising both human and technical capabilities that provide services to employees, customers, and suppliers. The latter definition puts more emphasis on the business value provided by investments in ITI

Listing of the Services from the Second Definition of ITI Computing platforms that provide computing services Telecommunication services provide data, voice, and video connectivity Application software services provide access to ERP, SCM, CRM, and KM Physical facilities management services IT management services for planning and managing ITI IT standards services for developing policies IT education services that provide training IT research and development services for developing future projects

Levels Of Infrastructure Public infrastructure The Internet Public telephone system Industry networks Enterprise wide infrastructure E-mail Corporate Web site Intranets Enterprise applications like SCM, ERP, CRM, and KM Functional business units Productions systems Customer systems Order entry systems Questions Centralization versus decentralization Cross functional applications

Evolution of IT Infrastructure Electronic accounting machine era: (1930–1950) General-purpose mainframe and minicomputer era: (1959 to present) Personal computer era: (1981 to present) Client/server era: (1983 to present) Enterprise internet computing era: (1992 to present)

Technology Drivers of Infrastructure Evolution Moore’s law and microprocessing power Microprocessor power (MIPS) doubles every 18 months Number of transistors on a chip doubles every 18 months Cost of computing falls by ½ every 18 months Near future will continue, but heat issues and consumer needs may slow this process The law of mass digital storage The number of kilobytes stored for $1 has doubled every 15 months since 1950 Metcalfe’s law and network economics Power of a network grows exponentially as a function of the number of network members (network economics) Declining communications costs and the Internet Standards and network effects ASCII, COBOL, UNIX TCP/IP, Ethernet, and WWW IBM/Microsoft/Intel

Moore’s Law Figure 6-5

Moore’s Law: Falling Cost of Chips Figure 6-6

The Growth of Mass Digital Storage Figure 6-8

Cost of Mass Digital Storage Figure 6-9

Exponential Declines in Internet Communications Costs Figure 6-10

Seven Key Infrastructure Components Computer Hardware Platforms Operating System Platforms Enterprise Software Applications Data Management and Storage Networking/Telecommunications Platforms Internet Platforms Consulting and System Integration Services

The IT Infrastructure Ecosystem Figure 6-11

Computer Hardware Platforms $110 billion annually spent in the United States Dominance of Intel, AMD, and IBM 32-bit processor chips at both the client and server level Hardware market is dominated by IBM, HP, Dell, and Sun Strong server market growth for 64 bit generic processors from AMD, Intel and IBM Blade servers replace box servers Mainframes continue as a presence working as very large servers

Operating System Platforms 100 billion annually spent in the United States Continued dominance of Microsoft OS in the client (95%) and handheld market (45%) Growing dominance of Linux (UNIX) in the corporate server market (85%) Windows 2002 and 2003 Server remains strong in smaller enterprises and workgroup networks

Enterprise Software Applications $165 billion annually spent in the United States for basic enterprise software infrastructure SAP, Oracle, PeopleSoft (now Oracle), and Siebel (now Oracle) dominate this market. Middleware firms like BEA and JD Edwards serve smaller firms, and work also in the Web services space. The enterprise market is consolidating around a few huge firms that have gained significant market share such as SAP and Oracle. Microsoft is expanding into smaller firm enterprise systems where it can build on its Windows server-installed base.

Data Management and Storage Data management software $70 billion annually spent in the United States. Oracle and IBM dominate the market. Microsoft (SQL Server) and Sybase tend to serve smaller firms. Open source Linux MySQL now supported by HP and most consulting firms as an inexpensive, powerful database used mostly in small to mid-size firms. Data storage hardware $35 billion annually spent in the United States for physical hard disk storage The hard disk market is consolidating around a few huge firms like EMC and smaller PC hard disk firms like Seagate, Maxtor, and Western Digital

Networking/Telecommunications Platforms 150 billion annually spent on networking and telecommunications hardware $700 billion annually spent on telecommunications services, e.g. phone and Internet connectivity Local area networking still dominated by Microsoft Server (about 75%) but strong growth of Linux challenges this dominance Enterprise networking almost entirely Linux or UNIX Cisco, Lucent, Nortel, and Juniper Networks continue to dominate networking hardware. The telecommunications services market is highly dynamic with MCI, AT&T, and Sprint providing most trunk line services for both phone and Internet. Growth of non-telephone Wi-Fi and Wi-Max services, and Internet telephony

Internet Platforms $32 billion annually spent on Internet infrastructure in the United States Internet hardware server market concentrated in Dell, HP, and IBM Prices falling rapidly by up to 50% in a single year for low-power servers Open-source Apache remains the dominant Web server software, followed by Microsoft’s IIS server. Sun’s Java grows as the most widely used tool for interactive Web applications. Microsoft and Sun settle a long-standing law suit and agree to support a common Java.

Consulting and System Integration Services Most firms today, even large firms, cannot develop their systems without significant outside help. $130 billion annually spent on computer system design, and related business services like business process redesign in the United States About 85% of business consulting in the United States involves IT business consulting. Integration services involves integrating data, and applications in a firm. Connecting new applications and systems to legacy systems IBM has transformed itself into a systems integration firm with IBM Global Services, the largest system integration firm.

Contemporary Hardware Platform Trends: Overview Integration of Computing and Telecommunications Platforms Grid Computing On-Demand (utility) Computing Autonomic Computing

Integration of Computing and Telecommunications Platforms Increasingly computing takes place over the network. Client level: integration of cell phones and PDAs (Example: Palm Treo) Television, video, and radio move toward digital production. Server level: The integration of voice telephone and the Internet bring together two historically separate and distinct global networks. The network in many respects is the source of computing power.

Grid Computing Rather than purchase huge mainframes or super computers, firms can chain together thousands of smaller desktop clients into a single computing grid; computers may be geographically remote It is estimated that from 25% - 50% of the computing power in the United States is unused. Grid computing saves infrastructure spending, increases speed of computing, and increases the agility of firms. Examples: Royal Dutch/Shell Group and the National Digital Mammography Archive

On-Demand (Utility) Computing Firms off-loading peak demand for computing power to remote, large-scale data processing centers Developed by IBM, SUN, and HP Firms pay only for the computing power they use, as with an electrical utility. Excellent for firms with spiked demand curves caused by seasonal variations in consumer demand, e.g. holiday shopping Saves firms from purchasing excessive levels of infrastructure

Autonomic Computing Autonomic computing is an industry-wide effort to develop systems that can: Configure, optimize, and tune themselves Heal themselves when broken Protect themselves from outside intruders and self-destruction Why is there a need for this? Computer systems (both hardware and software) have become so complex that the cost of managing them has risen. Thirty to fifty percent of a company’s IT budget is spent preventing or recovering from system crashes. Operator error is the most common cause of crashes. Example: Windows XP and Max X OS automatically download patches and updates.

Software Platform Trends: Overview The open-source software movement Java and Linux Software for enterprise integration Enterprise wide systems Linkage to older systems and applications Enterprise application integration Middleware Web services and service-oriented architecture Software outsourcing Software packages Application service providers Custom software development or maintenance of existing systems to outside firms

The Open-Source Software Movement Open-source software is free and can be modified by users. Developed and maintained by a worldwide network of programmers and designers under the management of user communities. The movement has evolved over 30 years and has demonstrated it can provide high quality software. Major examples include Linux, Firefox (browser), and Apache (Web server software that resides on the server and delivers Web content to your browser) Linux is the most widely used open-source software program. Linux is an operating system derived from Unix. IBM, HP, Intel, Dell, and Sun have adopted and support Linux. Linux is a major alternative to Windows server and even client operating systems

Java A programming language that is independent of the operating system and hardware processor. Applications written in Java can run on any hardware for which a Java virtual machine has been defined. Java is embedded in PDAs, cell phones, music players, automobiles, set-top cable TV systems, and browsers. Java is a leading interactive programming environment for the Web. Applet concept Dispute with Microsoft

Software For Enterprise Integration An important software trend of the last decade is the usage of enterprise-wide software systems by firms (SCM, ERP, CRM, and KM). Rather than build their own software, large firms increasingly purchase enterprise applications prewritten by specialized software firms like SAP or Oracle. The goal is to achieve an integrated firm-wide information environment, reduce cost, increase reliability, and to adopt business best practices which are captured by the software. Enterprise software firms achieve economies of scale by selling the same software to hundreds of firms.

Software For Enterprise Integration (continued) How do you link new enterprise software with older legacy applications? Middleware approach Special software that creates an interface between two different systems Enterprise application integration approach Enterprise application integration software creates a single software hub where multiple systems can exchange data through a single hub rather than building countless interfaces for each system

Enterprise Application Integration (EAI) Software Versus Traditional Integration Figure 6-13

Web Services And Service-Oriented Architecture An alternative to middleware and EAI is to use new Web-based standards to create a communication platform allowing older applications to communicate with newer applications. Web services refers to a set of loosely coupled software components that exchange information with each other using Web communication standards and languages Web services permit computer programs to communicate with one another and share information without rewriting applications, or disturbing older legacy systems. Web services are based on XML, and standards like SOAP, WSDL, and UDDI to create this communication environment.

Web Services And Service-Oriented Architecture (continued) XML stands for extensible markup language and is a more powerful version of HTML that enables one to tag items that provide meaning to data. Web Services Description Language (WSDL) describes the tasks performed by the Web service and the commands and data it will accept so that it can be used by other applications. Universal description discovery and integration (UDDI) enables a Web service to be listed in a directory of Web services for easy location. The collection of Web services used to build a firm’s software constitute what is know as a service-oriented architecture (SOA)

Software Outsourcing: Packages Prewritten off-the-shelf software built by a software company Eliminates the need for the company to write their own Available for all standard business applications within and across industries Includes all the transaction processing systems mentioned in earlier chapters Also includes the large enterprise applications

Software Outsourcing: Application Service Providers A business that delivers and manages applications and computer services from remote computer centers to multiple users using the Internet or a private network. Software is not installed on the firm’s systems. Rather than purchase hardware and software, firms can go onto the Internet and find providers who offer the same functionality over the Internet, and charge on a per-user or license basis. Example: Salesforce.com provides customer relationship management and sales force management services to firms

Software Outsourcing: Custom Software A firm contracts custom software development or maintenance of existing legacy programs to outside firms, often in low-wage countries. Example: Dow Chemical hired IBM for $1.1 billion to create an integrated communication system for 50,000 Dow employees in 63 countries. Why would Dow not build this system itself?

Changing Sources of Firm Software Figure 6-15

Management Challenges ITI management must be guided by the firm’s need to provide computer-based services to customers, employees, and suppliers. To this wisely the firm must deal with: How do we make wise infrastructure investments? How do we choose and coordinate infrastructure components? How do we prepare for infrastructure change (scalability)? How should we control and manage ITI? (decentralization versus centralization)

Management Solutions Consider your strategic situation: six questions to ask (see next slide) Start out small, with respect to large scale infrastructure changes (develop one module at a time) Consider the total cost of ownership Develop benchmarks for the total cost of ownership

Six Questions to Ask 1. What is the market demand for computer-based services from customers, employees, and suppliers? 2. What is your firm’s business strategy or what new services are needed to achieve goals? 3. What is the firm’s IT strategy with respect to ITI and costs? 4. What is the position of your firm with respect to IT compared to your competition (ahead or behind)? 5. What is the position of your firm with respect to computer-based services to customers, employees, and suppliers compared to your competition? 6. How do your expenditures for ITI compare with your competition?

Total Cost of Ownership When calculating the costs of systems, be sure to include all the costs: Hardware acquisition Software acquisition Installation Training Support Maintenance Infrastructure requirements Downtime Space and energy The desktop management concept for distributed computer assets (http://cais.isworld.org/articles/8-6/default.asp?View=Journal&x=50&y=7 )