Chapter 6 Data Communications - Case & Exercise Jason C. H. Chen, Ph.D. Professor of MIS School of Business Gonzaga University Spokane, WA 99258 USA chen@jepson.gonzaga.edu

USING YOUR KNOWLEDGE (p. 209) #1 Suppose you manage a group of seven employees in a small business. Each of your employees wants to be connected to the Internet. Consider two alternatives:   Alternative A: Each employee has his or her own modem and connects individually to the Internet. Alternative B: The employees’ computers are connected using a LAN and the network uses a single modem to connect.

a. Sketch the equipment and lines required for each alternative Alternative A:

Alternative B:

Compare two issues: 1) initial set-up cost, 2) speed and flexibility for the future

DSL ( use existing UTP telephone lines) Compare two issues: 1) initial set-up cost, 2) speed and flexibility for the future DSL ( use existing UTP telephone lines) NIC NIC NIC UTP wire NIC NIC NIC NIC DSL or Cable

c. Compare the alternatives using the criteria in Figure 6-16 (cont.) Initial Setup Cost Ongoing Speed Flexibility Option: A Option:B Less expensive More Good Not very flexible may be slow if each users is consistently uploading/downloading huge files More expensive Less Yes (easy to add more users to the network)

b. Explain the actions you need to take to create each alternative. To create alternative A, you would arrange for and obtain seven modems from your Internet Service Provider. As this is a business setting, you are likely to want DSL modems so that regular voice communication will not be interrupted on the phone lines to each of your employees. Connect each computer to its DSL modem and connect the modem to the phone line. Pay your ISP for seven Internet connections. To create alternative B, install network interface cards on each computer. Connect each NIC to a switch using unshielded twisted pair wire. Connect the switch to a router, enabling the computers to share a single Internet connection. Connect the router to the correct modem (DSL or cable), and pay your ISP for one Internet connection.

c. Compare the alternatives using the criteria in Figure 6-16. Alternative A would require the initial cost of seven DSL modems. Each modem would have to be attached to each computer using existing phone lines. Ongoing costs include the seven Internet connections provided by the ISP. This configuration would provide excellent Internet access speed to each computer, but would not be very flexible. Alternative B would require more extensive initial set up costs. The NICs would have to be installed on each computer. Cables would have to be run to connect each NIC with the switch. The switch would have to be installed and configured and connected to the router. The router would have to be installed, configured, and connected to the modem. Ongoing costs would include one Internet connection provided by the ISP and costs associated with maintaining and repairing the switch and router. Performance in this configuration could decline if each user accesses the Internet extensively. This configuration is more flexible than the other since it is relatively easy to add more users to the network.

d. Which of these two alternatives do you recommend?   Unless each user is constantly uploading and downloading huge files, alternative B would provide the most effective and flexible plan for Internet access for the business.

Case Study 6: Turbulent Air in Those Azure Clouds (pp. 210 – 212) Microsoft has to find a profitable way to put a big part of its business out of business If Azure is successful, Office 365 will replace Windows Server and SQL Server, which is 24% of current revenue

Azure Standard Rates

1. In your own words, summarize Microsoft’s problem.   In a nutshell, Microsoft is facing trends in the marketplace (cloud computing) that make one of its core business product lines obsolete. As it moves to attain a competitive position in the cloud computing market, it makes its own products and services unnecessary, essentially cannibalizing its server line of business.

2. Explain the meaning of the following sentence: “…you can purchase an hour of a mid-range server for 24 cents. Let’s assume the cost of running that server is a little less than half, say, 10 cents. Because Rackspace can sell an hour on a bare server for a penny and half, it’s likely that a big part of that 24 cents is a license for Windows Server, and the true marginal cost to Microsoft is probably much less than 10 cents.”   The point of this sentence is that the cost of an hour of a mid-range server factors in a fee for the Windows server license that Microsoft wants to recover from its customers. However, since Microsoft owns its own server software, it does not actually have to pay this server fee to anyone, but keeps it for itself (in essence, offsetting the lost software license fees it can no longer attain through the sale of servers owned in-house by its customers).

3. How does the example Office 365 marginal revenue analysis change if the cost of running that server is 1 cent, not 10?   If the cost of running the server is one cent per hour, Microsoft’s margin will increase: Office 365 costs $6 per month, per employee, which is $120 for 20 people, or $1,440 per year. $1,440 – (8760 * $.01) = 1,440 – 87.60 = $1,352.40

4. How does the example Office 365 marginal revenue analysis change if that single server supports 2,000 users, not 20?   If 2,000 users were supported, the revenue side of the equation increases substantially: 2,000 * $6 = $12,000 Assuming the original assumption of the cost of running the server at ten cents per hour, the new margin is: $12,000 - $876 = $11,124

5. As of this writing Microsoft just purchased Skype; their reasons for doing so are unclear at present (November 2011), but most likely involve the problems addressed in this case. By the time you read this, Microsoft’s Skype strategy should be clear. Describe what it is and how it changes this analysis.   Microsoft’s strategy is not clear at this point (December 2011), but the reaction to this purchase is fairly positive. Many believe that Microsoft made a smart move buying advanced communications technology it can put into its products along with a ready base of users. The most likely first step will be to bring Skype to the nearly 35 million active members of Xbox Live, Microsoft’s online gaming setup, allowing players to video-chat while they play games or watch movies.

5 (cont.) Microsoft will then look to introduce Skype as an app on its Windows Phones and make it complementary to its PC software, analysts said, helping it battle rival services Google Talk and Apple Inc’s FaceTime.   The strategy will be to draw more people into Skype, especially business users, pushing them towards paid services. “It’s a huge installed base and Microsoft can target them with services from Bing, ads and so on,” said Jack Gold, head of J Gold Associates, a telecoms research firm. “Skype can also plug into the Lync environment and give Microsoft scalability way beyond what they can do now, as many companies already use Skype.” Source: Microsoft’s likely strategy for Skype October 29, 2011 http://timesofindia.indiatimes.com/tech/news/software-services/Microsofts-likely-strategy-for-Skype/articleshow/10529444.cms