Exam

Name___________________________________

1.
From 1995 through 2000, many EC projects and start-up companies were funded with little analysis of their business
viability or fnances.
Answer:

True
False
Dif: 1
Type: TF
Page Ref: 664
AACSB:
Objective:

2.
The result of the rush to invest in EC projects and start-up companies was the 2001 to 2003 "dot-com bust," when
hundreds of EC startups went out of business and the stock market crashed.
Answer:

True
False
Dif: 1
Type: TF
Page Ref: 664
AACSB:
Objective:

3.
After the dot-com bust, most IT executives acquired the knowledge and tools to do ROI calculations on proposed EC
investments.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 664
AACSB:
Objective:

4.
One reason why EC justifcation is needed is that companies now realize that EC is not necessarily the solution to all
problems.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 664
AACSB:
Objective:

5.
According to a CIO Insight report, EC justifcation decreases the credibility of EC projects.
Answer:
True

False
Dif: 1
Type: TF
Page Ref: 665
AACSB:
Objective:

6.
One basic way to categorize diferent EC investments is to distinguish between investment in infrastructure and
investment in specifc EC applications.
Answer:

True
False
Dif: 1
Type: TF
Page Ref: 665
AACSB:
Objective:

7.
Infrastructure investments are made for the short-term because of frequent technological changes.
Answer:
True

False
Dif: 1
Type: TF
Page Ref: 665
AACSB:
Objective:

8.
Cost-beneft analysis is frequently assessed by return on investment (ROI), which is also the name of a specifc method for
evaluating investments.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 665
AACSB:
Objective:

9.
All EC investments need to be formally justifed to insure that they align with the company's competitive strategy.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 665
AACSB:
Objective:

10.
Metrics are used to describe costs, benefts, or the ratio between them and need to be defned properly with a clear way to
measure them.
Answer:

True
False
Dif: 3
Type: TF
Page Ref: 666
AACSB:
Objective:

11.
Key performance indicators (KPI) are used to qualitatively track critical metrics or success factors.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 666
AACSB:
Objective:

12.
Cannibalization occurs when a new EC initiative produces substantial online sales, but traditional sales fall such that no
increase in total revenue occurs.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 669
AACSB:
Objective:

13.
A major difculty in justifying EC projects is that many costs and benefts are intangible and therefore very difcult to
measure.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 671
AACSB:
Objective:

14.
Creating a competitive advantage, providing a beneft to society, and improving the company's image are examples of
tangible benefts that might be realized from an EC project.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 671
AACSB:
Objective:

15.
In preparing the business case for EC investment, managers should examine the potential additional revenues, such as
increased revenues via products or services from a larger global market because of more efective product marketing on
the Web.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 674
AACSB:
Objective:

16.
The ROI method uses a formula that divides the total net beneft by the initial cost. The result is a ratio that measures the
ROI for each year or for an entire period.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 674
AACSB:
Objective:

17.
In an NPV analysis, analysts convert future values of benefts to their present-value equivalents by discounting future
cash fows at the risk-free rate set by the Federal Reserve Bank.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 675
AACSB:
Objective:

18.
Given the diversity of activities involved in e-procurement, the metrics used to measure the value of e-procurement must
refect how well each process is accomplished and take into consideration whether the company is a buyer or seller.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 679
AACSB:
Objective:

19.
The average cost curve of regular products is U-shaped and has an optimal lowest point, but with digital products the
average cost per unit declines as quantity increases.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 682
AACSB:
Objective:

20.
Usability testing refers to testing application software modules one at a time.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 691
AACSB:
Objective:

21.
Unit testing refers to testing the combination of application modules acting in concert.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 691
AACSB:
Objective:

22.
Interoperability refers to connecting people, data, and diverse systems.
Answer:

True
False
Dif: 1
Type: TF
Page Ref: 692
AACSB:
Objective:

23.
Performance value is the likelihood a segment of source code can be used again to add new functionalities with slight or
no modifcation.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 692
AACSB:
Objective:

24.
The higher purchase price is a disadvantage of purchasing an EC system.
Answer:
True

False
Dif: 1
Type: TF
Page Ref: 693
AACSB:
Objective:

25.
Vendors dropping a product or going out of business is a disadvantage to purchasing an EC system.
Answer:

True
False
Dif: 1
Type: TF
Page Ref: 693
AACSB:
Objective:

26.
Turnkey computing is the provision of computational resources on demand via a computer network.
Answer:
True

False
Dif: 1
Type: TF
Page Ref: 695
AACSB:
Objective:

27.
Reduced time-to-market is a cloud computing advantage.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 695
AACSB:
Objective:

28.
New technologies require new organizational structures and procedures.
Answer:

True
False
Dif: 1
Type: TF
Page Ref: 699
AACSB:
Objective:

29.
Reengineering eliminates the intermediaries between sellers and buyers.
Answer:
True

False
Dif: 1
Type: TF
Page Ref: 700
AACSB:
Objective:

30.
Business process reengineering is the analysis and design of workfows and processes within an organization.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 700
AACSB:
Objective:

31.
Structured management is a holistic management approach focused on aligning all aspects of an organization with the
wants and needs of clients.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 701
AACSB:
Objective:

32.
Mass customization enables manufacturers to create specifc products for each customer based on the customer's exact
needs.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 701
AACSB:
Objective:

33.
Leveraging intangible assets, capabilities, relationships, and unleashing dormant assets is a critical success factor for EC.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 705
AACSB:
Objective:

34.
Critical elements that can afect the value of EC across cultures are perceived trust, consumer loyalty, regulation, political
infuences, and even the content of online ads.
Answer:

True
False
Dif: 2
Type: TF
Page Ref: 707
AACSB:
Objective:

35.
Developing economies often face power blackouts, unreliable telecommunications infrastructure, undependable delivery
mechanisms, and a relatively few customers who own computers and credit cards. These limitations can be overcome
when predicting EC investment payofs by using a combination of break-even analysis and NPV.
Answer:
True

False
Dif: 2
Type: TF
Page Ref: 707
AACSB:
Objective:

36.
CIOs need to efectively communicate the value of proposed EC projects in order to gain approval for each of the
following reasons except
A)
the success of EC projects may be assessed in order to pay bonuses to those involved with the project.
B)
some large companies, and many public organizations, mandate a formal evaluation of requests for funding.
C)
companies now realize that EC is not necessarily the solution to all problems.
D)
demand for expanding or initiating e-business projects is no longer strong so there are fewer requests for funding.
Answer:
D
Dif: 2
Type: MC
Page Ref: 664-665
AACSB:
Objective:

37.
One basic way to categorize diferent EC investments is to distinguish between investments in infrastructure and
investments in specifc EC applications because benefts from infrastructure investments
A)
are very complex.
B)
have a low return.
C)
depend on the EC applications.
D)
are made for the long-term.
Answer:
D
Dif: 1
Type: MC
Page Ref: 665
AACSB:
Objective:

38.
Basic reasons companies invest in IT and EC include each of the following except
A)
justify new marketing campaigns.
B)
reduce time-to-market.
C)
improve business processes.
D)
increase customer satisfaction and retention.
Answer:
A
Dif: 2
Type: MC
Page Ref: 665
AACSB:
Objective:

39.
Not all EC investments need to be formally justifed. Each of the following is a case where formal evaluation may not be
needed except
A)
when the relevant data are not available, are inaccurate, or are too volatile.
B)
when the value of the investment is relatively small for the organization.
C)
when the EC project is mandated and must be done regardless of the costs and benefts.
D)
when competitors have made that type of investment.
Answer:
D
Dif: 2
Type: MC
Page Ref: 665
AACSB:
Objective:

40.
A comparison of the costs of a project against the benefts best defnes
A)
benefts metric.
B)
IRR.
C)
cost-beneft analysis.
D)
feasibility justifcation.
Answer:
C
Dif: 1
Type: MC
Page Ref: 665
AACSB:
Objective:

41.
Metrics can
A)
defne the value proposition of business models.
B)
be the basis for specifc goals and plans.
C)
assess the health of companies by using tools such as balanced scorecards and performance dashboards.
D)
do all of the above.
Answer:
D
Dif: 2
Type: MC
Page Ref: 666
AACSB:
Objective:

42.
Metrics are used to describe each of the following except
A)
the ratio of costs to benefts.
B)
costs.
C)
benefts.
D)
standards.
Answer:
D
Dif: 2
Type: MC
Page Ref: 666
AACSB:
Objective:

43.
In B2C, an example of a tangible EC metric from the buyer's perspective is
A)
ease of use of EC.
B)
cost/price of the product.
C)
proft per customer.
D)
convenience in purchasing.
Answer:
B
Dif: 3
Type: MC
Page Ref: 667
AACSB:
Objective:

44.
Tangible metrics include
A)
reelection of candidates.
B)
lower tax rates.
C)
fexibility in changing a purchase.
D)
ease of use of EC.
Answer:
B
Dif: 3
Type: MC
Page Ref: 667
AACSB:
Objective:

45.
For governments, an example of an intangible EC metric is
A)
risk reduction.
B)
reelection of candidates.
C)
increase in participation in government programs.
D)
lower tax rates.
Answer:
B
Dif: 2
Type: MC
Page Ref: 667
AACSB:
Objective:

46.
Productivity benefts from using EC are difcult to measure because
A)
EC gains in certain areas of the company may be ofset by losses in other areas.
B)
the payofs are too short.
C)
qualitative benefts do not count.
D)
there is no time lag in EC gains.
Answer:
A
Dif: 3
Type: MC
Page Ref: 669
AACSB:
Objective:

47.
The relationship between EC investment and organizational performance is
A)
shared with other investments.
B)
not measurable.
C)
indirect.
D)
direct.
Answer:
C
Dif: 3
Type: MC
Page Ref: 670
AACSB:
Objective:

48.
EC costs and benefts can be classifed into two broad categories
A)
short-term and capital.
B)
direct and routine.
C)
operational and strategic.
D)
tangible and intangible.
Answer:
D
Dif: 1
Type: MC
Page Ref: 671
AACSB:
Objective:

49.
The major steps in the process of justifying large-scale EC and IT projects include each of the following except
A)
do not leave out strategic benefts, including long-term ones.
B)
document and verify all fgures used in the calculation. Clarify all assumptions.
C)
be careful not to overestimate cost and underestimate benefts (a tendency of many managers).
D)
lay an appropriate foundation for analysis with your vendor, and then conduct your ROI.
Answer:
C
Dif: 3
Type: MC
Page Ref: 672
AACSB:
Objective:

50.
A graphic representation of the maturity, adoption, and social application of specifc IT tools best defnes
A)
hype cycle.
B)
logic model.
C)
Gantt chart.
D)
network diagram.
Answer:
A
Dif: 2
Type: MC
Page Ref: 672
AACSB:
Objective:

51.
Gartner's hype cycle includes each of the following stages except
A)
simplicity of method.
B)
trough of disillusionment.
C)
plateau of productivity.
D)
technology trigger.
Answer:
A
Dif: 3
Type: MC
Page Ref: 672
AACSB:
Objective:

52.
According to Gartner's hype cycle, which of the following is the stage of overenthusiasm and unrealistic projections
during which a furry of publicized activity by technology leaders may result in some successes but more failures as the
technology is pushed to its limits?
A)
trough of disillusionment
B)
slope of enlightenment
C)
peak of infated expectations
D)
plateau of productivity
Answer:
C
Dif: 3
Type: MC
Page Ref: 672-673
AACSB:
Objective:

53.
According to Gartner's hype cycle, which of the following stages is the point at which the technology becomes
unfashionable and the media abandons the topic, because the topic did not live up to its infated expectations?
A)
peak of infated expectations
B)
plateau of productivity
C)
trough of disillusionment
D)
slope of enlightenment
Answer:
C
Dif: 3
Type: MC
Page Ref: 672-673
AACSB:
Objective:

54.
Traditional methods for evaluating EC investments include each of the following except
A)
discount rate.
B)
ROI.
C)
NPV.
D)
payback period.
Answer:
A
Dif: 1
Type: MC
Page Ref: 674-678
AACSB:
Objective:

55.
Which of the following is the discount rate that makes the NPV of cash fows produced over time equal to zero?
A)
IRR
B)
ROI
C)
TCO
D)
CPR
Answer:
A
Dif: 2
Type: MC
Page Ref: 675
AACSB:
Objective:

56.
A formula for calculating the cost of owning, operating, and controlling an IT system best defnes
A)
total cost of ownership.
B)
total benefts of ownership.
C)
return on investment.
D)
payback period.
Answer:
A
Dif: 2
Type: MC
Page Ref: 675
AACSB:
Objective:

57.
Benefts of ownership that include both tangible and intangible costs best defnes
A)
NPV analysis.
B)
total benefts of ownership.
C)
beneft-to-cost analysis.
D)
economic value of ownership.
Answer:
B
Dif: 2
Type: MC
Page Ref: 675
AACSB:
Objective:

58.
The return on invested capital generated by a company minus the cost of the capital used in recreating the cash fow best
describes
A)
return on investment.
B)
break-even analysis.
C)
economic value added.
D)
NPV analysis.
Answer:
C
Dif: 3
Type: MC
Page Ref: 675
AACSB:
Objective:

59.
Maximizing the value for unconstrained project selection is an advantage of
A)
payback period.
B)
net present value.
C)
total cost of ownership.
D)
economic value added.
Answer:
B
Dif: 2
Type: MC
Page Ref: 676
AACSB:
Objective:

60.
The disadvantage of the NPV method for evaluating EC and IT is
A)
it is difcult to compare projects of unequal lives or sizes.
B)
it assumes reinvestment at the same rate.
C)
it may be difcult to classify outlays as expenses or investments.
D)
the true benefts are difcult to measure.
Answer:
A
Dif: 3
Type: MC
Page Ref: 676
AACSB:
Objective:

61.
Types of appraisal and justifcation methods for IT investments include each of the following except
A)
portfolio approaches.
B)
ratio approaches.
C)
real-time investment approaches.
D)
fnancial approaches.
Answer:
C
Dif: 3
Type: MC
Page Ref: 677-678
AACSB:
Objective:

62.
Which of the following advanced methods for EC justifcation and evaluation uses the idea of critical success factors and
focuses on key organizational objectives and the potential impacts of the proposed EC project on each of them?
A)
performance dashboard
B)
management by maxim
C)
benchmarks
D)
information economics
Answer:
D
Dif: 3
Type: MC
Page Ref: 678
AACSB:
Objective:

63.
Which of the following advanced methods for EC justifcation and evaluation uses a combination of brainstorming and
consensus-reaching methodologies to determine how much a company should invest in large EC infrastructures?
A)
balanced scorecard
B)
management by maxim
C)
benchmarks
D)
scoring methodologies
Answer:
B
Dif: 3
Type: MC
Page Ref: 678
AACSB:
Objective:

64.
Each of the following metrics indicates excellence in e-procurement except
A)
increased on-time deliveries.
B)
increased order fulfllment rate.
C)
increased production costs.
D)
decreased number of rejects received from suppliers.
Answer:
C
Dif: 3
Type: MC
Page Ref: 679
AACSB:
Objective:

65.
Justifying information security projects
A)
is not done because ROI calculators are not available.
B)
is not needed because it is well-known that preventing network security problems is less labor intensive than cleaning up
virus infections.
C)
should be done because employee security training is usually poorly done.
D)
should focus on defending against external threats such as hackers and malware.
Answer:
C
Dif: 3
Type: MC
Page Ref: 681
AACSB:
Objective:

66.
Antivirus investments are easily justifed because more than ________ percent of viruses enter business networks via e-
mail.
A)
85
B)
33
C)
50
D)
25
Answer:
A
Dif: 2
Type: MC
Page Ref: 681
AACSB:
Objective:

67.
The average-cost curves (AVC) of physical products and digital products
A)
are both L-shaped.
B)
are diferent because the AVC of physical products declines as quantity increases forming an L-shape, while the AVC of
digital products is U-shaped.
C)
are diferent because the AVC of digital products declines as quantity increases forming an L-shape, while the AVC of
physical products is U-shaped.
D)
are both U-shaped.
Answer:
C
Dif: 3
Type: MC
Page Ref: 682
AACSB:
Objective:

68.
An equation indicating that for the same quantity of production, Q, companies either can use a certain amount of labor or
invest in more automation best describes
A)
unit testing.
B)
production function.
C)
product valuation.
D)
Q-model.
Answer:
B
Dif: 2
Type: MC
Page Ref: 682
AACSB:
Objective:

69.
Transaction costs include each of the following except
A)
negotiation costs.
B)
production costs.
C)
search costs.
D)
monitoring costs.
Answer:
B
Dif: 2
Type: MC
Page Ref: 683
AACSB:
Objective:

70.
Costs incurred in ensuring that the agent performs tasks as expected best defnes
A)
production costs.
B)
agency costs.
C)
time-on-task costs.
D)
opportunity costs.
Answer:
B
Dif: 2
Type: MC
Page Ref: 683
AACSB:
Objective:

71.
McAfee allows users of its VirusScan virus-detection software to automatically update the latest security patches online.
This is an example of ________ to attract customers who value this automatic update.
A)
agility
B)
product or service diferentiation
C)
core competency
D)
competitive advantage
Answer:
B
Dif: 2
Type: MC
Page Ref: 685
AACSB:
Objective:

72.
The fair market value of a business or the price at which a property would change hands between a willing buyer and a
willing seller who are both informed and under no compulsion to act best describes
A)
feasibility.
B)
agility.
C)
valuation.
D)
reusability.
Answer:
C
Dif: 2
Type: MC
Page Ref: 685
AACSB:
Objective:

73.
A Web-based seller of CDs carefully monitors the prices charged by its competitors for identical products. This company
has the ability to change a given price within three minutes in response to changes by competitors. This is an example of
EC
A)
core competency.
B)
product or service diferentiation.
C)
competitive advantage.
D)
agility.
Answer:
D
Dif: 2
Type: MC
Page Ref: 685
AACSB:
Objective:

74.
Referencing the capabilities needed by Webstore users, buyers need the ability to
A)
create the capability for cross-selling and up-selling.
B)
analyze purchases in order to customize buyers' experiences.
C)
provide Web-based postsale support.
D)
track orders once they are shipped.
Answer:
D
Dif: 2
Type: MC
Page Ref: 687
AACSB:
Objective:

75.
Referencing capabilities needed by Webstore users, sellers need the ability to do each of the following except
A)
select products to purchase and negotiate or determine their total price.
B)
provide an electronic shopping cart in which buyers can assemble their purchases.
C)
track shipments to ensure that they are delivered.
D)
arrange product delivery.
Answer:
A
Dif: 3
Type: MC
Page Ref: 687
AACSB:
Objective:

76.
Determining whether a website meets the original business objectives and vision best defnes
A)
feasibility testing.
B)
usability testing.
C)
acceptance testing.
D)
unit testing.
Answer:
C
Dif: 2
Type: MC
Page Ref: 691
AACSB:
Objective:

77.
A structured approach to shifting/transitioning individuals, teams, and organizations from a current state to a desired
future state. It is an organizational process aimed at empowering employees to accept and embrace changes in their
current business environment. This best describes
A)
usability testing.
B)
change management.
C)
employee empowerment.
D)
acceptance testing.
Answer:
B
Dif: 2
Type: MC
Page Ref: 702
AACSB:
Objective:

78.
Each of the following is a critical success factor (CSF) of the Old Economy except
A)
compete to sell product.
B)
build market share to get economies of scale.
C)
deliver high-value products.
D)
create new partnerships, stay with core competency.
Answer:
D
Dif: 2
Type: MC
Page Ref: 705
AACSB:
Objective:

79.
One of the strengths of EC is the ease with which its adopters can reach a global population of consumers. However, EC-
driven businesses must consider the critical elements afecting the value of EC across cultures. These elements include
each of the following except
A)
perceived trust.
B)
political infuences.
C)
consumer loyalty.
D)
delivery delays.
Answer:
D
Dif: 2
Type: MC
Page Ref: 707
AACSB:
Objective:

80.
Each of the following apply to EC in developing economies except
A)
developing economies struggle with various issues that create too many business and technology risks to justify
investment in those economies at this time.
B)
developing economies, such as China and India, represent a signifcant opportunity for EC to connect businesses to
customers, as well as other businesses.
C)
developing economies often face power blackouts and unreliable infrastructure and delivery mechanisms creating
limitations that make it difcult for frms to predict whether EC investments will pay of, and when.
D)
the potential volume of transactions in developed countries can make EC investments more attractive for established frms
than new frms because established frms have already recovered the costs of their IT infrastructures.
Answer:
A
Dif: 3
Type: MC
Page Ref: 707
AACSB:
Objective:

81.
List and briefy describe three reasons why EC justifcation is needed.
Answer:
Companies realize that EC is not necessarily the solution to all problems. Therefore, EC projects must compete for funding
and resources with other internal and external projects. Analysis is needed to determine when funding of an EC project is
appropriate. Some large companies, and many public organizations, mandate a formal evaluation of requests for funding.
Companies need to assess the success of EC projects after completion, and later on a periodic basis. The success of EC
projects may be assessed in order to pay bonuses to those involved with the project.
Dif: 2
Type: ES
Page Ref: 664-665
AACSB:
Objective:

82.
List and briefy discuss the difculties in measuring productivity and performance gains from EC investments.
Answer:
Data, or the analysis of the data, may hide productivity gains. In service industries, such as fnance or health-care delivery,
it is more difcult to defne what the products are, how they change in quality, and how they may be related to
corresponding benefts and costs. EC productivity gains in certain areas of the company may be ofset by losses in other
areas. For example, increased online sales may decrease ofine sales, a situation known as cannibalism. The results of any
investment justifcation depend on what is actually measured. To assess the benefts of EC investment, one should look at
productivity improvement in the area where the EC project was installed. However, productivity increase may not
necessarily be a proftable improvement if there are losses in other areas. Many EC investments take fve to six years to
show signifcant positive results, but many studies do not wait that long to measure productivity changes.
Dif: 3
Type: ES
Page Ref: 669
AACSB:
Objective:

83.
Explain tangible costs and benefts. Explain intangible costs and benefts.
Answer:
Tangible costs are those that are easy to measure and quantify and that relate directly to a specifc investment. The costs
involved in purchasing hardware, software, consulting, and support services usually are tangible, as are labor costs. These
costs can be measured through accounting information. Tangible benefts are direct benefts such as increased
proftability, improved productivity, and greater market share, and can be measured with relative ease. Intangible costs
are indirect costs that may include the learning curve of the frm's customer service employees to incorporate an EC
system to respond to customer inquiries. Another intangible cost may involve having to adapt other business processes or
information systems, such as processing items returned by customers or building and operating an inventory tracking
system. In many cases, EC projects generate intangible benefts, such as faster time-to-market, increased employee and
customer satisfaction, easier distribution, greater organizational agility, and improved control. These are very desirable
benefts, but it is difcult to place an accurate monetary value on them.
Dif: 2
Type: ES
Page Ref: 671-672
AACSB:
Objective:

84.
List and explain fve methods for evaluating IT investments.
Answer:
ROI, payback period, net present value, value analysis, and information economics are fve methods. ROI uses a formula
to determine the value of a product by dividing net benefts by the initial cost of the project. The payback period calculates
how long it will take to recover the cost of a new project. The net present value discounts the net benefts for each year
back to their present value, and then compares them with the cost of doing the project. Value analysis evaluates the
performance of a low-cost, small-scale version of the project before committing major investment dollars to the full
project. Information economics looks at how a project will impact key organizational objectives. Exhibit 13.7 identifes
additional methods.
Dif: 3
Type: ES
Page Ref: 674-678
AACSB:
Objective:

85.
Defne cloud computing. Identify fve advantages of cloud computing.
Answer:
Cloud computing is the provision of computational resources on demand via a computer network, and the customer pays
only for actual usage. Advantages include no local server installation, rapid scalability, reliability of systems incorporating
the technology, pay per use, and reduced time-to-market.
Dif: 2
Type: ES
Page Ref: 695
AACSB:
Objective:

1.
TRUE

2.
TRUE

3.
FALSE

4.
TRUE

5.
FALSE

6.
TRUE

7.
FALSE

8.
TRUE

9.
FALSE

10.
TRUE

11.
FALSE

12.
TRUE

13.
TRUE

14.
FALSE

15.
TRUE

16.
TRUE

17.
FALSE

18.
TRUE

19.
TRUE

20.
FALSE

21.
FALSE

22.
TRUE

23.
FALSE

24.
FALSE

25.
TRUE

26.
FALSE

27.
TRUE

28.
TRUE

29.
FALSE

30.
TRUE

31.
FALSE

32.
TRUE

33.
TRUE

34.
TRUE

35.
FALSE

36.
D

37.
D

38.
A

39.
D

40.
C

41.
D

42.
D

43.
B

44.
B

45.
B

46.
A

47.
C

48.
D

49.
C

50.
A

51.
A

52.
C

53.
C

54.
A

55.
A

56.
A

57.
B

58.
C

59.
B

60.
A

61.
C

62.
D

63.
B

64.
C

65.
C

66.
A

67.
C

68.
B

69.
B

70.
B

71.
B

72.
C

73.
D

74.
D

75.
A

76.
C

77.
B

78.
D

79.
D

80.
A

81.
Companies realize that EC is not necessarily the solution to all problems. Therefore, EC projects must compete for funding
and resources with other internal and external projects. Analysis is needed to determine when funding of an EC project is
appropriate. Some large companies, and many public organizations, mandate a formal evaluation of requests for funding.
Companies need to assess the success of EC projects after completion, and later on a periodic basis. The success of EC
projects may be assessed in order to pay bonuses to those involved with the project.

82.
Data, or the analysis of the data, may hide productivity gains. In service industries, such as fnance or health-care delivery,
it is more difcult to defne what the products are, how they change in quality, and how they may be related to
corresponding benefts and costs. EC productivity gains in certain areas of the company may be ofset by losses in other
areas. For example, increased online sales may decrease ofine sales, a situation known as cannibalism. The results of any
investment justifcation depend on what is actually measured. To assess the benefts of EC investment, one should look at
productivity improvement in the area where the EC project was installed. However, productivity increase may not
necessarily be a proftable improvement if there are losses in other areas. Many EC investments take fve to six years to
show signifcant positive results, but many studies do not wait that long to measure productivity changes.

83.
Tangible costs are those that are easy to measure and quantify and that relate directly to a specifc investment. The costs
involved in purchasing hardware, software, consulting, and support services usually are tangible, as are labor costs. These
costs can be measured through accounting information. Tangible benefts are direct benefts such as increased
proftability, improved productivity, and greater market share, and can be measured with relative ease. Intangible costs
are indirect costs that may include the learning curve of the frm's customer service employees to incorporate an EC
system to respond to customer inquiries. Another intangible cost may involve having to adapt other business processes or
information systems, such as processing items returned by customers or building and operating an inventory tracking
system. In many cases, EC projects generate intangible benefts, such as faster time-to-market, increased employee and
customer satisfaction, easier distribution, greater organizational agility, and improved control. These are very desirable
benefts, but it is difcult to place an accurate monetary value on them.

84.
ROI, payback period, net present value, value analysis, and information economics are fve methods. ROI uses a formula
to determine the value of a product by dividing net benefts by the initial cost of the project. The payback period calculates
how long it will take to recover the cost of a new project. The net present value discounts the net benefts for each year
back to their present value, and then compares them with the cost of doing the project. Value analysis evaluates the
performance of a low-cost, small-scale version of the project before committing major investment dollars to the full
project. Information economics looks at how a project will impact key organizational objectives. Exhibit 13.7 identifes
additional methods.

85.
Cloud computing is the provision of computational resources on demand via a computer network, and the customer pays
only for actual usage. Advantages include no local server installation, rapid scalability, reliability of systems incorporating
the technology, pay per use, and reduced time-to-market.