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Chevron Takes to the Clouds
The importance of the Internet and Web is illustrated in the many applications discussed in this chapter. However, their importance may far exceed the sum of these applications. The Internet and the Web are quickly becoming equivalent with computing, especially with the rise of Web 2.0 technologies, which provides a platform for computing. This is evidenced by online applications such as Google Docs and Adobe Photoshop Express, and extends to the way businesses are managing their information systems. Take Chevron as an example.
Chevron Corporation is based in San Ramon, California and is one of the world’s leading energy companies. It employs more than 55,000 people in 180 countries to produce and transport crude oil and natural gas and to refine, market, and distribute fuels and energy products. Chevron works with many suppliers, each of which provides the company with continuously updated editions of their products and services catalogs. Chevron negotiates the price of the items and services that they purchase from the suppliers. Managing supplier catalogs and negotiating prices while staying within a budget has been such a chore that Chevron, like most other large enterprises, decided to pay an outside information systems company millions of dollars annually to manage the responsibility.
The complicated process of negotiating prices with suppliers became unwieldy for Chevron and its catalog management services provider. Most negotiating was done through e-mail with spreadsheet attachments. The company hired by Chevron to manage the process acted as the middleman. Eventually, it became apparent that the system was ineffective and costly. Chevron searched for an alternative and found it in a new service from Ketera Technologies.
Ketera Technologies provides on-demand services that the company calls “spend management solutions.” According to its Web site (www.ketera.com), Ketera provides “applications and services needed to control and reduce corporate spending at a low cost of ownership.” The application and services that Ketera provides run on Ketera servers maintained by Ketera staff and delivered to clients over the Internet through a Web browser.
Using Ketera’s services over the Web, Chevron suppliers can change prices, which Chevron executives then approve or adjust to stay in budget. Ketera’s service provides numerous tools that Chevron can use to analyze and control its spending. Most importantly, since the service is provided on the Web, all involved parties have convenient access to a centralized system, allowing Chevron to negotiate with all suppliers from one location and using one tool.
Ketera is one of many software companies providing software services over the Internet. Recall from previous chapters that this method of delivering software is referred to as software as a service, or SaaS. Increasing numbers of businesses of all sizes are turning to SaaS. One compelling reason involves accounting. To stay profitable in a challenging economy, many companies are reducing capital expenditures. Software purchases are classified as capital expenditures, while Web- delivered software services are not. Web-delivered software is sold on a subscription basis, and classified by accountants as a maintenance expense, an area of the budget that is not being cut as much as capital expenses.
Internet security has also developed to the point where companies are more confident that the data being managed will remain private and secure as it travels the Internet. SaaS vendors are providing clients with adequate assurances that the data will remain safe in their hands.
Industry analysts expect that by 2011 the worldwide market for SaaS will grow from $6.3 billion to $19.3 billion. This estimate and the rapid increase of offerings of Web-based software for both personal and business use indicate a strong migration from private ownership of software and information systems to a model in which software and information systems are supplied as subscription services delivered over the Internet. This is what defines cloud computing. Cloud computing will make the Internet and Web more important to businesses and society than ever.
1. What benefits and dangers are presented by SaaS and cloud computing?
2. Name two reasons companies are turning to SaaS.
1. Do you think SaaS suffers from any limitations because it is delivered over the Internet? What are they?
2. How might the increasing number of software services and data being delivered over the Internet affect its infrastructure?