Chapter 9 SaaS and Cloud Computing

Question 1

A startup is deciding whether to build its own data center or use AWS. One founder argues that owning servers gives them more control, while another argues that using AWS will allow them to launch faster and scale more easily without large upfront costs.

Which statement BEST explains the advantage of using AWS in this situation?

A. AWS eliminates all long-term costs associated with infrastructure B. AWS allows the firm to outsource infrastructure and scale resources without large upfront investment C. AWS increases control over hardware compared to owning servers D. AWS removes the need for any technical expertise within the firm

Correct answer: B

Cloud infrastructure like AWS lets a company avoid buying and maintaining its own servers up front. Instead, the firm can rent computing resources as needed and scale faster as demand changes. AWS does not eliminate all future costs, it gives less direct hardware control than owning servers, and companies still need technical expertise to design and manage their systems.

Question 2

A company uses Google Docs instead of Microsoft Excel installed locally. Employees notice that while collaboration is easier, some advanced features are missing and performance can sometimes be slower when working with large files.

Which concept BEST explains these tradeoffs?

A. Network effects increase the value of Google Docs over Excel B. SaaS solutions trade off performance and feature depth for accessibility and convenience C. Open-source software reduces latency compared to proprietary software D. Traditional software eliminates the need for internet connectivity

Correct answer: B

SaaS tools are often easier to access, share, and collaborate in, but they may not include every advanced feature found in desktop software. They can also feel slower because performance depends on network travel and hosted execution. That convenience-versus-feature-depth tradeoff is the core idea here.

Question 3

A firm adopts a SaaS-based CRM system. Over time, the firm becomes highly dependent on the provider, and switching to another system would require retraining employees, migrating data, and redesigning workflows.

Which concept BEST describes this situation?

A. Network effects B. Switching costs C. Economies of scale D. Open standards

Correct answer: B

Switching costs are the time, money, disruption, and effort required to move from one system to another. In this case, retraining staff, moving data, and redesigning workflows all make the firm more locked in to the provider. That is a classic SaaS switching-cost problem.

Question 4

A small startup is able to launch a global app using AWS without purchasing any servers or hiring a large IT team. Ten years ago, this would have required significant capital investment.

Which concept BEST explains how cloud computing enabled this outcome?

A. Cloud computing increases barriers to entry by centralizing infrastructure B. Cloud computing lowers entry barriers by reducing upfront costs and infrastructure requirements C. Cloud computing eliminates competition by standardizing platforms D. Cloud computing increases switching costs for new firms

Correct answer: B

Cloud computing lowers the barrier to entry because startups no longer need to spend huge amounts on physical servers, data center space, or large infrastructure teams before launching. Renting infrastructure on demand makes it possible to start small, launch faster, and scale when usage grows.

Question 5

A company is considering moving mission-critical systems to the cloud but is concerned about potential outages, data security, and reliance on a single vendor.

Which concept BEST addresses these concerns?

A. Service Level Agreement (SLA) B. Network effects C. Price elasticity of demand D. Open-source licensing

Correct answer: A

A service level agreement helps define reliability expectations, uptime promises, support responsibilities, and other important terms when a company outsources infrastructure or software services. It is one of the main tools firms use to manage cloud risk for important systems.

Practice Quiz