Glossar

A randomized group of experiments used to collect data and compare performance among two options studied (A and B). A/B testing is often used in refining the design of technology products, and A/B tests are particularly easy to run over the Internet on a firm’s website. Amazon, Google, and Facebook are among the firms that aggressively leverage hundreds of A/B tests a year in order to improve their product offerings

Money owed for products and services purchased on credit

Third parties that promote a product or service, typically in exchange for a cut

of any sales

o An increase in price causes an increase in demand

o Example: Collectibles (cars)

The ability to take advantage of complementary products developed for a prior

generation of technology

An open source, decentralized payment system (sometimes controversially referred to as a digital, virtual, or cryptocurrency) that operates in a peer-to- peer environment, without bank or central authority

Unpredicted, but highly impactful events. Scalable computing resources can help a firm deal with spiking impact from black swan events. The phrase entered from the 2007 book of the same name by Nassim Tale

A distributed and decentralized ledger that records and verifies transactions and ownership, making it difficult to tamper with or shut down

The symbolic embodiment of all the information connected with a product or

service

Shifting capacity to a cloud provider during periods of high demand

o Period between distributing cash and collecting funds associated with a given

operation (e.g., sales)

o Rapid inventory turnover and long payment terms enable Amazon to consistently post a negative cash conversion cycle. The firm sells products and collects money from customers in most cases before it has paid suppliers for these products

o Exists when a firm’s potential partners see that firm as a threat. This threat could come because it offers competing products or services via alternative channels or because the firm works closely with especially threatening competitors

o Amazonandpartnershavealsobeenvictimsofchannelconflict,stoppingthe sale of Kindles and blocking the sale of books published through Amazon imprints. But when channel conflict occurs, the winner will likely be the channel that offers the greatest aggregate value to its partners

The rate at which customers leave a product or service

Describes the use of cloud computing to provide excess capacity during periods of spiking demand. Cloudbursting is a scalability solution that is usually provided service, kicking in as needed

Replacing computing resource – either an organization’s or individual’s

hardware or software – with services provided over the Internet

A classification of software that monitors trends among customers and uses this data to personalize an individual customer’s experience

o Abasicgoodthatcanbeinterchangedwithnearlyidenticalofferingsbyothers – think milk, coal, orange juice, or to a lesser extent, Windows PCs, and Android phones. The more commoditized an offering, the greater the likelihood that competition will be based on price

o In markets where commodity products are sold, the Internet can increase buyer power by increasing price transparency

Products or services that add additional value to the primary product or service

that makes up a network

When increasing numbers of users lower the value of a product or service

A type of virtualization that allows for shared operating systems for more resource savings and faster execution. However, containers still isolate applications so they execute and move to different computing hardware, just like conventional virtualization

When two or more markets,once considered distinctly separate, begin to offer features and capabilities. As an example: the market for mobile phones and media players are converging

A line of identifying text, assigned, and retrieved by a given Web server and

stored by your browser

When an increase in the number of users on the side of the market (console

owners, for example) creates a rise in the other side (software developers)

o A digital asset where a secure form of mathematics (cryptography) is used to handle transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies usually take advantage of a technology known as a blockchain

o Cryptocurrencies are entirely digital — there are no physical “coins.” Cryptocurrencies are created and can be earned by miners who participate in verifying and permanently recording transactions in a secure, distributed public ledger (the blockchain)

o A set of databases designed to support decision-making in an organization

o Largedatawarehousesarecomplex,cancostmillions,andtakeyearstobuild

A type of machine learning that uses multiple layers of interconnections among data to identify patterns and improve predicted results. Deep learning most often uses a set of techniques known as neural networks and is popularly applied in tasks like speech recognition, image recognition, and computer vision

o Removing an organization from a firm’s distribution channel.

Disintermediation collapses the path supplier and customer

o Offers two potential benefits:

▪ Eliminates the need to share revenues with a third party

▪ Provides exclusive access to valuable consumer data assets

The path through which products or services get to customers

Pricing that shifts over time, usually based on conditions that change demand

(e.g., charging more for scare items)

When costs can be spread across increasing units of production or in serving multiple customers. Businesses that have favorable economics of scale (like many Internet firms) are sometimes referred to as being highly scalable

Greater as shift workers work at constant rates throughout the day

When one market attempts to conquer a new market by making it a subset, component, or feature of its primary offering

Exists when savvy rivals watch a pioneer’s efforts, learn from their successes and missteps, then enter the market quickly with a comparable or superior product at a lower cost before the first mover can dominate

The costs that do not vary according to production volume

A product with a free version—sometimes with limited features or that stops working after a period of time—to allow customers to try a product and hopefully entice them into making a product purchase or subscription decision

Cloud computing architectures that combine on-premises infrastructure with

public cloud services

A way of doing business that competitors struggle to replicate and that

frequently involves technology in a key enabling role

o A change in price causes a underproportional change in demand

o Example: Cigarettes

A decision situation where one party has more or better information that its

counterparty

Where cloud providers offer services that include running the remote hardware, storage, and networking (i.e., the infrastructure), but client firms can choose software used (which may include operating systems, programming languages, databases, and other software packages). In this scenario, the cloud firm usually manages the infrastructure (keeping the hardware and networking running), while the client has control over most other things (operating systems, storage, deployed applications, and perhaps even security and networking features like firewalls and security systems)

A software-based copy using a pre-defined model of the object being created

o Sometimes referred to as inventory turns, stock turns, or stock turnover. It is the number of times inventory is sold or used during a given period. A higher figure means that a firm is selling products quickly

o Inventory Turnover= Number of units sold (per period) / Inventory

Sometimes referred to as inventory turnover, stock turns, or stock turnover. It is the number of times inventory is sold or used during a given period. A higher figure means that a firm is selling products quickly

o Key Performance Indicators — measurable values defined by a firm to demonstrate progress toward a given goal. Examples are quite broad and could include customer acquisition, cost reduction, or improvement in the ROI of online ad campaigns

o Inventory turnover

o Number of friends

o Number of followers

o Sales per Square Foot

o Net Present Value (NPV)

▪ NPV =-I +PV =-I +∑n CF(1+i)-t 0 0 0 0 t=1 t

• This represents the value of the investment project

▪ If we set CF0 = -I0, we can write the net present value formula as:

NPV =∑n CF (1+i)-t

An acronym for Linux, the Apache Web server software, the MySQL database, and any of several programming languages that start with P (e.g., Perl, Python, or PHP)

An opensource software operating system

Problems that arise when organizations cannot easily convert assets to cash. Cash is considered the most liquid asset – that is, the most widely accepted with a value understood by all

o In this context, it refers to an extremely large selection of content or products. The long tail is a phenomenon whereby firms can make money by offering a near-limitless selection

▪ Large selection of products or content beneficial for Internet retailers

o The ability to serve large geographic areas through lower-cost inventory means Internet firms can provide access to the long tail of products, potentially earning profits from less popular titles that are unprofitable for physical retailers to offer

o Amazontakesadvantageofthelongtail,aconceptwherefirmscanprofitably offer a selection of less popular products. Amazon’s enormous product selection — with offerings from the firm and from third parties — reinforces its position as the first-choice shopping destination

o The costs associated with each additional unit produced

o The software business is attractive due to near-zero marginal costs and an opportunity to establish a standard — creating the competitive advantages of network effects and switching costs

A market where there are many buyers but only one dominant seller

o Chip performance per dollar doubles every eighteen months

o Moore’s Law (and related advances in fast/cheap technologies in things like storage and telecommunications) has driven six waves of disruptive, market- transforming computing. The sixth wave involves embedding intelligence and communications in all sorts of mundane devices. Some point to a future “Internet of Things,” where objects will collect and share data and automatically coordinate collective action for radical efficiency improvements

o As chips get smaller and more powerful, they get hotter and present power- management challenges. And at some point, Moore’s Law will stop because we will no longer be able to shrink the spaces between components on a chip

o Also known as Metcalfe’s Law, or network externalities. When the value of a product or service increases as its number of users expands

o The software business is attractive due to near-zero marginal costs and an opportunity to establish a standard—creating the competitive advantages of network effects and switching costs

o Number of bidirectional connections: value of the network= n(n-1) 2

o Number of unidirectional connections: value of the network = n(n-1)

Commonly known as patent trolls, these firms make money by acquiring and asserting patents, rather than bringing products and services to market

Database that can deal with the free-form structure and high-volume data

A market dominated by a small number of powerful sellers

A market that derives most of its value from a single class of users (e.g,instant

messaging)

Software that is free and where anyone can look at and potentially modify the

code

Performing the same tasks better than the rivals perform them

o A marginal change in price causes an infinite change in demand

o Example: A 5€ banknote sold for 5.01€ ➔ no demand

A 5€ banknote sold for 4.99€ ➔ infinite demand

o A change in price causes no change in demand

o Example: Emergency heart operations

Absence of brick-and-mortar stores brings down costs for real-estate, energy,

inventory, and security

Where cloud providers offer services that include the hardware, operating system, development tools, testing, and hosting (i.e., the platform) that its customers use to build their own applications on the provider’s infrastructure. In this scenario, the cloud firm usually manages the platform (hosting, hardware, and supporting software), while the client has control over the creation and deployment of their application

Products and services that allow for the development and integration of software products and other complementary goods, affectively creating an ecosystem of value-added offerings. Windows, iOS, the Kindle, and the standards that allow users to create Facebook apps are platforms

o The rate at which the demand for a product or service fluctuates with price change. Goods and services that are highly price elastic (e.g., most consumer electronics) see demand spike as prices drop, whereas goods and services that are less price elastic are less responsive to price change (think heart surgery)

o e(P) = dQ/Q / dP/P

o The degree to which complete information is available

▪ In markets where commodity products are sold, the Internet can increase buyer power by increasing price transparency

Selling more goods gives better bargaining power with suppliers

The strategic thinking approach suggesting that a firm is to maintain sustainable competitive advantage, it must control an exploitable resource, or set of resources, that have four critical characteristics. These resources must be (1) valuable, (2) rare, (3) imperfectly imitable, and (4) nonsubstitutable

Benefits derived by interaction among members of a single class of participant (e.g., the exchange value when increasing numbers of Instant Messaging users gain the ability to message each other)

Ability to either handle increasing workloads or to be easily expanded to manage workload increases. In a software context, systems that aren’t scalable often require significant rewrites or to purchase or development of entirely new systems

Advantages related to size

o Can be attained by leveraging the cost of an investment across increasing

units of production

o Having a bigger customer base enables firms to:

▪ Have better cost structure

▪ Have better profit prospects ▪ Offer better pricing

Also known as “hardened”. Term used to describe technology products that

contain particularly strong security features

A massive network of computer servers running software to coordinate their collective use. Server farms provide the infrastructure backbone to SaaS and hardware cloud efforts, as well as many large-scale Internet services

A type of cloud computing where a third-party vendor manages servers, replication, fault-tolerance, computing scalability, and certain aspects of security, freeing software developers to focus on building “Business Solutions” and eliminating the need to spend time and resources managing the technology complexity of much of the underlying “IT Solution”

Provides negotiating leverage to secure lower prices and longer payment terms

The positive influence created when someone finds out that others are doing

something

A form of cloud computing where a firm subscribes to a third-party software

and receives a service that is delivered online

o Performing different tasks than rivals, or the same tasks in a different way

o Firms that leverage technology for strategic positioning use technology to create competitive assets or ways of doing business that are difficult for others to copy

A language used to create and manipulate databases

Financial performance that consistently outperforms industry averages

o The cost a consumer incurs when moving from one product to another. It can involve actual money spent (e.g., buying a new product) as well as investments in time, any data loss, and so forth

➢ Sources of switching costs

▪ Learning costs: Switching technologies may require an investment in

learning a new interface and commands

▪ Information and data: Users may have to reenter data, convert files or databases, or even lose earlier contributions on incompatible systems

▪ Financial commitment: Can include investments in new equipment, the cost to acquire any new software, consulting, or expertise, and the devaluation of any investment in prior technologies no longer used

▪Contractual commitments: Breaking contracts can lead to compensatory damages and harm an organization’s reputation as a reliable partner

▪ Search costs: Finding and evaluating a new alternative costs time and money

▪ Loyalty programs: Switching can cause customers to lose out on program benefits. Think frequent purchaser programs that offer “miles” or “points” (all enabled and driven by software)

In order to win customers from an established incumbent, a late- entering rival must offer a product or service that not only exceeds the value offered by the incumbent, but also exceeds the incumbent’s value and any customer switching costs

All of the technology products and services used to build and run one single

information technology solution

When a firm preannounces a forthcoming product or service and experiences a sharp and detrimental drop in sales of current offerings as users wait for the new item

Thin or thin client computing devices have very little computing power in the device itself, and instead perform the bulk of computing and storage over the network, “in the cloud”. Smart speakers and television streaming sticks are all examples of thin clients. The term is also used to describe applications that run in a browser, but where most of the computing happens remotely (e.g., SaaS tools like Salesforce)

o An economic measure of full cost of owning a product (typically computing hardware and/or software). TCO includes direct costs such as purchase price, plus indirect costs such as training, support, and maintenance

o Model to record all costs incuring during the lifetime of an IT investment through the procurement and use of IT

Network market that comprises of participant, both of which are needed to deliver value for the network to work (e.g., video game console owners and developers of video games)

o A change in price causes a proportional change in demand o Example: Financial Times

A form of cloud computing where a firm develops its own software, and then runs it over the Internet on a service provider’s computers

o The set of activities through which a product or service is created and

delivered to customers

o There are five primary components of the value chain and four supporting components. The primary components are:

▪ Inbound logistics — getting needed materials and other inputs into the firm from suppliers

▪ Operations — turning inputs into products or services

▪ Outbound logistics — delivering products or services to consumers,

distribution centers, retailers, or other partners

▪ Marketing and sales — customer engagement, pricing, promotion, and transaction

o Support — service, maintenance, and customer support o The secondary components are:

▪ Firm infrastructure — functions that support the whole firm, including general management, planning, IS, and finance

▪ Human resource management — recruiting, hiring, training, and development

▪ Technology / research and development — new product and process design

▪ Procurement — sourcing and purchasing functions

The costs that change directly and proportionally to production volume

Leveraging consumers to promote a product or service

When a firm runs an instance of a PC’s software on another machine and simply delivers the image of what’s executing to the remote device. Using virtualization, a single server can run dozens of PC’s, simplifying backup, upgrade, security, and administration

A type of software that allows a single computer (or cluster of connected computers) to function as if it were several different computers, each running its own operating system and software. Virtualization software underpins most cloud computing efforts, and can make computing more efficient, cost- effective, and scalable

A fully supported product or service that’s made by one company but sold by another