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MIS Essentials 4th Edition Kroenke

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 1

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6
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.. The Cloud
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LEARNING OBJECTIVES

1. Describe why the cloud is the future for most organizations.


2. Describe how organizations use the cloud.
3. Explain how AllRoad Parts can use the cloud.
4. Explain how organizations can use cloud services securely.
5. Discuss what the cloud means for your future.

CHAPTER OUTLINE

▪ Why is the cloud the future for most organizations?


 What is the cloud?
 Why is the cloud preferred to in-house hosting?
 Why now?
 When does the cloud not make sense?
▪ How do organizations use the cloud?
 Cloud services from cloud vendors
 Content delivery networks from cloud vendors
 Use Web services internally
▪ How can AllRoad Parts use the cloud?
 SaaS services at AllRoad
 PaaS services at AllRoad
 IaaS services at AllRoad
▪ How can organizations use cloud services securely?
 Virtual private network (VPN)
 Using a private cloud
 Using a virtual private cloud
▪ What does the cloud mean for your future?
▪ How does the knowledge in this chapter help you?

Experiencing MIS InClass EXERCISE 6

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 2

What, Exactly, Does that Standard Mean?

1. Search the Internet for ISO 27001. Explain the purpose of this standard.

The ISO 27001 standards engage both technical and business managers to examine all
aspects of the management system. Security requirements are created, implemented
and monitored by management in cooperation with technical professionals. The joint
monitoring fosters better business alignment within the company.
Source: What Are the Benefits of ISO 27001? | eHow.com http://www.ehow.com/list_6936896_benefits-iso-
27001_.html#ixzz2FijtSty6, accessed 12/20/12.
(LO: 1, Learning Outcome: Describe different methods of managing IS security,
AACSB: Analytic Skills)

2. Does compliance with ISO 27001 mean that a data center is secure? Does it mean
that no security threat against compliant data centers will be successful? What does it
mean?

ISO 27001 helps organizations stay current by establishing consistent security


product and process evaluation, implementation, monitoring, review and maintenance
procedures. Applying a standard process to the selection and maintenance of existing
and new security procedures that involves both management and information
technology (IT) personnel helps prevent problems before they occur. It also addresses
legal compliance through standardized internal and external audits. ISO 27001
provides additional opportunities for benchmarking, helping companies more readily
implement best practices and reach stretch goals. Detailed, expanded comparisons
with others in the same industry lead to breakthrough improvements.

Complying with ISO 27001 does not mean that a data center is secure or that no
threats against a data center will be successful. However, it does mean that the
organization has adopted management practices that include attention to security
issues and that the organization is committed to a security management system that
involves both technical and management perspectives. (LO: 1, Learning Outcome:
Describe different methods of managing IS security, AACSB: Analytic Skills)

3. Search the Internet for evidence that Microsoft Azure complies with ISO 27001.
Summarize your findings.
The Microsoft cloud has obtained ISO/IEC 27001:2005 certification and SAS 70 Type 1 and II attestations.

Note:
ISO/EC 27001:2005 is a standard that specifies requirements for establishing, implementing, operating,
monitoring, reviewing, maintaining and improving a documented Information Security Management System. You
can find out more about it here.

Note #2:
Statement on Auditing Standards (SAS) 70 is an auditing standard developed by the American Institute of Certified
Public Accountants, which provides guidance for independent auditors to issue an opinion on a service or
organization’s disclosure of its control of activities and processes.

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 3

(LO: 1,
Source: http://www.windowsecurity.com/articles/Microsoft-azure-security-Cloud.html, accessed 12/20/12.
Learning Outcome: Describe different methods of managing IS security, AACSB:
Analytic Skills)

4. Search the Internet for evidence that Amazon’s EC2 complies with ISO 27001.
Summarize your findings.
SAS 70 is an auditing standard that provides guidance for an auditor issuing a
report about internal controls implemented by a cloud services provider. However, to
assess the adequacy of a data center controls, it is necessary to read and analyze the
report that was prepared in accordance with SAS 70.

Amazon has received the ISO 27001 certification for its Infrastructure as a Service platform:
EC2. Amazon received this certification after completing a SAS 70 type II audit a year earlier.

ISO 27001 certification is an information security standard. Its full name is: ISO/IEC
27001:2005 – Information technology — Security techniques — Information security
management systems — Requirements. ISO 27001 specifies the management system needed
to bring information security under explicit management control. SAS 70 certification specifies
the depth of security and controls by thorough investigation and testing of each defined control.

Goal of this certification is that Amazon can prove to its customers a certain maturity for its
cloud computing platform EC2.

Source: http://cloudcomputing.info/en/news/2010/11/amazon-ec2-receives-iso-27001-certification.html, accessed


12/20/12. (LO: 1, Learning Outcome: Describe different methods of managing IS
security, AACSB: Analytic Skills)

5. Search the Internet for evidence that Microsoft’s auditors have issued a report in
accordance with SAS 70. Summarize your findings.

See answer to item 3 above. (LO: 1, Learning Outcome: Describe different methods
of managing IS security, AACSB: Analytic Skills)

6. Search the Internet for evidence that Amazon’s auditors have issued a report in
accordance with SAS 70. Summarize your findings

See answer to item 4 above. (LO: 1, Learning Outcome: Describe different methods
of managing IS security, AACSB: Analytic Skills)

7. Compare and contrast your answers to questions 3/4 and 5/6. Does your comparison
cause you to believe that there are significant differences with regard to security and
control between Azure and EC2?

Based on the research here, both Azure and EC2 are meeting the ISO 20071 standard
and the SAS 70 audit standard. (LO: 1, Learning Outcome: Describe different
methods of managing IS security, AACSB: Analytic Skills)

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 4

8. Many small businesses operate with local servers running in storerooms, broom
closets, and the like. Summarize the major risks of this situation. How can using a
cloud vendor that is scores well according to the standards discussed help such
companies?

Servers stored in closets are not particularly well protected in terms of physical
security or restricted access and are unlikely to meet the security standards discussed
here. Clearly the cloud services provide a much higher level of security attention and
sophistication than does the security practices of many small businesses. (LO: 1,
Learning Outcome: Describe different methods of managing IS security, AACSB:
Analytic Skills)

9. Suppose a publicly traded large organization operates its own Web farm and has
certifications indicating that it has complied with ISO 27001 and has issued a
statement of controls in accordance with SAS 70 that indicates controls are at least
adequate. Is there any reason to believe that the organization’s data assets on that
Web farm are more or less secure than they would be if stored in Azure or EC2?
Explain your answer.

About all we can say is that the in-house data assets are stored with a management
system in place that is comparable to the management system in place at several large
cloud vendors. One could argue that the cloud vendors have only one line of
business—cloud storage—and hence are more focused on the security of their data
resources. They also have more to lose if breaches occur. However, without knowing
more about the in-house hosting, we really can’t say it is any worse or any better than
the cloud options. (LO: 1, Learning Outcome: Describe different methods of
managing IS security, AACSB: Analytic Skills)

10. Based on your answers to these questions create a general statement as to the
desirability, considering only data security, of storing data on Azure and EC2 as
compared to storing it on servers managed in-house.

Cloud data security is provided by the cloud vendors and satisfies the standards for
data security that are available today. It is possible for in-house hosted data security
to conform to the same standards if the organization has devoted sufficient resources
and attention to its security management. For smaller organizations with fewer
resources devoted to data security, the cloud-based data storage may provide a much
higher level of security than is currently provided with in-house systems. (LO: 1,
Learning Outcome: Describe different methods of managing IS security, AACSB:
Analytic Skills)

USING YOUR KNOWLEDGE

6-1. Define cloud and explain the three key terms in our definition. Using Figure 6-3 as a
guide, compare and contrast cloud-based and in-house hosting. In your opinion,

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 5

explain the three most important factors that make cloud-based hosting preferable to
in-house hosting.

The cloud is the elastic leasing of pooled computer resources that are accessed via
Internet protocols.
• Elastic: the amount of resources leased can be increased or decreased
dynamically, programmatically, in a short span of time and organizations pay for
just the resources they use.
• Pooled computer resources: many different organizations use the same physical
hardware; the hardware is shared through virtualization.
• Internet protocols: resources are accessed using standard rules that enable cloud-
hosting vendors to provide processing capabilities in flexible, yet standardized,
ways.

In-house hosting provides the organization the most control over its data resources
and enables the organization to design and implement its own security and disaster
preparedness programs. This control and assurance about security comes at a high
dollar cost, plus saddles the organization with an inflexible infrastructure with a
degree of obsolescence risk.

Cloud-based hosting provides lower-cost, flexible computing resources that can


quickly scale up or down as needed. The downside of the cloud-hosted option is
dependency on the cloud vendor, loss of control over the data location, and the
inability to directly see the true security and disaster preparedness capabilities of the
vendor.

The three factors that make cloud-based hosting preferable today are: cheap
processors, data communication and data storage; virtualization technology that
makes it possible to create a new virtual machine almost instantaneously; and Web
service standards that enable cloud-hosting vendors to provide processing capabilities
in flexible yet standardized ways. (LO: 5, Learning Outcome: Compare and contrast
different ways of connecting to the Internet, AACSB: Analytic Skills)

6-2. Apple invested more than $1 billion in the North Carolina data center shown in
Figure 6-2. For Apple to spend such a sum, it must perceive the iCloud as being a key
component of its future. Using the principles listed in Figure 3-2 (page 57) explain all
the ways that you believe the iCloud will give Apple a competitive advantage over
other mobile device vendors.

The iCloud enables Apple to offer significant enhancements to its mobile device
product line. The ability to synchronize each device’s content is an incredible
advantage, and relieves users of a common frustration when the content of their
various devices is not synchronized. This definitely differentiates Apple’s mobile
device offerings from others.

The iCloud will help to lock in customers, who will not consider moving to another

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 6

providers devices and hence give up the advantages of the iCloud. Apple has already
moved to lock in suppliers by only accepting apps developed by committed Apple
developers. This huge investment in the iCloud data center will be difficult for new
entrants in the market to duplicate, thus raising barriers to entry. Apple should
experience lower costs with the almost self-managing data center it has created. (LO:
5, Learning Outcome: Explain how IS can be used to gain and sustain competitive
advantage, AACSB: Reflective Thinking Skills)

6-3. Suppose that you work at AllRoad Parts and Kelly tells you that she doesn’t believe
that cheap, elastic provisioning of servers is possible. “There has to be a catch
somewhere,” she says. Write a one-page memo to her explaining how the cloud
works. In your memo, include the role of standards for cloud processing.

The cloud is based on the Internet as its foundation. It also utilizes a design
philosophy called the service-oriented architecture (SOA). According to this
philosophy, all interactions among computing devices are defined as services in a
formal, standardized way. This philosophy enables all the pieces of the cloud to fit
together. For many organizations to use the cloud and to be able to mix and match
Web services, they need to agree on standard ways of formatting and processing
service requests and data. That leads us to cloud protocols and standards. The
protocols that run the Internet also support cloud processing. Four standards that are
used for Web services and the cloud are:

• WSDL (Web Services Description Language)


A standard for describing the services, inputs and outputs, and other data
supported by a Web service. Documents coded according to this standard are
machine readable and can be used by developer tools for creating programs to
access the service.
• SOAP
A protocol for requesting Web services and for sending responses to Web service
requests.
• XML (eXtensible Markup Language)
A markup language used for transmitting documents. Contains much metadata
that can be used to validate the format and completeness of the document, but
includes considerable overhead.
• JSON (JavaScript Object Notation)
A markup language used for transmitting documents. Contains little metadata and
is preferred for transmitting volumes of data between servers and browsers. While
the notation is the format of JavaScript objects, JSON documents can be
processed by any language.
(LO: 5, Learning Outcome: Compare and contrast different ways of connecting to the
Internet, AACSB: Use of Information Technology)

COLLABORATION EXERCISE 6

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 7

1. Using the knowledge of this chapter and the intuition of the members of your team,
summarize threats that cloud services present to such ISVs.

If our business has been focused on creating and maintaining an IT infrastructure for
other businesses, it is likely that we will experience difficult times as existing
customers and new businesses choose to utilize cloud-based computing resources.
The cloud is a viable, inexpensive alternative to owning and managing computing
resources, hence, our traditional business services will no long be needed. (LO: 2,
Learning Outcome: Learning Outcome: Describe the effects of e-commerce on the
modern business world, AACSB: Reflective Thinking Skills)

2. Suppose your team owns and manages one of these ISVs. You learn that more and
more of your clients are choosing SaaS cloud services like Google for email, rather
than setting up local email servers.

a. What, if anything, can you do to prevent the encroachment of SaaS on your


business?

There is probably very little we can do to prevent the encroachment of SaaS on


our business. The economics are overwhelmingly in favor of the SaaS providers.
Perhaps we could try and keep our customers in the dark about their options that
now include the cloud, but eventually they will become aware of it and they might
resent that we were not forthcoming about the most cost effective ways for them
to obtain their computing resources. (LO: 2, Learning Outcome: Explain how IS
can be used to gain and sustain competitive advantage, AACSB: Reflective
Thinking Skills)

b. Given your answer to question 2a, identify three alternative ways you can
respond.

We could just abandon the work we have always done completely. However,
companies will still need help in determining the right cloud-based computing
options. They will need help in building their databases on the cloud. They will
need help in learning to use the cloud-based resources and they will still need
training so that their people are comfortable with the systems obtained from the
cloud vendors. (LO: 2, Learning Outcome: Explain how IS can be used to gain
and sustain competitive advantage, AACSB: Reflective Thinking Skills)

c. Which of the three responses identified in your answer to question 2b would you
choose? Justify your choice.

Students’ ideas on the responses and the best response will vary. There will be a
significant change in the ISV’s business. Under existing conditions, the business
emphasizes technical expertise. Now the ISV business will need to emphasize
detailed understanding of their customers’ needs for the cloud-based environment.
The focus will be on what you can DO with cloud-based offerings to make the

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 8

business more efficient and effective, not just providing the technical expertise to
create the infrastructure. Services will be very people-oriented and will be much
less technically-oriented. It is not likely that everyone on the ISV’s staff can adapt
to the more people-centered focus of the business. Some highly technical folks are
not well suited to providing training and support to business people. Some
students may feel the outlook is too pessimistic, but others will most likely focus
on new opportunities associated with helping small businesses take advantage of
the cloud successfully. (LO: 2, Learning Outcome: Explain how IS can be used to
gain and sustain competitive advantage, AACSB: Reflective Thinking Skills)

3. Even if SaaS eliminates the need for email and other local servers, there will still
remain viable services that you can provide. Name and describe those services.

Students’ ideas for services that could be provided for each of these components will
vary, but will most likely include training and support to help organizations fully
utilize these resources. (LO: 2, Learning Outcome: Explain how IS can be used to
gain and sustain competitive advantage, AACSB: Reflective Thinking Skills)

4. Suppose instead of attempting to adapt an existing ISV to the threat of cloud services,
you and your teammates decide to set up an entirely new business, one that will
succeed in the presence of SaaS and other cloud services. Looking at businesses in
and around your campus, identify and describe the IS needs those businesses will
have in the cloud services world.

Students’ ideas are likely to cover a wide range of options. For example, if your
university has a medical school, they may identify ways to create and support
telemedicine-related businesses. (LO: 2, Learning Outcome: Explain how IS can be
used to gain and sustain competitive advantage, AACSB: Reflective Thinking Skills)

5. Describe the IS services that your new business could provide for the business needs
you identified in your answer to question 4.

The purpose of telemedicine is to extend the expertise of medical specialists to


underserved locations. If we specialized in this field, we could help attract medical
talent interested in this practice, train them on how to utilize the telemedicine
capabilities, and recruit and train medical personnel in the remote areas to participate
in the telemedicine initiatives. (LO: 2, Learning Outcome: Explain how IS can be
used to gain and sustain competitive advantage, AACSB: Reflective Thinking Skills)

6. Given your answers to questions 1–5, would you rather be an existing ISV attempting
to adapt to this new world or an entirely new company? Compare and contrast the
advantages and disadvantages of each alternative.

Student responses to this question will vary. Clearly, an existing ISV will face
challenges in “reinventing” itself, especially adapting to new training roles rather than
more technical roles. A business making a fresh start doesn’t have that baggage, but
also doesn’t have the established client base as a foundation for the business. (LO: 2,

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 9

Learning Outcome: Explain how IS can be used to gain and sustain competitive
advantage, AACSB: Reflective Thinking Skills)

7. Changing technology has, for centuries, eliminated the need for certain products and
services and created the need for new products and services. What is new, today,
however, is the rapid pace at which new technology is created and adapted. Using
cloud services as an example, create a statement of the posture that business
professionals should take with regard to technology in order to thrive in this fast-
changing environment. Notice the verb in this assignment is thrive, and not just
survive.

The most important lesson to be learned here is that technological change is constant.
While the changes can be confusing and even frightening, business professionals
should welcome the opportunities provided by new technological options and look to
the future instead of trying to cling to the past. The information technology world is
one of constant change and evolution. No company can assume their market will
remain constant over time, no matter how large it is. (LO: 2, Learning Outcome:
Explain how IS can be used to gain and sustain competitive advantage, AACSB:
Reflective Thinking Skills)

CASE STUDY 6

FinQloud Forever … Well, at Least for the Required Interval …

6-4. In your own words, summarize the dealer-broker record retention requirements.

The dealer-broker retention requirements have three elements: records of financial


transactions cannot be altered after the fact; the records must be retained for a certain
time period, and indexes must be created that permit record searches. (LO: 4,
Learning Outcome: Describe different methods of managing IS security, AACSB:
Reflective Thinking Skills)

6-5. Reread the SEC’s 2003 interpretation. In your own words, explain the difference
between “integrated hardware and software control codes” and software
applications that use “authentication and approval policies, passwords, or other
extrinsic controls.” Give an example of each.

Integrated hardware and software control codes refers to systems that combine
control features for both the hardware and software used in the system. Software
controls alone that might prevent records from being overwritten or erased through
passwords do not prevent a record from being changed or deleted. (LO: 6, Learning
Outcome: Describe different methods of managing IS security, AACSB: Analytic
Skills)

6-6. Clearly, in the view of the SEC, the likelihood of compromise of an integrated system

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 10

of hardware and software is considerably less than the likelihood of compromise of a


system of authentication, passwords, and procedures. Justify this view

The SEC’s position is that extrinsic controls could be readily misused to overwrite
records. The SEC believes it would be far easier to compromise such extrinsic
controls like passwords than it would be to tamper with a system of integrated
hardware and software controls. (LO: 4, Learning Outcome: Describe different
methods of managing IS security, AACSB: Analytic Skills)

6-7. Do you agree with the view in question 6-6? Why or why not?

Students may take positions on both sides of this issue, but it is not hard to believe
that systems that rely to a considerable degree on human behavior (such as the
safeguarding of passwords) is more vulnerable. (LO: 4, Learning Outcome: Describe
different methods of managing IS security, AACSB: Analytic Skills)

6-8. Investigate Jordan & Jordan (www.jandj.com) and Cohasset Associates


(www.cohasset.com). If you were a consultant to a financial institution, to what
extent would you rely on the statements of these organizations?

It will be difficult for students to answer this question just by looking at their Web
sites. They both appear to have expertise in this arena. Whether they have the
technical knowledge to evaluate the security of specific integrated hardware and
software security solutions is harder to judge. Try pushing the students beyond what
the words on the Web sites say to discover the research they would want to conduct
before relying on the statements of these organizations. (LO: 4, Learning Outcome:
Describe different methods of managing IS security, AACSB: Reflective Thinking
Skills)

6-9. If you were a consultant to a financial institution, what else might you do to verify
that FinQloud complies with the SEC ruling and its 2003 interpretation?

I would consider hiring an independent firm to perform its own assessment of


compliance. It is hard to just take the word of the companies hired by NASDAQ
OMX at face value – they had a vested interest in finding a result that made FinQloud
look good. (LO: 4, Learning Outcome: Learning Outcome: Describe different
methods of managing IS security, AACSB: Reflective Thinking Skills)

6-10. Explain how the knowledge that you have gained so far in this course helps you to
understand the SEC’s 2003 interpretation. Summarize how your knowledge would
help you if you worked for a financial institution. Cast your answers to this question
in a way that you could use in a job interview.

At this point in the course, students will be able to appreciate the vulnerability of
systems that are protected by extrinsic methods (passwords and authentication and
approval policies). The human factor introduces risk that an integrated system of

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 11

hardware and software controls does not share. (LO: 4, Learning Outcome: Describe
different methods of managing IS security, AACSB: Reflective Thinking Skills)

MyMISLab

6-11. Suppose you manage a sales department that uses the SaaS product
Salesforce.com. One of your key salespeople refuses to put his data into that system.
“I just don’t believe that the competition can’t steal my data, and I’m not taking that
risk.” How do you respond to him?

While this is an understandable concern, the salesperson should be reassured that the
vendor, SalesForce, is a well-established provider of CRM products. SalesForce
could not survive if its customers could not rely upon the safety and security of their
data. Perhaps the reluctant salesperson has other reasons for his resistance to this
change. I will try to determine the real underlying causes of his concerns about the
CRM product we are adopting. (LO: 4, Learning Outcome: Describe different
methods of managing IS security, AACSB: Reflective Thinking Skills).

6-12. Go to http://aws.amazon.com and search for AWS database offerings. Explain the
differences among Simple Database Service, Amazon Relational Store, and
MongoDB. Which of these three would you recommend for storing AllRoad Parts’ 3D
printing design files? (By the way, whenever you query the Internet for any AWS
product, be sure to include the keyword AWS in your search. Otherwise, your search
will result in Amazon’s lists of book about the item you’re searching for.)

These three DBMS products are part of Amazon’s Platform as a Service EC2 DBMS
offerings. Customers can obtain DBMS software as a part of the platform it obtains
from Amazon. Simple Database Service provides a DBMS that is a simple, limited-
capability, table-oriented product. Amazon Relational Store can provide either a full
version of the MySQL open-source DBMS product or a full version of the Oracle
DBMS product. MongoDB is a no-SQL DBMS product that stores objects in JSON
format. Since MongoDB is designed to be a document-storage database, it may be the
most appropriate for storing AllRoad’s 3D printing design files. (LO: 2, Learning
Outcome: Discuss best practices for using and managing databases, AACSB:
Analytic Skills)

6-13. Supposed Lucas wants AllRoad to set up a private internet, and he justifies this
request on the basis of better security. Explain why that is not a good decision, and
rebut his claim about security by suggesting that AllRoad use a VPC. Justify your
suggestion.

The major cloud service vendors employ thousands of highly trained, skilled
specialists to create, manage, administer, and improve their cloud services. It is nearly
impossible to imagine that the security they provide could be done better in a private
internet managed by the IT department at AllRoad. If security is paramount, AllRoad

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Kroenke - MIS Essentials 4th Ed - Instructor’s Manual 12

should consider a Virtual Private Cloud, which is a subset of a public cloud with
highly restricted, secure access. (LO: 4, Learning Outcome: Describe the major types
of computer hardware and software used by companies, AACSB: Analytic Skills)

6-14. In five sentences or less, explain how the cloud will affect job prospects for you in
the next 10 years.

There will be fewer small companies providing information systems services to their
local communities. The number of employees involved in managing the computing
infrastructures associated with the cloud is relatively small. Because of the
availability of cheap computing infrastructure, there may be more startup businesses
that can quickly and cheaply acquire the computing infrastructure they need. The
demand for people who know how to create, use, and manage information systems
will continue to be strong. (LO: 5, Learning Outcome: Describe the effects of e-
commerce on the modern business world, AACSB: Reflective Thinking Skills)

Copyright © 2015 Pearson Education, Inc.

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