Challenges of implementing cloud computing in SMEs (UK)

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Challengesof implementing cloud computing in SMEs (UK)

LiteratureReview

Cloudcomputing is a modern day technical term used in businessorganizations and computer science in reference to a networked groupof remote computers to enhance data storage and online services.Cloud computing is achieved through the application of virtualizationtechnology in which physical machines are connected to ‘virtual’devices to enhance multiple computing efficiencies. Cloud computingis hailed for efficiencies in computing operations unlike when usingthe traditional user interfaces (computer desktops).Akey aspectincloud computing agility enables users to re-provisiontechnologicalinfrastructure.

Secondly,cloud computing enhances the application of programming interfaces(API) computers interact with another software. Third, cloudcomputing has been hailed for economic value in cost reduction hassignificant cuts on operational expenditure. There is sharing ofresources i.e. applications and hence lower installation costs.Fourth, users can interact with ‘virtue’ machines whenever theyhave access to the internet regardless of the device locationconnection infrastructure is provided by third party via internet.Fifth, maintenance is significantly reduced as applications are notinstalled in every computer but can be accessed from the hostcomputer.

Cloudcomputing improves productivity as multiple users can work on thesame task concurrently rather than waiting for one to completethereby saving significant time. Reliability is a key aspect in cloudcomputing multiple redundant sites can be used and this is importantin for data recovery in case data is lost. Furthermore, cloudcomputing enhances data security as data is centralized, andincreased data security resources.

However,cloud computing may lead to loss or exposure of sensitive data ifdata is accessed by multiple users in different locations withunreliable information infrastructure security. Nonetheless, cloudcomputing is undoubtedlythe most efficient modern-day technology thatfacilitates multiple computing uses,as well as data storage security.

Howcloud computing can help SME develop unique capacity

Smalland medium enterprises (SMEs) are key market players in mostdeveloped and developing countries.VMware(2011)maintainsthat, SMEs contributes the largest share in UK GDP and providingemployment opportunities to millions of people. Therefore, anytechnology or strategy directed at improving business efficiencywould not only benefit the enterprises but the nation economy aswhole. Adoption of information technology is one strategy throughwhich these small enterprises could improve business efficiency.

However,these enterprises operate on limited capital, labor and technology isminimally used unless it is the core instrument through which theoverall business activity takes place. According to Wilson,and Davies (2008, p.490),technology adoptionby SMEs remains significantly lowdespite vaststrides in new technological development.This is viewed as the mainchallenge behind low business growth in the SMEs.Sokolov,(2009, p.67),adds that, the adoption of cloud computing by SMEs would be vital inenabling the businesses develop their unique capacities. In his studyanalysis, Lee(2004,p.65)observesthat if SMEs had access to scalable information technology such ascloud computing, businesses would deliver services and products thathave been offered by large corporations in the past. The resultingeffect is that, SMEs would have a more leveraging competitiveadvantage in the market(VMwarem, 2011).

InUK, SMEs are the majority enterprises covering 99% of businesses inthe market(VMware, 2011).A survey conducted by CIO in 2010 on business strategies andpriorities ranked cloud computing as top technological priorities formany businesses among the SMEs(Misra &ampMondal, 2011). The surveyfinding show that cloud computing is a strategic technology optionfor SMEs despite limited resources.Premkumar (2003)concursthat cloudcomputing in SMEs help the enterprises in delivering services andgoods at lower costs thereby derive good returns from the investmentswith the limited resources. In this case, the SMEs would delivervalue to customers thereby having acompetitive edge against largecorporations(Ramdani, 2008,p. 54).

Theimpact of technology adoption has been studied in many cases, andcloud computing has great gains for business adopting it. Miller(2008, p. 94) observes that businesses SMEs that adopt cloudtechnology have the advantage of improving their flexibility,scalability, reliability and capacity. With cloud computingtechnology, SMEs would accelerate marketing with less capitalinvestment(Lee, 2004,p. 78).Small enterprises can use and pay cloud computing services withoutnecessary investing in the overall computing infrastructure therebyimproving business efficiency at low costs. These advantages areimportant for the SMEs as they enhance business growth.

Premkumar(2003)argues that,cloud computing providers are IT specialist who would serves as‘departmental IT’ consultants. In this case, cloud computinghelps SMEs to operate without IT consultants costsSMEs capital expenditure shifts to operational expenditure.Oliveira&amp Martins (2011, p. 115), points out that, cloud computing hasbecome a game changer among the SMEs by offering innumerablecapabilities and scalable infrastructure. Through, cloud computingSMEs can access marketplace and select effective IT services thatmeet business needs at lower costs the on-demand IT service iscustomized for SMEs(Ramdani,2008,p. 59).

Ina study on information adoption by SMEs Rui (2007), assessedthat,cloudcomputing helps SMEs grow their revenue by increasing the businessagility whileresponding swiftly to market demands and attracting newcustomers. This time-in market advantage helps the SMEs becomecompetitive in the market while enhancingbusinessreliability withclients. Cloud computing also enhancesbusiness mobility for SMEs asoperations between chains SMEs can be managed via the internet(Misra&ampMondal, 2011).

Howdo SMEs develop cloud base resource?

VMware(2011) noted that mostSMEs operate on limited resources, and cloud computing has not beeneffectively adopted. Small business enterprises need a valueproposition on how to adopt cloud computing that enhancecompetitiveness through on-demand IT services without necessarilyinvesting heavily in IT capabilities(Misra&ampMondal, 2011, p.510).Ina study on IS in SMEs, Ramdani (2008,p. 63) assessed that mostSMEs have interest to adopt cloud computing services but the decisionto implement the decisions is hampered by resource limitation.Information technology adoption by most firms could be explainedthrough a broadtheoretical perspective of technology-organization andenvironment framework(Tornatzky &amp Fleischer, 1990).

Accordingto Tornatzky&amp Fleischer(1990: 154)technologyadoption by SMEsisinfluencedby technology, organization and environment framework contexts.Thesecontexts in the TOE framework illustrate the opportunities andconstraints that befall many SMEs in the adoption of cloudtechnology.

Challengesof implementing cloud computing in SMEs (UK)

Literaturereview indicates that, the TOE framework is suitable in explainingwhy technological adoption remains a great challenge for SMEs.Tornatzky&amp Fleischer (1990) argued that technology adoption is influencedby three main elements the technological context of the business,organization capabilities and the environmental context in which thebusiness thrives.

Relativeadvantage Itis postulated that technology adoption in most SMEs is influenced byrelative advantage factor. Several studies have research on thisfactor (Gibbs &amp Kraema, 2004). These studies have shown that whenbusiness owners perceive that there is a relative advantage to gainin adopting particular innovation, the probability of adoptionincreases (Lee 2004 60). Miller (2008) observed that,relativeadvantagesare gained by SMEs when they adopt the cloudcomputing technology these small enterprises benefit fromaccessible, reliable and flexible ICT (Sokolov, 2009).

Uncertaintyin most cases some technological innovations have low short lifespan,and this increases uncertainty especially if the particularinnovation is for business purposes. However, lack ofessentialknowledge in regard to technological innovation may createuncertainty even when the innovation has low risks. Rogers (2003)supports this claim by asserting that uncertainty is a majorchallenge for innovation adoption. In a rejoinder, Chaudhury &ampBharati, (2008) observes that in cloud computing, privacy, lock-inandsecurity are major concernsfor SMEs. In this way, when such concernsare apparent, they create a great challenge to SMEs adopting cloudcomputing.

CompatibilityMany studies have indicated that compatibility is a great challengein adopting cloud technology (Rogers 2003 Premkumar, 2003). Mostbusiness owners get concerned on whethernew technology adoption suchas cloud computing would be consistent with business values and needs(Lee 2004). As such, it is essential for innovations to be compatibleand consistent with SMEs needs and values(Hsbollah&ampIdris,2009:68).

ComplexityRogers (2003: 230) argues that, the complexities that accompany newtechnology hinders technology adoption. SMEs are small enterpriseswith limited resources and pursuing complex technology may be harmfulto the business. For instance, newtechnology may compromise businesssystems existing in the SMEs systems. As such, new technologies needto be easy to use and user-friendly to facilitate easy adoption(Sahin, 2006). Recent studies on challengesof technology adoptionindicate thata complexity was adversely mentioned as the leadingchallenge when making adoption decision by SMEs (Chaudhury &ampBharati, 2008).

TrialabilitySome studies have indicated that, trialability is another factor thatinfluence the rate of technology adoption (Kedall 2001 Rogers,2003). In study findings Idris and Hsbollah (2009) observes that,trial ability is an important consideration when assessing onlinetechnology. In a rejoinder Sahin (2006) states that during theprocess of technological adoption decisions, reinventionsof the sametechnology may affect the rate of adoption or early adopters.However, this is not a great problem to laggards as they learn fromearly innovators success or failure and thus trialability influenceinnovation adoption (Rogers, 2003).

OrganizationcontextIn this case such aspects as organization size, management and priorexperience with technology hasa significant effect on technologyadoption by SMEs. Previous studies have linked the size of businessenterprise with capacity to adopt cloud computing technology.Furthermore, most SMEs have limited resources and time to invest innew technologies as they emerge. However, this does not mean that theSMEs do not consider new technology as strategic priorities.The greatimpediment to new technology adoptionis limited by organization size(Chaudhury&amp Bharati, 2008, p.18).

Inaddition, organization management has great influence in adopting newtechnology. Ramdani and Kawalek (2008), found that organization topmanagement support for new technology adoption is paramount. In mostcases, the top management in SMEs determines what technology to adoptand encourage the staffs to support the decision. However, if the topmanagement does not deem a particular technology as fit for thebusiness, this has a great impact in technology adoption.Furthermore, technology familiarity and prior experience is anothersignificant aspect that influences technology adoption in SMEs. Forinstance, if a business IT department is not versed with innovations,this would mean extra costs to train which may not mean well for SMEsthat operate on limited resources.

Environmentcontextthe industry as well as the business environment in which a businessoperates have been found to influence new technologyadoptionsignificantly. For instance, the presence of cloud computingservice provider could influence the surrounding SMEs adopt thetechnology. In addition, the market scope in which the businessoperate would affect has some influence on technology adoption tiscould be inform of competition.

Theoriesrelated to cloud computing in SMEs

Year of Publication

Focus of Work

Method adopted-case study, action research, survey

Contribution to knowledge-what they are adding

Limitation

Fred Davis

1989

Technology Acceptance model (TAM)

Study

-The theory models how users use and accept new technology

-The theory postulates that when users are presented with new technology there are factors that influence decisions to adopt new technology.

-This is based on perceived usefulness (PU) and perceived ease of use (PEOU)

-Limitedexplanation and predictability on the general theory

-TAM focusesonly on individual ‘user’ of computers with the concept of ‘perceived usefulness’- this does not adequately explain factors influencing user perception of ‘Usefulness.’ As such the theory ignores the fundamental social consequences of IS use.

Everett Rogers

1962

Diffusion of innovation theory

Study

-Technology diffusion occurs in stages awareness (Knowledge), interest (persuasion), evaluation (decision), trial (implementation) and adoption (confirmation).

-Categorized technology adoption within the social system in levels innovators, early innovators, early majority, late majority, laggards and leap floggers.

-Factors such as compatibility, complexity, relative advantage, trialabity and observability influence individuals’ decision on technology adoption.

-For the adoption to be successful there must be effective communications, use the influence of opinion leaders and organization to influence adoption.

-The theory fails to account for the flexibility and dynamic changes that influence technology adoption.

-Continual innovations attract new adopters along the S-curve and not as static as postulated by Rogers.

Tornatzky&amp Fleischer

1990

Technology-Organization-Environment Framework (TOE)

study

-The process by which organizations adopt new technology is influenced by three distinct factors organization context, environment and the technological context of the

firm.

-Technological context refers to the external and internal relevant to the firm.

-organization context refers to the resources and characteristics within the firm that influence technology adoption such as size, management, resources among others.

-Environmental context that influence technology adoption involves the industry dynamics, regulatory, competitions and micro-economics

The three elements are the threats and opportunities towards technology adoption

-the model does not explain factors that influence innovation adoption such as uncertainty, complexity and compatibility. There are other factors that influence technology adoption in SMEs beyond environment context, technology and organization context.

Icek Ajzen

1985

Theory of planned behavior (TPB)

Study

-individuals behaviors are influenced by beliefs, intentions, knowledge norms, attitude and perception.

-These aspects influence individuals’perception, attitude and intention before making decisions.

In this case, such planned behaviorpredisposes actions taken influence decisions on technology adoption.

-Does not adequately explain how and why people would adopt a particular technology or not. Theory assumes that all actions and decisions are static and presumed and fails to consider the effects of external influence to decisions or planned actions.

Bibliography

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Gibbs,J.and Kraemer,K.2004,“Across‐countryinvestigation of the determinants of scope of e‐commerceuse: an institutional approach”,ElectronicMarkets,Vol. 14 No. 2, pp. 124‐137.

Hsbollah,H.M.and Idris,M.2009,“E‐learningadoption: the role of relative advantages, trialability and academicspecialization,”CampusWideInformation Systems,Vol. 26 No. 1, pp. 54‐70.

Kendall,J.(2001),“Receptivityof Singapore`s SMEs to electronic commerce adoption”,TheJournal of Strategic Information Systems,Vol. 10 No. 3, pp. 223‐242.

Lee,J.2004,“Discriminantanalysis of technology adoption behavior: a case of internettechnologies in small businesses,”Journalof Computer Information Systems,Vol. 44 No. 4, pp. 57‐66.

Miller,M.2008,CloudComputing: WebBasedApplications That Change the Way You Work and Collaborate Online,Que,Indiana,IN.

Misra,S.C.and Mondal,A.2011,“Identificationof a company`s suitability for the adoption of cloud computing andmodeling its corresponding Return on Investment,”Mathematicaland Computer Modeling,Vol. 53 No. 3‐4,pp. 504‐521

Oliveira,T. and Martins, M. 2011, “Literaturereview of information technology adoption models at firm level,”TheElectronic Journal Information Systems Evaluation,Vol. 14 No. 1, pp. 110‐121.

Premkumar,P.2003,“Meta‐analysisof research on information technology implementation in smallbusiness,”Journalof Organizational Computing and Electronic Commerce,Vol. 13 No. 2, pp. 91‐121.

Ramdani,B.2008,Technological,Organizational &amp Environmental Factors Influencing SMEs Adoptionof Enterprise Systems: A Study in the Northwest of England,ManchesterUniversity,Manchester.

Rogers,E.(2003),Diffusionof Innovations,5th ed., FreePress,NewYork, NY.

Rui,G. 2007, “InformationSystems Innovation Adoption among Organizations a MatchBasedFramework and Empirical Studies,National University of Singapore, Singapore.

Sahin,I.2006,“Detailedreview of Rogers’ diffusion of innovations theory and educationaltechnology‐relatedstudies based on Rogers’ theory”,TheTurkish Online Journal of Educational Technology,Vol. 5 No. 2, pp. 14‐23.

Sokolov,I.P. 2009, “CloudComputing: Overview, Concepts and Business Deployment Scenarios,”Vienna University of Economics and Business, Vienna.

Tornatzky,L. and Fleischer, M. 1990, TheProcess of Technology Innovation,Lexington Books, Lexington, MA.

VMware(2011), “CIOglobal cloud computing adoption survey”,Viewed 19 October 2014, at:www.vmware.com/resources/wp/cloud_adoption_register.html.

Wilson,H., Daniel, E. and Davies, I.A. 2008, “Thediffusion of e‐commercein UK SMEs,”Journalof Marketing Management,Vol. 24 No. 5‐6,pp. 489‐516.