The rapid development and dissemination of new information, as well as telecommunications technology today acquires the character of the global information revolution, which has a growing influence on politics, economics, management, finance, science, culture and other social spheres within national borders and in the world as a whole. One of the most important tasks of the present time is improving management processes, including the use of modern information technology. It is the key to performance of virtually all organizations. Effective management of the organization today is not possible without control of its information activities and the entire system of corporate information. Therefore, developed management information system is the key to success of an organization.
Brief History of Amazon
Amazon is a company that has changed the very essence of trade, contributing to the popularity of sales via the Internet. Its founder was Jeffrey Bezos. The idea to create an online store came to him in 1976, on the day of his twelfth birthday. Jeffrey wanted to book cartoon characters from the screen. After graduating from high school with honors, Bezos entered the prestigious Princeton University (physics department). There, he decided to focus attention on the issues of computer support. In this area, there were fewer specialists and it was assumed that there would be an increasing demand for professionals of decent level soon (Stone, 2014).
As a result, Bezos began to study at the Department of electronic instrumentation and Informatics of Faculty of Physics. He successfully graduated in 1986 with honors and diploma of electronics engineer. Bezos refused to work in Intel, Bell Labs (Lucent Technologies) and Andersen Consulting (Accenture).
He liked the work of a young telecommunications company Fitel (founded by two professors of Columbia University), which aimed at revolutionizing the market of financial transactions. Software from Fitel would help financial market participants get profit from the difference in value of the same assets in different countries. Soon Bezos was awarded by the company and became director of customer interaction. Having worked in Fitel for two years, Bezos realized that he could not develop the company to transnational dimension. He began to look for a new job.
Recruiters from Bankers Trust looked through his CV, and he turned his attention to Wall Street, where he began working in the financial services company DE Shaw. Four years later, he was promoted to a position of senior Vice President. However, soon he discovered the Internet. After that, Jeff retired; he got the idea of a new Internet company. In 1994, there were only about 38 million of Internet users. These were mainly students of technical colleges and enthusiasts, who could combine personal computer themselves and knew how to work with the modem, connected to it (Stone, 2014).
Once Bezos read that during the year the number of Internet users has increased by 3200%. And he decided to launch a company that would sell books via the Internet. Bezos decided that the new company would be called Amazon, in honor of the deepest river of the planet (a metaphor for the Internet: the streams flow into the river, the river water seeks its vast ocean). It was located in Seattle, as there were stocks of the largest distributor of books Ingram. The choice of Seattle as the location for the headquarters of Amazon has played a positive role in fundraising (Stone, 2014).
300 thousand dollars were invested in the project of Bezos by his parents. The rest of the money was invested by private investors. At first, Bezos hired programmers from Silicon Valley and bought equipment and in 16 July 1995 opened a store at: www.amazon.com. Database contained millions of titles and convenient search engine allowed as a request to use the author’s name, title of the book or the international code ISBN (Stone, 2014).
The site accepted orders via the web (the term “e-commerce” almost never used till that moment), by telephone, email and fax, and Jeff often answered calls and emails of customers himself (Filson, 2002). In addition, he established his own department of delivery. During the first month, the store sold books in all 50 US states and 45 countries. By September 1995, the Amazon.com site sold books weekly for 20 thousand dollars. During all this time, Jeff did not spend a single cent on advertising (the company was advertised via the first free banner networks). The explosive growth of sales surpassed all sorts of expectations. A year later, Amazon has been featured on the cover of Wall Street Journal as the most successful of season online business.
It should be mentioned that the company of Bezos has one important difference from many Internet startups that is the fact that management information was high. This led to a long-term strategy building and Jeffrey Bezos became interested in long-term perspective. Therefore, Amazon survived the collapse of the dot-coms later. On May 15, 1997 the presentation of the company on IPO took place. At the moment there are 8 branches of Amazon: Canada, China, Japan, Germany, France, Spain, Italy and the UK. They differ from each other by different postage, a variety of goods and language (Stone, 2014). The largest and most popular Amazon remains in the US, but in the last few years subsidiaries in Germany and the UK have started to gain popularity as much as the basic unit. Basically, this popularity is growing among the CIS countries (primarily, this is due to the cheaper than in the US delivery of purchased goods). The seller of goods can be both the Amazon Company and merchants, for a fee of displaying their products on their websites. Guarantor in these cases is the Amazon: it thoroughly checks the sellers, accepts payments, tracks the performance of the seller, guarantees return policy. Therefore, purchases on Amazon are considered being relatively safe among Internet users all around the world. Amazon has no physical stores and all sales transactions are made exclusively via the Internet. Therefore, the Amazon managed to keep the prices of sold goods at a very low level.
The uniqueness of Amazon, roles and applications of information system in the company should be considered to characterize the reasons of the success of the company.
The Uniqueness of the Amazon, Roles and Applications of Information Systems
Management information system of Amazon was an attempt to link directly the information system and its development with organizational goals using logical analysis. It regularly produces structured reports on various aspects for the Amazon. Its tasks are to assess the operations and create a report based on it (Laudon & Laudon, 2013). Management information system of the company is a set of interrelated machines organized in a hierarchical structure, covering all aspects of the company from top to bottom (Sousa & Oz, 2014). It forms the first, rarely the second level of information system and performs its normal function and transmits information machines of the second level (Sousa & Oz, 2014). At this level, the data is used for optimization calculations (Laudon & Laudon, 2013). Thus, the management information system consistently implements the principles of unity and organization of information through the use of technical means of collection, storage, processing and transmission of information in conjunction with the use of analytical methods of mathematical statistics and models of forecasting and analytical calculations.
Because of its development, Amazon.com has managed to become the biggest online store in the world. This is illustrated by a case study of technology of the company. Thus, Amazon.com was first to introduce such a service as the customer reviews on any product in order to gain a competitive advantage, even though sometimes the reviews were negative. Case study was that the producers initially opposed the introduction of this feature. They thought that the introduction of this option could negatively affect sales in the presence of a large number of negative reviews. However, the analysis of information on the basis of management information system showed that the reviews only increased sales and the problem was solved, which gave the company a competitive advantage at the time.
Another case study of management of company deals with the question of specialization in which managers were dealing only with the sale of the books. Instead, on the basis of management information system, a decision to diversify the activities was adopted and a competitive advantage has been acquired. Today, Amazon sells a variety of products, including appliances, DVD and even digital music.
Speaking about management in the Amazon, it needs to be admitted that the situation was very difficult at the beginning. The company believed that success could be achieved only with small groups of workers. That’s why Jeffrey Bezos did not use complex vertical hierarchy in management. Everything has been built on the work of small groups till the current moment.
An important role in the successful sale rates of the Amazon was played by the proper marketing. Management information system has helped to build a sales system, in which ordinary people themselves started to promote products of Amazon. Any site owner can sell products of Amazon through their own resource, receiving a percentage of sales.
Management information system helped to create the concept of cloud computing. Amazon has already offered to rent their computers for complex calculations. Moreover, the company is going to concentrate efforts on this kind of earnings in the future, giving it the key priorities.
Amazon was engaged in renting its computing power as early as March 2006.
If to calculate the approximate revenue from Amazon rental cloud computers, many interesting results can be seen.
It is known that most of the computers in the park of Amazon region cost 300 dollars. Each computer of Amazon brings approximately 0.1 dollar per hour (in case it is simply used to store information Amazon takes 0.18 dollar). This shows that in a year Amazon can earn 876 dollars from each computer. It should be borne in mind that the company is still spending money on electricity and maintenance, but the amount of money usually does not exceed the cost of the computer. On average, Amazon uses a computer for 2 years. It turns out that the gross margin could reach 45 percent, which is by far higher for the company than the book business.
Also, applications of information systems in the company can be seen in the infrastructure of cloud system.
Infrastructure of Cloud System of Amazon
Amazon Web Services (AWS) is Infrastructure Web Services platform in the cloud, represented by Amazon in early 2006. This infrastructure provides a wealth of services to offer, such as data storage (file hosting, distributed data warehouse), while rent virtual servers provide computing power and others (van Vliet & Paganelli, 2011).
Amazon has the following services in its cloud infrastructure:
- Amazon Simple Queue Service (Amazon SQS);
- Amazon Simple Storage Service (Amazon S3);
- Amazon Elastic Cloud Compute (Amazon EC2);
- Amazon CloudFront;
- Amazon SimpleDB (van Vliet & Paganelli, 2011).
In the context of transactional systems two technologies Amazon S3 and Amazon EC2 attract particular attention.
Amazon Mechanical Turk (MTurk) Service is one of the services of a family of AWS. With the help of it, the companies (currently only those located in the US), known as Requesters, posted simple tasks on the website, which, however, a man knew to perform better than machine. Registered workers performed these tasks and got fee for it (van Vliet & Paganelli, 2011).
Amazon Simple DB, as the name implies, is a very simple database, and therefore is not suitable for large scale Web-based applications. Furthermore, this is a proprietary management information system, which means that the application, which is too closely integrated with Amazon Simple DB, will be tied to the cloud of Amazon.
Amazon EC2 provides API Web-services for allocation, management and release of virtual servers after they are no longer needed with the return of the liberated resources to the cloud of Amazon. Therefore, any application on the Web can run a virtual server in the cloud of Amazon by giving a single call to the Web-services of the company (van Vliet & Paganelli, 2011).
The service EC2 provides two types of storage space:
- ephemeral or short-term storage tied to a node, lifetime of which expires with the expiration of the life of the node;
- block storage, which works similarly to Storage Area Network, SAN. It does not disappear with time.
Amazon Simple Storage Service is a cloud storage data available in real time via the API Web-services to store any number of objects varying in size from 1 B to 5 GB in a more or less flat namespace (van Vliet & Paganelli, 2011).
Cleversafe cloud platform is based on a unique technology development companies across a dispersed storage (in this regard, such trademark as Dispersed Storage was registered). Dispersed storage technology goes next. The data is divided into slices and stored on different physical media, located in different geographical locations. Algorithms used for dispersal of data are based on the concept of control of parity, but they act according to a complicated procedure, as these algorithms allow recovering data from a subset entirety. For example, data may be distributed across 12 different locations, and at the same time it is enough to keep any 8 data subsets to restore the full set of data. Such technology is known as information dispersal. It allows high availability and geographic redundancy, avoiding the cost of data replication (van Vliet & Paganelli, 2011). The company uses the device Cleversafe Dispersed Storage for building private and public clouds as a basis for infrastructure Software as a Service. Dispersed storage meets all the requirements of cloud infrastructure as it provides space for storage on demand, so that allocated space is available from any geographical point.
Furthermore, dispersion can increase security levels in the cloud. It does not necessarily require encryption as every slice has too little information in order to be useful. Such architecture helps overcome the legitimate concerns of users for data stored outside of their direct control. Such fears are often an obstacle to the decision of storing data outside the enterprise. Access to a single device comprises a single fragment of the distributed copies since tape backup contains a full copy of data. It will not allow, for example, an attacker to access data. In addition to the foregoing, dispersed storage can be scaled over a broad range and provides storage for a large quantity of data. By adding servers to the cloud infrastructure with automatic detection of space to store, performance can be scaled with the help of adding additional drives and the total space available for data storage can increase. Virtualization enables rapid deployment and providing storage space on demand. All these features make it possible to optimize the efforts of administration and management information system.
If to speak about strengths of this information system, it should be said that AWS has built its cloud in a way that it can take almost any workload, and this makes it a popular choice among small firms, organizations with mission-critical applications and web developers. Amazon sells 5 times more processing power than the other 14 companies caught in the quadrant.
If to speak about things to consider, it should be admitted that Amazon does not create a complete package of services as some of its competitors. This lack of service and support especially repels some users, as these items mean additional line costs in their bills.
Cloud information system was designed to solve unique problems that could not be solved using older technology information system. Technology information system based on RAID and replication is not well suited for use in cloud infrastructure, because there are no convenient ways of scaling up the informational level.
Main competitors of Amazon should further be described.
Competitors of Amazon
At the moment, Amazon is the main competitor of the auction eBay, according to the assortment of products and prices (Krishnamurthy, 2004). However, in the context of management information systems a new case service appeared. It is based on a cloud storage system.
Almost all the technological world corporations are trying to struggle against each other on this basis. In all that relates to public clouds, Amazon surpasses all the competitors. However, IBM and SAP are trying to enter the competitive cloud market (Goolsbee & Chevalier, 2003). SAP argues that the rapid growth of cloud business brings more and more profits. It will become a stable source of income in the future. Although IBM owns the business with the supply of components which still generates a rather good profit, the service and software segments are noticeably affected. In this case, IBM is also actively investing in cloud infrastructure: the company recently invested 1.2 billion dollars in the construction of fifteen data centers in the main world economic areas. Although Amazon accumulates computing power on the scale of five times superior to the other power providers, Google is expected to become the most serious competitor of the clouds of Amazon. This can happen because Google has more extraordinary and gigantic capacity of its own networks. In addition to networking, Amazon does not stop introducing new services and reducing prices (Stone, 2014). However, Google has already signed about seventy-five API for developers of cloud solutions and this is more than Amazon has (Stone, 2014). Thus, the problem for Amazon is the fact that it does not have such networks.
By tracing the Google network initiatives over the last years, it is clear that in its cloud management information systems the company will use dark fiber that is fiber optic untapped channels. During the past ten years, Google as well as Yahoo and Microsoft were building a huge dark fiber network, which was usually leased to other providers. But if Google uses it by its own, it will get terabit connection between its data centers. Since such channels of dark fiber owned by Google cannot be quickly deployed, it is expected that Amazon may not be able to avoid competition in the future by just investing in the network infrastructure. AWS is structurally incapable now to engage in competition with Google on the basis of speed data transfer between data centers.
The Amazon Company has an instructive history of success. The company has changed the very essence of trade, providing for the popularity of sales via the Internet. Information system of the company currently has a comprehensive infrastructure, which led to the company’s leadership in the field of cloud computing. And although Google is the main competitor of the Amazon, there is one important difference between Amazon and other companies. Amazon’s management information system is better developed. This leads to the formation of long-term strategy and subsequently to success, so developed management information system is the guarantee of success of the organization, which confirms the thesis put forward.
Read more about organizational structure of Amazon