CLOUD COMPUTING ADOPTION
An Exploratory Study
Yazan Alshamaila, Savvas Papagiannidis and Feng Li
Newcastle University Business School, Newcastle University, 5 Barrack Road, Newcastle upon Tyne, U.K.
Business School, Newcastle University, Newcastle upon Tyne, U.K.
Keywords: Cloud Computing, SME, Information Technology Adoption, Technological Factors, Organisational Factors,
Environmental Factors.
Abstract: The growing adoption of cloud computing is changing the way business information systems are developed,
scaled up, maintained and paid for. This not only applies to large organisations, but also increasingly to
small and medium-sized businesses (SMEs). In particular, cloud computing promises to improve the
reliability and scalability of IT systems, which allows SMEs to focus their limited resources on their core
business and strategy. In the SME context, technology adoption and usage decisions are influenced by many
factors. This paper attempts to conceptualize cloud computing adoption and to enhance understanding of the
range of factors affecting cloud computing adoption decision making in SMEs. Based on semi-structured
interviews with SMEs and service providers in the North East of England, a number of factors were
examined and found to affect the adoption process. By adopting the TOE framework as a theoretical basis, it
has been found that cloud computing adoption decision is influenced by different types of factors and
therefore, is not exclusive to one or two dimensions e.g. technological and organisational contexts, as
presented in some previous ICT adoption studies. The main factors that were identified playing a significant
role in SME adoption of cloud services were: relative advantage, uncertainty, geo-restriction, compatibility,
trialability, size, top management support, innovativeness, industry, market scope, supplier efforts and
external computing support. These finding have important implications and great value to the research
community, business practitioners, and policy makers in terms of formulating better strategies for cloud
computing adoption. For service providers, using the research model in this study can assist in increasing
their understanding of why some SMEs choose to adopt cloud computing services. In this study, the authors
present empirical evidence from Northeast of England where limited research efforts have taken place.
1 INTRODUCTION
The use of information and communication
technologies (ICT) can improve business
performance, and has provided many new
opportunities for small and medium sized enterprises
(SMEs, firms with 1-250 employees), enabling them
to compete with large firms (Alberto and Fernando,
2007; Swash, 1998). In the United Kingdom, SMEs
represent the vast majority of all enterprises, 99%
according to BIS (2010), a figure which is not
atypical for virtually all countries. In the new global
market, ICT has become a central issue for
competitiveness among SMEs (Harindranath et al.,
2008). Cloud computing is not only of interest for
large businesses, but also for small and medium-
sized ones too (Jain and Bhardwaj, 2010), since they
tend to have more limited resources in terms of time,
money and expertise (Wymer and Regan, 2005;
Cragg and King, 1993). In-house IT requires
specialised staff to plan, design, implement, and
manage increasingly complex hardware, software,
and networking equipment (Thinkstrategies, 2002).
Some of the promised benefits from cloud
computing can be very appealing for SMEs, which
need to ensure they maximise their return on
investment and remain competitive in an ever more
demanding business environment. Despite their
importance, limited research has studied the
adoption, implementation and usage of ICT in the
small enterprises within the UK context
(Harindranath et al., 2008; Shiels, 2003). This paper
seeks to contribute to a growing body of research on
cloud computing, by studying the SME adoption
process. Reviewing the literature concerning ICT
innovation adoption present numerous studies about
518
Alshamaila Y., Papagiannidis S. and Li F..
CLOUD COMPUTING ADOPTION - An Exploratory Study.
DOI: 10.5220/0003884105180524
In Proceedings of the 8th International Conference on Web Information Systems and Technologies (WEBIST-2012), pages 518-524
ISBN: 978-989-8565-08-2
Copyright
c
2012 SCITEPRESS (Science and Technology Publications, Lda.)
different technologies, in turn, these studies list tens
of factors that have been used to study the
technology adoption decision of organisation. One
criticism of much of the literature is the method of
choosing the main factors that will be used in
particular research. Therefore, the main research
objective of this paper was to study the cloud
computer adoption process. More specifically, our
main research question was what are the major
factors that influence the likelihood of cloud
computing adoption in SMEs. The North East of
England was selected for this study as it is a region
that aspires to become home to innovative digital
firms. After defining cloud computing, the literature
review will be presented and the theoretical
framework adopted in this study is discussed in
detail. This is followed by a description of the
study’s overall research design and methodological
issues. The paper continues by presenting the
study’s main findings, before highlighting future
research avenues.
2 PREVIOUS STUDIES AND THIS
RESEARCH
2.1 What is Cloud Computing?
Cloud computing services have been defined in
many different ways. For instance, Buyya et al
(2008, p.2) defined cloud computing as “a type of
parallel and distributed system consisting of
collection of interconnected and virtualised
computers that are dynamically provisioned and
present as one or more unified computing resource
based on service-level agreements established
through negotiation between service provider and
customer”. Plummer et al (2008, p.3) defined cloud
computing as "a style of computing where massively
scalable IT-related capabilities are provided as a
service using Internet technologies to multiple
external customers". According to Leimeister et al
(2010) various researchers refer to cloud computing
as a new paradigm and emerging technology, while
others believe it is not really a new concept, as it
uses traditional computing technologies. Either way,
the on-demand computing model is expected to
influence the way many enterprises approach IT-
related services. IDC predict that spending on public
IT cloud services will grow from $16.5 billion in
2009 to over $55 billion in 2014 (Gens, 2010). In
turn this can help businesses improve the creation
and delivery of IT solutions, by enabling them to
access computing services more flexibly and
at reduced cost (Jain and Bhardwaj, 2010).
2.2 Theoretical Background
On a firm level, theories such as diffusion of
innovation (Rogers, 2003) have been widely applied
to studies looking at how innovations are adopted
and diffused. In this paper we will use the
Technology, Organisation, and Environment (TOE)
framework put forward by Tornatzky and Fleischer
(1990) for a number of reasons. First of all, the TOE
framework is based on the Diffusion of innovation
theory. Oliveira and Martins (2011) suggest that as
the TOE framework includes the environment
context, which is not included in the Diffusion of
innovation theory, the former becomes better able to
explain intra-firm innovation adoption. For them, the
TOE framework has a solid theoretical basis,
consistent empirical support, and the potential of
application to IS adoption. Also, Rui (2007, p.13]
notes that “compared to Rogers’ innovation
diffusion model, the TOE framework (or those TOE-
like frameworks) overcomes the domination of the
technical perspective and provides a useful
analytical tool to distinguish between the inherent
qualities of an innovation and the motivations,
capabilities, and broader environmental context of
the adopting organisation”. Finally, TOE has been
applied successfully to numerous studies, for
instance, Iacovou (1995) and Kuan and Chau (2001).
3 METHODOLOGY
This paper’s main research objective is to study the
cloud computing adoption process by SMEs in the
North East of England. More specifically, our
research questions aim to examine which factors and
to what extent each of these factors influence the
cloud adoption decision making by SMEs. For this
exploratory work, a qualitative study was deemed
appropriate as it enables deeper analysis of the
underlying factors. Such an approach can then pave
the way for an explanatory quantitative approach.
With the purpose of exploring the impact of TOE
factors on SME adoption of cloud computing
services, initial empirical work using semi-
structured interviews as the data collection method
was conducted, as they can provide the necessary
flexibility needed in an exploratory study. Sarosa
(2007) suggest that using semi-structured interviews
in the context of a qualitative approach may
facilitate exploring all the factors and the
communication of all stakeholders within an ICT
CLOUDCOMPUTINGADOPTION-AnExploratoryStudy
519
innovation adoption process.
Interviews opened with a discussion of the firm’s
background and key business activities. It then
moved on probe their currently adopted ICT
technologies and discussed the major factors that
affected their cloud computing adoption decision
making process. Studies that adopt the TOE model
have attracted criticism due to the way they pick and
choose from a list of attributes that have been
empirically tested on other IS innovations (Ramdani
and Kawalek, 2007b). In order to avoid such bias,
participants had the opportunity to discuss those
factors they thought were of importance in their own
cases, instead of structuring the discussion around
the TOE attributes. When it came to participants
(Table1), using Rogers’ adopter categorization, on
the basis of innovativeness, nine cases have been
categorized into three main groups. These were the
service providers (F1-F3), SMEs that had already
adopted cloud computing services (adopters) (F4-
F6) and SMEs that intended to adopt cloud
computing services in the next 3 years (prospectors)
(F7-F9). To overcome the pro-adoption bias, this
study focuses on both adopters and prospectors of
cloud computing services. Moreover, cloud
computing providers who participated in this
research project were chosen to be providers for a
variety of computing services, not just cloud
services.
Table 1: Participant information.
#
Industry
Adoption
Stage
Interviewee’s Position
F1 IT Provider
Operations Manager- for
Cloud
F2 IT Provider Managing Director
F3 IT Provider
Technical Services
Director
F4 Education
Already
adopted
Technical Director
F5 Financial
Already
adopted
Electrical Department
Manager
F6 Legal
Already
adopted
Quantum- Marketing
Manager
F7 Education Prospector
Scientific Facilities
Manager
F8 Legal Prospector IT Manager
F9 Retail Prospector Technical Manager
4 FINDINGS & DISCUSSION
4.1 Technological Context
Relative Advantage: Firms are more likely to adopt
Innovation when they perceive an innovation as
offering a relative advantage (Lee, 2004). To do so,
though, SMEs need to have a clear understanding of
the relative advantages of cloud services. In the
current study, prospectors have referred to their late
reaction to the lack of awareness about this type of
service. Organisations that have already adopted
cloud services (F4, F5, and F6) were aware of the
benefits of this type of service. F8 and F9 justified
their interest in cloud services, stating their
expectation that cloud computing services could
make them more effective and competent. For
instance, cloud scalability and mobility could
provide them with more control over their
operations. Hinder
Uncertainty & Geo-restriction: Unlike previously
studied ICT innovations for instance (Ramdani and
Kawaiek, 2007a; Thong, 1999) it was found that
SME adoption of cloud computing services is highly
dependent on the level of uncertainty. Participants
raise several points that can possibly cause concern
about adopting cloud computing services. Among
these one could mention security, privacy, geo
restriction, accessibility, and vendor lock-in, with
the first three being the most important ones. Service
provider F3 confirmed that it was understandable
that privacy and relinquishing total ownership are
concerns for businesses, when considering adopting
cloud computing. This may be addressed by building
relationships with trusted service providers. As one
of the participants stated: “Yes, for sure, I
appreciate that you feel like someone else has your
data, but there has to be an element of trust”
(F9).The majority of early adopters and prospectors
(F5, F6, F7, and F9) actually stated that they trusted
service providers, which is of critical importance to
adoption.
Much of the uncertainly around cloud computing
was how data is handled and where it is stored.
Adopting cloud services imply submitting
information and computing operation to a remote
vendor. Vendor can be local or national, and most
often international. In turn this can generate
concerns regarding the Differences in legislation
across countries, data production policies, disaster
recovery issues etc. As a result, a new factor, geo-
restriction, was identified and found to be crucial for
SMEs when considering adopting cloud computing
services. This is clearly reflected in the answer by
F2 “Some companies that are hugely concerned
about the sensitivity of data will be concerned
about: where is our data, is it in UK? Or in Europe?
Is it in USA? And sometimes, this is a big obstacle to
overcome.” F5 agreed, stating that “the
confidentiality of our users’ data, no chance we can
put them at risk, or send them to other country”.
Early adopters and prospectors tend to underline this
WEBIST2012-8thInternationalConferenceonWebInformationSystemsandTechnologies
520
point in any negotiation with service providers.
Some SMEs might show no tolerance regarding this
issue (F2, F4, F5, and F6). In summary this
exploratory study has found evidence of a
relationship between the adoption decision and
uncertainty about cloud computing services. Still
more explanatory research would have been useful
to further our understanding on this front.
Compatibility & Complexity: SMEs expect
adopted cloud services to be compatible and easy-to-
use. Early adopters F5 and F6 expressed their
satisfaction about the level of compatibility and
complexity using cloud services. For prospectors
(F7, F9), they expect it to be comfortable to use, at
least after a short period of adoption. Cloud service
providers claimed that most cloud services seem to
be consistent with the firm's values and technology
needs.
Trialability: In terms of the impact of the
trialability, it was found to be particularly useful for
the clients to try the product before the
implementation, and this impacted on the adoption
decision. This was the case for all participants,
except for F4, which had the intention to adopt cloud
services even before trying the product: “Yes we
tried it, but the intention was always there to use it.
So it did not affect the adoption decision”. Both
early adopters and prospectors asserted that
trialability affected their decision in a positive way.
It appears that trying the technology helps reinforce
the SME’s choice.
4.2 Organisational Context
Organisation size: Organisation size has been
shown to be a major factor in adopting ICT
innovations in many previous studies. Start-ups and
small businesses were found to be inclined to adopt
cloud services. According to the data from the
interviews (e.g. service provider F1, early adopter
F5, and prospectors F7, F9), organisational size was
found to be an important parameter for start-ups and
small businesses, enabling them to change direction
quickly and to be more flexible if needed. As F7
stated: “we are a very small group , and we are
controlling our destiny , and it’s easy for us to do
whatever we want...so yes, we are quite eligible in
that respect”.
Top management support: Regarding top
management commitment and support, our findings
are consistent with those of Ramdani and Kawaiek,
(2007)a; Lertwongsatien and Wongpinunwatana,
(2003); who found that without top management
support, SMEs are less likely to adopt new
technologies. Services providers (F1, F2) noted that
in many cases, it was the firm’s chief executive and
managing director who heard about the cloud and
encouraged IT staff to investigate it further. In
contrast, adopters and prospectors (F5, F6) stated
that it was the IT department staff who suggests the
adoption of cloud computing services, which was
then supported by the top management team.
Prior experience and familiarity: This was
another new factor identified in the responses of
different types of participants in this study. Apart
from F5, who stated that this factor has nothing to do
with their adoption decision as a company, service
providers, adopters and prospectors agreed that
using similar technology, in particular, virtualization
services, make adopters more comfortable with
cloud services, as they are already familiar with
these types of services: “we had a virtual
environment internally in the organisation and that
was there for some time ... so yes, I guess it did.”
(F9).
4.3 Environmental Context
Market scope and Industry: In the context of SME
adoption of cloud services, it was found that this
varied from industry to industry. Business industry
was one of the organisational characteristics that
Goode and Stevens (2000) listed as consistently
associated with the adoption of technology. Both
adopters (F4, F5 and F6) and prospectors (F7, F8)
mentioned that cloud services are more relevant to
sectors that have high computing requirements,
typically related to the nature of the business
operations in those sectors. Also, it was found that
the wider the market area in which an SME operates,
the more likely it is to adopt cloud services to
support its business operations.
Competitive pressure: When it came to
considering competitive pressure as a potential
motivation for adoption, most of those interviewed
(F4, F5, and F7) indicated that they did not consider
this a significant factor. Unlike other previously
studied IT innovations e.g. Crook and Kumar
(1998); Grover (1993) competitive pressure is
shown not to be an important factor for SMEs when
making the adoption decision. Service provider (F3)
defends this result on the basis that SMEs have
bigger issues to consider when making the adoption
decision beyond the competitive pressure.
Supplier efforts and external computing
support: In-line with previous studies (Lippert and
Forman, 2005; Hunter, 1999; Igbaria et al., 1995)
which demonstrate the availability of external
CLOUDCOMPUTINGADOPTION-AnExploratoryStudy
521
support to be positively related to adoption, in this
study, the majority of participants who belong to
provider, adopter and prospector groups, emphasised
the importance of supplier efforts and external
computing support in the decision making process.
4.4 Discussion
New technologies are expected to bring significant
benefits and value to a company, well beyond those
that already-adopted technologies deliver. Therefore,
relative advantage is often used as a significant
indicator in the ICT innovations literature
(Chaudhury and Bharati; 2008, Ramdani and
Kawaiek, 2007a; Lee, 2004; Thong, 1999). The
client’s innovativeness and self-motivation are
sometimes not always enough; awareness and
understanding of these advantages is important for
the adoption decision. This draws the attention to the
importance of the role that supplier marketing efforts
can have.
Although in most cases in this study, early
adopters and prospectors tended to rely on the
element of trust in the service providers, uncertainty
was still a serious hindering factor for adoption.
Cloud security, privacy and giving ownership are
main concerns for businesses. Moreover, the
location of the data-centre was found to be a key
issue in any negotiation between SMEs and service
providers. A possible explanation for this might be
that SMEs have a preference for their data to be
physically stored in the UK, ensuring that cloud
data-centres are subject to UK laws and legislation.
Differences in legislation across countries can be
significant enough to create a sense of uncertainty
and to be a main barrier for cloud computing
adoption and diffusion among SMEs. An important
implication arising from this is that cloud computing
providers need to carefully consider the location of
their data centres. On the other hand, SMEs need to
be aware about the legal issues stemming from data
centre location and pay more attention to the
services level agreement (SLA) in the first place to
safeguard their rights. Taking these issues into
consideration may lead to decreasing the level of
uncertainty among SMEs.
Considering the organisational factors, prior
experience or familiarity with similar technologies
such as virtualization leads to an easier decision
making process. Consumers gain a level of
comparison from previous experience with similar
services, or by a contrast of capabilities of the
service with alternative services (Anjana et al., 2003;
LaTour and Peat, 1979). Business size was one of
the organisational characteristics that Goode and
Stevens (2000) listed as consistently associated with
the adoption of technology. This factor has been
found to apply equally well to large and small
businesses (Goode and Stevens, 2000). In the case of
small and start-up business, avoiding capital
expenditure encourages them and increases their
willingness to adopt the cloud. This is besides the
fact that compared to large organisations, SMEs are
more flexible. The present findings seem to be
inconsistent with Low et al (2011), which found that
larger firms have a higher probability of adopting
cloud computing because they have more resources
and may be better able to take on risk.
Finally, when it came to environmental factors,
this study did not find any evidence that competitive
pressure and observability were significant factors
for adoption. This might simply be related to the low
rate of diffusion for cloud computing among SMEs
till now. Cloud service providers could encourage
small businesses in many ways. For instance, they
can allow them to try the product or service before
committing to it, offering their customers the
opportunity to determine the level of compatibility
and complexity of the product. In turn this could
help SMEs validate their choice and, therefore,
reduce the perceived risks. Service providers can
also demonstrate, using relevant successful case
studies, the benefits of adopting cloud computing.
Hence, this may lead to competitive pressure and
observability needed for the diffusion. It is worth
pointing out that given that in small businesses the
CEO is often the owner-manager (Thong, 1999), in
that case, sales pitches should not just be targeted to
IT staff but also directly to the top management, for
the reason that support and commitment from the
top management team makes the company more
likely to adopt new technologies. There was
agreement among all participants in this study that
innovativeness of the decision-maker or whether the
organisational strategy was instilled with innovation
had a great impact on the willingness to adopt new
technologies. The nature of the sectors may also
influence and in many cases even determine the
level of IT infrastructure needed. This may explain
why cloud computing may be more attractive for
certain sectors but not others. Therefore, suppliers
need to understand their clients’ sectors and business
first.
Finally, although adopters and prospectors
underlined the importance of providers’ activities to
make SMEs adopt cloud services, in six cases of this
study SMEs did not feel it was adequate until now.
A possible explanation for this is the fact that at the
WEBIST2012-8thInternationalConferenceonWebInformationSystemsandTechnologies
522
moment providers recognizes the changing IT
industry-environment, and they are very active in
order to be a facilitator for cloud services. At the
same time, they have a lot of investment in in-house
software and hardware. This can lead to an
impression among stakeholders that cloud service
providers themselves have no clear stance or vision
about cloud computing. For instance, service
provider (F2) did not hide the fact that they will not
push SMEs in a specific direction, e.g. cloud
computing: “Because we are not only a cloud
computing provider, we don’t try to push them down
a particular route”. Consequently, more research on
this topic needs to be undertaken before discussing
how service providers can play a role in cloud
computing diffusion because clients would be
affected by their service provider’s thought, and the
extent to which the provider believes in the benefits
that cloud computing can bring to their business.
5 CONCLUSIONS
“Computing services on-Demand” is gradually
modifying the way information systems services are
developed, scaled, maintained and paid for. The on-
demand, pay-by-use method of cloud computing is
based on a set of many pre-existing and well-
researched trends such as utility computing,
virtualization and Software-as-a-Service (SaaS).
Although, many of the concepts do not appear to be
new, the real innovation of cloud computing lies in
the comprehensive way it provides computing
services to the customer (Leimeister et al., 2010;
Yadav and Zeng Wen, 2010). This study represents
an early attempt to explore and develop an SME
cloud computing adoption model that was
theoretically grounded in the TOE framework. By
adopting the TOE framework this study has shown
that the three contexts of this framework
(technological, organisational, and environmental)
are connected to each other. In other words, cloud
computing adoption is influenced by different types
of factors and, therefore, is not exclusive to one or
two dimensions e.g. technological & organisational
contexts, as presented in some previous ICT
adoption studies (e.g. Low et al., 2011). The main
factors that were identified as playing a significant
role in SME adoption of cloud services were:
relative advantage, uncertainty, geo-restriction,
compatibility, complexity, trialability, size, top
management support, prior experience,
innovativeness, industry, market scope, supplier
efforts and external computing support. In contrast,
this study did not find any evidence that competitive
pressure or observability were significant
determinants of cloud computing adoption.
Future research could build on this study by
examining cloud computing adoption in different
sectors and industries and in different countries in
both a qualitative and quantitative way. Given that
SMEs are pervasive in all economies this will call
for a careful selection of samples that can help
provide a representative picture of cloud computing.
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