EXPLAINING ADOPTION OF REMOTE HOSTING: A CASE STUDY
Tsipi Heart Department of Industrial Engineering and Management, Ben-Gurion University of the Negev
[email protected] Nava Pliskin Department of Industrial Engineering and Management, Ben-Gurion University of the Negev
[email protected] Noam Tractinsky Department of Information Systems Engineering, Ben-Gurion University of the Negev
[email protected]
Submitted to the Second information Systems Workshop on global Sourcing: Service, Knowledge and Innovation
EXPLAINING ADOPTION OF REMOTE HOSTING: A CASE STUDY ABSTRACT Purpose: Eliciting factors affecting organizational intention to adopt remote hosting (RH). Methodology: An interpretive epistemology is used during the first two levels of data analyses, leading to a final, pre-positivist one. The case study methodology is used, where data are collected via semi-structured interviews, documents, and observations. Data analysis has been conducted in three phases: the first two interpretive and the final one pre-positivist. During the final analysis phase, the technology-organizationenvironment (TOE) theory is used, underlying the emerging model. Findings: Major technology-related factors affecting organizational intention to adopt RH are: perceived business benefits and reduced IT cost. Major organization-related factors are: perceived ease of implementation and ease of contract formulation and implementation. Major environment-related factors are: perceived systems availability / data security and vendor trustworthiness. While all are important, the findings highlight the criticality of environment-related factors. The RH adoption model drawn based on these findings can perhaps explain past RH failure and perhaps RH future as well. Research limitations/implications: A major limitation is the methodology, as one case cannot be generalized. Nonetheless, the contribution is in applying the TOE model to the emerging RH context and opening a new research trajectory in which the RH adoption model can be refined, operationalized, and empirically tested. The main practical implications from this study are for managers evaluating the RH option, since this study highlights primary factors affecting the adoption decision, and for RH vendors since this study emphasizes the importance of environmental factors, including risks associated with the Internet and vendor trustworthiness. Keywords: Remote hosting (RH); Organizational IT adoption; TechnologyOrganization-Environment (TOE) model; Model development; Case study. 2
EXPLAINING ADOPTION OF REMOTE HOSTING: A CASE STUDY INTRODUCTION Remote hosting (RH) is suggested as a sourcing option for organizational applications and databases. Offered since the late 1990s, entitled then Application Service Provision (ASP), RH is now also referred to as software on-demand or Software as a Service (SaaS). In spite of the optimistic forecasts as to its future (Currie, 2000), RH did not gain the predicted popularity, especially not for enterprise applications (i.e. ERP, CRM, etc.). Consequently, RH has been considered a failure until recently, with many early providers quitting this line of business. However, RH is nowadays arousing new interest, manifested in the evident success of Salesforce.com, and in the fact that the new SAP ERP package for the mid-market, named Business byDesign, is supplied in RH mode only. Moreover, other leading IT solution providers follow suit and offer enterprise applications in this business model, for example, Dynamic CRM by Microsoft. In light of RH past failure and current re-emergence, there is merit to eliciting factors affecting the decision to adopt RH, particularly by early adopters. To this end, an indepth case study has been conducted at a medium-sized national hotel-chain that evaluated RH adoption in 2000. The Technology-Organization-Environment (TOE) theory of organizational IT adoption (Tornatzky & Fleischer, 1990; Zhu et al., 2003) is used to frame the final phase of data analysis and to show that, at least in this case, environmental factors played a critical role is the decision. Based on this finding, we argue that the major effect of the environment on the adoption decision is more significant in the RH context, particularly vendor trustworthiness. This findings, if further empirically supported, might also apply to other IT innovations that involve both transacting over the Internet and a heavy reliance on a provider. The rest of the paper is organized as follows. First, a literature review of theories underlying organizational IT innovation adoption is presented. Next, the methodology used in this study is briefly described, followed by a description of the case details
3
and by an analysis of the data via the TOE lens. Finally, the RH adoption model is developed, and the paper’s contribution and implications are discussed. THEORETICAL BACKGROUND Innovation is defined as “an idea, practice, or object that is perceived as new by an individual or another unit of adoption. An innovation presents an individual or an organization with a new alternative or alternatives, with new means of solving problems” ((Rogers, 1983), p. xviii). In light of this, RH is undoubtedly an IT innovation for the adopting organization. RH would be considered an administrative (Daft, 1978), Type II innovation (Swanson, 1994), if existing organizational applications are retained. On the other hand, RH would be considered a combination of administrative and technical innovation according to the dual-core model (Daft, 1978), or Type III innovation (Swanson, 1994), if new organizational applications are implemented. Innovations are classified as incremental innovations versus disruptive or radical ones, based on their level of discontinuity from existing practices (Rosenbloom & Christensen, 1994; Bower & Christensen, 1995), or as enabling innovations versus emerging ones, based on their level of maturity (Afuah, 2003). In this regard, RH might be considered disruptive, because new organizational processes and know-how in terms of IT management are required upon RH adoption. Likewise, RH is still an emerging innovation because it is still immature as not many organizations opt for this IT solution for their mission-critical IT applications (Bryson & Sullivan, 2003). Two main streams dominate the IT innovation adoption research: individual adoption (Rogers, 1983; Davis, 1989) and organizational adoption (Christensen, 1992a; Christensen, 1992b; King et al., 1994; Fichman, 2004). Although past research about organizational IT adoption is related to this work, an extensive review of this literature is beyond the scope of this paper. Instead, the reader is referred, for example, to (Fichman, 1992; Gallivan, 2001; Jeyaraj et al., 2006) for a comprehensive literature review. Our review next is limited to papers that are highly relevant to the theoretical framework underlying the analysis of this case study.
4
A large body of research, borrowing from economics and organization science, theorized organizational IT adoption to be a result of a comprehensive and comprehensible cost-benefit analysis of the innovation (Williamson, 1979; Wernerfelt, 1984). Similarly, the Resource Based View (RBV) of the firm was often instrumental in explaining adoption of IT governance mechanisms such as IT outsourcing, based on classification of resources by rarity, specificity and imitability (Wernerfelt, 1984; Wade & Hulland, 2004). These theories, however, somewhat simplify reality when complex organizational innovations are considered (Lacity & Willcocks, 1995; Hancox & Hackney, 2000), for example in predicting future dynamics of innovative change in the IT domain (Fichman, 1992; King et al., 1994). Furthermore, consideration of environmental factors by these theories is somewhat limited (King et al., 1994; Orlikowski & Barley, 2001; Fichman, 2004). In contrast, institutional theories maintain a broader view of organizational IT innovation adoption, assuming that organizational actors are affected by an environment constituting of internal and external institutions (Zucker, 1986; King et al., 1994; Orlikowski & Barley, 2001). Particularly the technology-organizationenvironment (TOE) theory (Tornatzky & Fleischer, 1990; Zhu et al., 2003; Zhu & Kraemer, 2005), postulates that factors related to the technology (or innovation), organization, and environment affect the organizational IT adoption decision. Being a broad and comprehensive theory, TOE has underlined conceptual and empirical studies on adoption of complex innovations such as Electronic Data Interchange (Iacovou et al., 1995; Chwelos et al., 2001), Electronic Trading System (Khalifa, 2006), and e-business (Zhu et al., 2003; Zhu & Kraemer, 2005). (Fichman, 1992; Jeyaraj et al., 2006) present a comprehensive list of TOE factors elicited in the literature. Among technology-related factors are perceived benefits, business benefits, importance, reduced costs, and technology trust (Iacovou et al., 1995; Swanson & Ramiller, 1997; Chwelos et al., 2001; Currie, 2004; Ratnasingam, 2004). Among organization-related factors are organizational readiness, discontinuity, professionalism of IT unit (Chwelos et al., 2001; Gallivan, 2001; Ramiller & Swanson, 2003; Jeyaraj et al., 2006). Among environment-related factors are supplyside uncertainty, demand-side uncertainty, risky environment, external pressure, and vendor characteristics for strategic partnership (Swanson & Ramiller, 1997; Chwelos 5
et al., 2001; Currie, 2004; Ravichandran, 2005). Because RH adoption is associated with heavy organizational reliance on a provider, vendor trustworthiness is a critical environmental factor (McKnight et al., 1998; Karahannas & Jones, 1999). This factor is a complex construct, playing a pivotal role in any bi-lateral engagement, that has been discussed not only as a dyadic trait between individuals but also between firms (Shapiro, 1987; Mayer et al., 1995; Kumar, 1996; Zaheer et al., 1998). The nature of this construct, its components, and its effect on the adoption decision are also highlighted in the case. METHODOLOGY The initial phases of this study adopt the interpretive research epistemology, using qualitative data. Since interpretive research "focuses on the complexity of human sense making as the situation emerges" ((Klein & Myers, 1999), p. 69) and does not pre-define independent and dependent variables, it is adequate for investigating complex and still un-institutionalized phenomena where well-formulated hypotheses based on sound theory are yet to be established (Davis et al., 1992). In such instances, case study research is particularly appropriate for an early formation of model and theory development (Benbasat et al., 1987; Eisenhardt, 1989) and thus used in this study. Yet, in order to extend the paper' s theoretical contribution, a pre-positivist stance is taken in the final phase of this study, in which variables and propositions stemming from the data are elicited. These variables and their relationships, however, are proposed for future research. Site Selection: We have chosen the Africa-Israel-Hotel (AIH) hotel chain as the target site for theoretical and practical reasons (Mingers, 2001). First, AIH opted to replace its organizational-wide, mission-critical front-office application suite, at a point in time when RH was still in its infancy and its organizational impacts and innovation characteristics were still blurred. Consequently, a thorough, structured, and documented evaluation of the RH option has been conducted by top management at AIH. Second, AIH executives, who made the decision within a relatively short period of time (December 1999 to June 2000), were willing to share both their documented and undocumented perceptions elicited during the process. This helped answering “why” and “how” questions underlying the case-study methodology (Yin, 1994). 6
There was also an element of convenience in the site selection due to the first author' s prior acquaintance with top AIH executives, which resulted in the full cooperation and the high level of confidence necessary for bringing out rich case information. Data collection: We acquired data for this study from semi-structured interviews with the CFO, CIO, CEO, a hotel manager and a marketing manager, as well as from company documents and direct observations. Semi-structured interviews were the main research instrument, triangulated by organizational documentation (Benbasat et al., 1987; Eisenhardt, 1989; Yin, 1994). Interviews were recorded and transcribed. Data analysis: As outlined in Table 1, we started data analysis in this study with interpretive epistemology, aimed at understanding the issues underlying the RH adoption decision at the AIH chain. Later on, in the second interpretive phase (Eisenhardt, 1989; Yin, 1994), we analyzed the data using text analysis methods for elucidating units of significance (Tutti et al., 1996), yielding the primary factors affecting RH adoption in this case. Finally, in the third, pre-positivist phase, propositions have been formulated to be empirically tested in a future, positivist study. As a result of deploying pluralist analysis methods (Eisenhardt, 1989), this gradual data analysis paved the way to formulating the RH adoption model proposed later. Since qualitative data are used, no statistical analyses are presented. Phase 1 Interpretive
Research question None
2 Interpretive
What are the driving and inhibiting factors affecting the decision to adopt RH in AIH? What is the definition of each factor in the RH context? What propositions are implied by the data?
3 Pre-Positivist
Input data List of events, interviews, documents and observations Transcribed interviews, list of events, documents, observations, previous filed study, literature Case details and implications derived at the second phase
Output RH adoption decision events RH adoption principal driving and inhibiting factors The RH adoption Intention Model
Table 1: Data analysis phases
THE AIH CASE DETAILS
7
In this section the raw facts about AIH and its move towards adoption of a hybrid mode of RH is described rather interpretively. The results of the final stage of the data analysis are subsequently presented in the next section in a more positivist manner. AIH, active since 1991, opened its first Crown-Plaza hotel in 1993, followed by opening of new hotels of the Holiday-Inn and Crown-Plaza brands in various locations nearly every year. By 2000, AIH employed more than a thousand employees in nine geographically distant hotels (Heart et al., 2007). In 1993, when the first AIH hotel opened, the only affordable hotel-management packages for handling hotel functionality (reservations, receptions, cashiering, housekeeping,
and
accounting)
were
stand-alone,
PC-based,
off-the-shelf
applications. Thus, AIH was forced to acquire an application for each newly opened hotel. Since 1994, with the addition of two new hotels to the chain, a CIO has been recruited at headquarters. The CIO contracted local vendors for IT maintenance and hired a technician to centrally supervise IT availability at the various hotels. Since 1997, AIH turned to further outsourcing its IT operations and maintenance, until, in 1999, AIH contracted, a local IT services company XOR to take over the IT altogether, including the CIO position, reporting directly to the CFO at AIH. In 1999, AIH management decided to replace the aging hotel management applications. After a thorough market search for off-the-shelf packages, the OPTIMA package from Silverbyte emerged as the best solution available. This package was offered in two alternative arrangements: purchased and locally installed at every hotel (traditional client-server mode), or accessed remotely from the vendor’s server farm via the Internet and paid per user (RH mode). After undertaking a thorough assessment process, lead by the CFO and CIO, AIH opted not for the RH mode suggested by Silverbyte but for a hybrid mode. The hybrid mode meant purchasing and centrally installing a server farm at AIH headquarters, to be remotely accessed from every hotel through a wide-area network (WAN), using inexpensive thin clients and the Citrix technology. One instance of the OPTIMA software has been installed at the server farm, as well as a unified database that allowed a distinctive hotel view alongside a consolidated view. AIH headquarters has 8
thus become the remote host (instead of Silverbyte) for applications and databases, accessed from anywhere regardless of geographical limitations. The new infrastructure has been installed within a few months and operated by the familiar XOR outsourcer. ANALYSIS OF THE RH ADOPTION DECISION VIA THE TOE LENS According to TOE, factors affecting an IT adoption decision can be classified into technology-related, organization-related, and environment-related factors. Because the factors affecting AIH' s decision, elicited from the data, can be classified in a similar manner, this categorization is adopted. Technology-Related Factors A list of minimal functional requirements served as a compatibility threshold for entering the ' best and final'stage. This, however, was hardly a differentiator among the various alternatives, since most evaluated applications provided these requirements. Therefore, two principal factors pertaining to the technology guided the selection process, as explained by the CFO and CIO: 1) business benefits to AIH and 2) contribution to reducing IT cost. Business benefits: The existing IT structure at the time of the RH adoption dilemma prohibited organization-wide data consolidation required for top management decision support. This was because of the disparate IT architecture, where the dated and slow file system included numerous redundancies, discrepancies and contradictions (Ross, 2003). The CEO explained: “With the existing disparate databases we were unable to consolidate data in a cost-effective manner. Rather, we had to print numerous reports in various formats and re-key the numbers into electronic spreadsheets. This procedure is not only costly and time-consuming, but also error-prone and rigid, unavailing management of accurate organizational-wide data when required”. Furthermore, one of the significant benefits management hoped for was a central reservation office replacing all local offices. This, however, required an online consolidated organizational database which was infeasible under the existing IT infrastructure but feasible under the RH solution.
9
IT cost reduction: Maintaining multiple instances of software and data at each geographically remote hotel proved costly. Being mission-critical, these applications should have been available nearly 100% of the time to provide the required guest services and to avoid financial loss. Achieving this goal required employing IT professionals at each hotel, in addition to contracting an external service company. Relating to this topic, the CIO said: “Because of the current decentralized IT configuration, we need to travel a lot among the various hotels all over the country, which is time-consuming and costly. This requires employing more IT personnel in order to ensure systems up-time and support to mission-critical business processes”. Installing the new applications locally would have maintained this resource drain, whereas the RH architecture meant one central installation requiring maintenance at a single location only. Organization-Related Factors AIH' s selection team considered two organization-related factors: 1) ease of implementation and 2) ease of contract formulation and fulfillment. Ease of implementation: Traditional local installations usually incur minimal disruption of existing processes, whereas RH often implies a departure from existing structures, with expected resistance, particularly from the IT personnel. The IT department at AIH was already outsourced to XOR, therefore no internal resistance toward RH was expected and central management assumed local managers would welcome easing the IT burden off their daily tasks1. The only thorny issue was the elimination of local reservation offices, because hotel managers used these offices to shape sales and marketing efforts, otherwise controlled centrally. Resistance, however, was preempted by top management as the CEO commented: "I made it clear that the decision to proceed towards a central reservations office is final. Nevertheless, each hotel manager came to me describing how damaging this decision might be. I told them that they would eventually thank me for this, because I could see the benefits for the individual hotels, as well as the whole company…"
1
The involvement of XOR was clearly significant in shaping the final solution, to which we
refer later on. 10
Ease of contract formulation and fulfillment: Contracting with a RH provider is important because of the need to assure excellent service level around the clock, as stated by the CFO: “We could not afford systems down-time at all, as this application is our most critical one. When this system is down we cannot allocate rooms to arriving guests, and we cannot check-in or check-out guests, since we have no access to guest accounting. This not only incurs actual money losses, but also is an impediment to our reputation. This system should be up and running 24 hours a day, 7 days a week all year round.” Thus, the ability to formulate a comprehensive contract is a pre-condition to willingness to adopt RH. AIH top management was confident of its ability to unambiguously formulate a comprehensive contract with Silverbyte, based on its previous experience with IT outsourcing contracts, therefore they did not perceive this factor as an obstacle to RH adoption. Environment-Related factors Two categories of environment related factors emerged: 1) assurance of systems availability and data security, and 2) vendor trustworthiness. Assurance of systems availability and data security: Because RH involves accessing applications and data over a WAN, often via the Internet, potential adopters are concerned about assurance of systems availability and data security. Network malfunctioning could impede application and data access altogether, or impose unacceptable response time. Data security is a prohibitive concern, since the perception of WANs in general, and the Internet in particular, is as risky and unsafe environments, especially with regard to sensitive organizational data. Data security breach might occur during transmission or at the storage location. Regarding data security during transmission over the WAN, the CIO conducted a pilot with a secured, backed-up broadband WAN, which resulted in good system response time, as well as acceptable data security assurance. In his words: “I demonstrated that we could inexpensively enhance our exiting WAN, and combined with the Citrix technology, achieve acceptable system availability and response time, as well as data security”. Data security at the storage location, however, resulted in rather negative attitude, as explained next.
11
Vendor trustworthiness: AIH was concerned with entrusting its most valuable IT assets to Silverbyte. Leading these concerns was the CFO, who said: “I could never even think of having our most valuable data stored elsewhere, other than within our own premises”, and, “I was concerned with Silverbyte’s long-term viability…”. Because under RH the company' s data resides on the vendor' s server farm, there is a complete dependence on the vendor to deploy adequate data security measures. Combined with the concern about the ability of Silvebyte to provide good service level along three years of the contract duration, a general negative atmosphere of lack of vendor trustworthiness emerged at AIH. Table 2 summarizes the technology-related, organization-related, and environmentrelated factors as perceived at AIH, whether positive, negative, or mixed.
12
Factor
Definition
Perception of informants toward RH
Technology-related The degree to which AIH' s Positive informants believe that adopting the RH technology entails business benefits above the alternative solution IT cost reduction The degree to which AIH' s Positive informants believe that adopting the RH technology entails reduction in IT cost Organization-related Ease of The degree to which AIH' s Positive implementation informants believe that adopting the RH solution is free of organizational effort Ease of contract The degree to which AIH' s Positive formulation and informants believe that fulfilment formulating a comprehensive RH contract is free of effort Environment-related Systems The degree to which AIH' s Mixed (positive on availability and informants believe that the network, negative data security adopting the RH solution at the vendor' s jeopardizes systems storage) availability and data security Vendor The degree to which AIH' s Negative trustworthiness informants believe that the RH vendor can be trusted to fulfil expectations Table 2: Perception at AIH of TOE factors in the RH context Business benefits
As evident in Table 2, AIH informants were rather confident about the gains from adopting the RH technology through both business benefits and cost reduction. Likewise, organizational factors were also positively perceived. In contrast, members of AIH' s selection team were concerned about environmental factors, particularly issues pertaining to vendor trustworthiness, which imposed rather negative perceptions regarding data security at the storage location, and vendor' s ability to fulfill expectations, in general. As a result, a hybrid RH-outsourcing solution was finally adopted, under which AIH opted for the RH architecture but owned the server farm. XOR, which in contrast to Silverbyte was already a trustworthy strategic partner
13
by then, was put in charge of installing and operating the servers, applications, and databases at headquarters. DISCUSSION The present study examines factors affecting the decision to adopt remote hosting by a distributed firm, at early stages of the introduction of this IT sourcing option. In this regard, the present case is unique as it allows investigating an adoption decision at a time when the considered technology was not only still immature and uninstitutionalized, but the information and cues about the innovation were still blurred (Zucker, 1986; Ramiller & Swanson, 2003). Traditional models of IT innovation adoption by organizations generally emphasize technology-related and organization-related factors (Rogers, 1983), similar to the factors elicited in this case. In this regard, RH adoption is no different from adoption of traditional organizational IT. Yet, when RH is at question, environmental factors perhaps play a more critical role, particularly such factors pertaining to the Internet, as the transaction environment, and to vendor trustworthiness. Although in this case, as a result of the successful pilot, AIH' s selection team was quite confident about the technology' s maturity in terms of assuring systems availability and data security on the network, the negative perceptions of vendor trustworthiness outweighed the rather positive perceptions of technology-related and organization-related factors. Thus, the major concerns and negative perceptions related to the vendor and its ability to adequately secure the data on its server farm, as well as its capability to deliver the required service level on a long-term basis, led to rejection of the pure RH solution, as offered by Silverbyte, and to adoption of the modified RH solution (which we termed ' hybrid' )2. It is therefore implied in the case details that vendor trustworthiness is critical because when RH engagement is evaluated, vendors are perceived as pivotal
2
Clearly, the involvement of XOR, then the trusted outsourcer, played an important role in shaping the
final decision to opt against accessing the applications and data from the vendor' s server-farm, paving the way to RH in hybrid mode. Such involvement of a third party, however, is not uncommon in organizations evaluating critical IT decisions. 14
partners and are expected to not only deliver according to expectations, but also to mitigate Internet risks. Hence, adoption of RH might differ from adoption of internally-installed applications due to the effect exerted by environmental factors, exemplified here by Internet risk and vendor trustworthiness. This finding is not shared by prior research that investigated adoption of organization-wide IT solutions, for example ERP (Oliver et al., 2005), where the adoption decision was dominated by organizational and technological determinants. Similarly, research where environmental factors were found important focused on factors such as external pressure (Iacovou et al., 1995; Chwelos et al., 2001) or consumer readiness (Zhu et al., 2003). The vendor' s characteristics, specifically its trustworthiness, while quite often discussed in the outsourcing literature (Koh et al., 1999), should perhaps become more important when considering RH adoption. This, however, merits further empirical support. The factors elicited in this case are illustrated in the model displayed next, along with causal relationships (propositions P1 – P6) posited among these factors and organizational intention to adopt RH. The instrumentality of the model is discussed next, not only for predicting present RH adoption or rejection decisions, but also for explaining the past mishaps and the future destiny of RH. The RH Adoption Model Figure 1 displays the emergent RH adoption model, based on the TOE theory, displaying factors associated with each of the three categories - technology, organization, and environment. These factors can be either subjectively perceived, as is often the case in the organizational context, or measured by objective indicators, depending on the capabilities of the evaluating organization. While Figure 1 posits only direct effects of the independent variables on the dependent one, for simplicity sake, internal relationships among these factors are also likely, reflecting the complexity of the organizational environment. This complexity is thus the reason for phrasing the dependent variable as ' intention to adopt'rather than ' adoption'since quite often, even positive intentions do not lead to eventual adoption because of reasons unforeseen at the time of evaluation. Nonetheless, prior research substantiated 15
the strong positive correlation between intentions and actual behavior (Iacovou et al., 1995; Chwelos et al., 2001).
Figure 1: Modelling organizational intention to adopt RH Further validation of the model is proposed for future research. In addition, various organizational factors, such as industry, size, structure, and other circumstances (e.g., involvement of third parties), which might also affect the adoption decision either directly or as control variables or moderators, not included in the RH model, are also left for further research. Assigning weights to the various affecting categories is another enhancement suggested for future research, as elaborated upon later. Next, we use the model in trying to explain the past failure of RH and to predict its future. Explaining the Past and Predicting the Future of RH through the RH Model Lens The introduction of RH in the late 1990s aroused quite a vibrant discourse, mainly driven by the supply side (IDC, 2000). Nevertheless, the adoption rate was below expectations, with the whole concept eventually nearly dying out with the dot-com collapse (Currie et al., 2004b). In spite of this failure, studies conducted in the early RH market scenario support the assertion that firms could find business benefits and 16
IT cost reduction through RH adoption (Ekanayaka et al., 2002; Currie et al., 2004a). Likewise, the level of discontinuity was relatively low for firms with weak IT departments or those that already outsourced mission-critical applications, and contract formulation expertise could either be purchased or already possessed internally. Evidently, and similar to this case, these could not have been the primary reasons for the generally broad rejection of RH in its early manifestation. In contrast, the environmental factors that affect contract fulfillment perceptions, proved prohibitive, because not only was the Internet an immature transaction environment, but also the vendors offering RH were largely small and newly emergent players. Even when owned by large companies, providers were named to disguise their owners (i.e. Pandesic LLC owned by SAP and Intel, NetLedger owned by Oracle). Hence, because all major IT vendors were absent from the RH market, organizations found it difficult to perceive RH providers as trustworthy and this, combined with perceptions about the risks of transacting over the Internet, eventually negatively influenced the intentions to adopt RH. Investigation of the current RH environment reveals a different picture, mainly due to the recent entrance of most major IT vendors, and the success of salesforce.com. Thus, IBM, Microsoft, and Oracle are explicitly pushing the on-demand business model, and SAP has launched its new Business byDesign ERP package for the midmarket to be delivered solely in the SaaS mode. Clearly, these vendors are trustworthy therefore perceived as more likely to deliver the required service level while mitigating risks. Moreover, the entrance of the leading IT vendors to this market attests to confidence in the future of RH, as is the growing customer base of Salesforce.com. In addition, the success of Salesforce.com also attests to the potential sustainability of SaaS, although Salesforce.com succeeded because it initially offered non mission-critical applications (e.g. sales force automation), which are not as risky as core applications (i.e. ERP). Under these circumstances, namely – a more ' normal' vendor environment (McKnight et al., 2002), organizations are more likely now to develop positive perceptions regarding the RH environment and therefore form positive intention to adopt. Hence, RH' s (or SaaS' s) destiny looks somewhat more promising, yet it is still to be seen whether adopted for core applications, as well. CONCLUSIONS 17
The research objectives at the outset of the present study was to elicit major factors affecting the organizational intention to adopt RH through an in-depth case study, and to compare these factors with those found in prior research. The proposed model and the illustration of its explanatory power are believed to demonstrate how these objectives have been achieved. Yet, one case study cannot be generalized, thus posing a limitation on the results that is quite typical to this type of study. Addressing the scarcity of studies that simultaneously deal with technological, organizational, and environmental determinants of IT adoption (Jeyaraj et al., 2006), specifically factors pertaining to adoption of RH, this work further contributes in several ways. First, the model highlights the importance of environmental factors in the RH context, particularly those pertaining to vendors, offering a theoretical enhancement of TOE to the RH context. Second, the model has practical merits therefore practitioners might find insights in the findings, as detailed next. For academia, the model revisits the TOE theory in the emergent RH context, with special attention to environment-related factors. This is because RH, as other weband vendor-driven IT applications, should be more sensitive to vendor and Internet issues than locally installed applications. More evidence is required by further research as to the identification, definition, and effects of these factors. Additional research questions were also mentioned above, specifically those pertaining to organizational circumstances that might control or moderate the environmental effects. Finally, an empirical test of the model is called for. Another theoretical contribution is suggested by using the proposed model as a first step in introducing a different IT innovation adoption paradigm, called for by (Fichman, 2004). Fichman recently proposed to move away from the common innovation adoption paradigm "typified by the desire to explain innovation using economic-realistic models, whereby organizations that have greater quantity of what might be called the ' right stuff'(i.e., greater innovation-related needs and abilities) are expected to exhibit greater quantity of innovation (i.e., greater frequency, earliness, or extent of adoption)" (p. 315). One of the alternative paradigms suggested by Fichman is the configuration paradigm, where the variance of the dependent variable is not 18
only affected by each individual independent variable, but also by the configuration of the combination of the constructs. The AIH case study illustrates a real-world instance of this paradigm, because the combination of the configuration of the three main determinants resulted at AIH in an intermediate level of RH adoption, somewhere between adoption and rejection. Thus, we propose that further research would investigate adding weights to the three categories, and define conditions driving various configurations. To practitioners, the model highlights major drivers and inhibitors of RH. Decision makers in potential customer organizations are advised to evaluate RH adoption consequences against their specific technology, organization, and environment circumstances, with indicators composing these categories suggested by this study. Particularly, specific RH features, such as scalability, flexibility, IT centralization, etc. should be considered against their benefits to the organization compared to alternative solutions. Organizational readiness, exemplified in this case by perceived ease of RH implementation and perceived ease of contract formulation should also be considered, as in all IT adoption decisions. Risks stemming from vendor dependence and the Internet, however, are more specific to the RH decision, and should carefully evaluate by decision makers. RH vendors, on the other hand, are alerted to the materiality of vendor trustworthiness and other environmental issues, pointing to the need to act in order for the RH environment to seem less risky. This is especially true for new entrants, who might offer innovative web-driven applications, yet whose trustworthiness is often questionable. If the findings of this study are further supported, these vendors are unlikely to acquire the critical customer mass, and should therefore consider partnering with experienced and reputable IT vendors. This work is thus one step towards better understanding the RH adoption issue when mission-critical applications are considered. Yet, more research is clearly warranted in order to substantiate a sound theory pertaining to organizational adoption of web- and vendor-driven applications which is still perceived by customer organizations as risky.
19
REFERENCES Afuah, A. (2003) Innovation Management. Oxford University Press, New-York. Benbasat, I., Goldstein, D. and Mead, M. (1987) The Case Research Strategy in Studies of Information Systems. MIS Quarterly 11 (3), 369-386. Bower, J. L. and Christensen, C. M. (1995) Disruptive Technologies: Catching the Wave. Harvard Business Review 73 (1), 43-53. Bryson, K. and Sullivan, W. (2003) Designing Effective Incentive-oriented Contracts for Application Service Provider Hosting of ERP Systems. Business Process management Journal 9 (6), 705-721. Christensen, C., M. (1992a) Limits of the Technology S-Curve: Part I. Production and Operations Management 1 (4), 334-366. Christensen, C., M. (1992b) Limits of the Technology S-Curve: Part II. Production and Operations Management 1 (4), 358-366. Chwelos, P., Benbasat, I. and Dexter, A., S. (2001) Research report: Empirical test of an EDI adoption model. Information Systems Research 12 (3), 304-321. Currie, Desai, B. and Khan, N. (2004a) Customer Evaluation of Application Services Provisioning in Five Vertical Sectors. Journal of Information Technology Theory and Application (JITTA) 19 (1), 39-58. Currie, W. (2000) Expanding IS Outsourcing Services through Application Service Providers. In The European Conference on Information Systems (ECIS), Vienna. Currie, W., L., Desai, B. and Khan, N. (2004b) Customer evaluation of application services provisioning in five vertical sectors. Journal of Information Technology 19 (1), 39-58. Currie, W. L. (2004) The organizing vision of application service provision: a process-oriented analysis. Information and Organization 14 (4), 237-267. Daft, R. L. (1978) A Dual-Core Model of Organizational Innovation. Academy of Management Journal 21 (2), 193-210. Davis, F. (1989) Perceived Usefulness, Perceived Ease of use and User Acceptance of Information Technology. MIS Quarterly 13 (3), 319-339. Davis, G. B., Lee, A. S., Nickles, K. R., Chatterjee, S., Hartung, R. and Wu, Y. (1992) Diagnosis of an information system failure : A framework and interpretive process. Information & Management 23 (5), 293-318. Eisenhardt, K. M. (1989) Building Theories From Case Study Research. Academy of Management. The Academy of Management Review 14 (4), 532.
20
Ekanayaka, Y., Currie, W. and Seltsikas, P. (2002) Delivering Enterprise Resource Planning Systems through Application Service Providers. Logistics Information Management 15 (3), 192-203. Fichman, R., G. (1992) Information Technology Diffusion: A review of empirical research. In 13th International Conference on Information Systems (Degross, J. I. and Becker, J. D. and Elam, J. J., Eds), pp 195-206, Dallas, Texas. Fichman, R., G. (2004) Going Beyond the Dominant Paradigm for Information Technology Innovation Research: Emerging Concepts and Methods. Journal of the Association for Information Systems 5 (8), 314-355. Gallivan, M., J. (2001) Organizational adoption and assimilation of complex technological innovations: Development and application of a new framework. Database for Advances in Information Systems 32 (3), 51. Hancox, M. and Hackney, R. (2000) IT Outsourcing: Frameworks for Conceptualizing Practice and Perception. Information Systems Journal 10, 217-237. Heart, T., Pliskin, N. and Curley, K. (2007) Application Hosting as Means for Aligning Business and IT. International Journal of E-Business 5 (2), 176-187. Iacovou, C. L., Benbasat, I. and Dexter, A. S. (1995) Electronic data interchange and small organizations: Adoption and impact of technology. MIS Quarterly 19 (4), 465485. Idc (2000) Worldwide ASP Spending Will Approach $8 Billion in 2004. [accessed September 10 2006]; Available from: http://aspstreet.com/archive/d.taf/what,show/id,381/rf,660. Jeyaraj, A., Rottman, J., W. and Lacity, M., C. (2006) A review of the predictors, linkages, and biases in IT innovation adoption research. Journal of Information Technology 21 (1), 1. Karahannas, M. and Jones, M. (1999) Interorganizational Systems and Trust in Strategic Alliances. In The Twentieth International Conference on Information Systems (ICIS), pp 346-357, New-York. Khalifa, M. (2006) SME Adoption of IT: The Case of Electronic Trading Systems. IEEE Transactions on Engineering Management 53 (2), 275-284. King, J. L., Gurbaxani, V., Kraemer, K. L., Mcfarlan, F. W. and Et Al. (1994) Institutional factors in information technology innovation. Information Systems Research 5 (2), 139. Klein, H. K. and Myers, M. D. (1999) A set of principles for conducting and evaluating interpretive field studies in information systems. MIS Quarterly 23 (1), 67(2).
21
Koh, C., Tay, C. and Ang, S. (1999) Managing Vendor-Client Expectations in IT Outsourcing: A Psychological Contract Perspective. In The Twentieth International Conference on Information Systems, pp 512-517, North Carolina. Kumar, N. (1996) The Power of Trust in Manufacturer-Retailer Relationships. Harvard Business Review 74 (6), 92-106. Lacity, M. and Willcocks, L. (1995) Interpreting Information technology Sourcing Decisions from a transaction Cost Perspective: Findings and Critique. Accounting Management and Information Technology 5 (3/4), 203-244. Mayer, R., Davis, J. and Schoorman, F. (1995) An Integrative Model of Organizational Trust. Academy of Management Review 20 (3), 709-734. Mcknight, D. H., Choudhury, V. and Kacmar, C. (2002) Developing and validating trust measures for e-commerce: An integrative typology. Information Systems Research 13 (3), 334. Mcknight, D. H., Cummings, L. L. and Chervany, N. L. (1998) Initial trust formation in new organizational relationships. The Academy of Management Review 23 (3), 473490. Mingers, J. (2001) Combining IS research methods: Towards a pluralist methodology. Information Systems Research 12 (3), 240. Oliver, D., Whymark, G. and Romm, C. (2005) Researching ERP adoption: an internet-based grounded theory approach. Online Information Review 29 (6), 585. Orlikowski, W., J. and Barley, S., R. (2001) Technology and institutions: What can research on information technology and research on organizations learn from each other? MIS Quarterly 25 (2), 145. Ramiller, N., C. and Swanson, E. B. (2003) Organizing visions for information technology and the information systems executive response. Journal of Management Information Systems 20 (1), 13-50. Ratnasingam, P. (2004) The impact of collaborative commerce and trust in Web services. Journal of Enterprise Information Management 17 (5), 382. Ravichandran, T. (2005) Organizational Assimilation of Complex Technologies: An Empirical Study of Component-Based Software Development. IEEE Transactions on Engineering Management 52 (2), 249-268. Rogers, E. (1983) Diffusion of Innovations. The Free Press, New York. Rosenbloom, R. S. and Christensen, C. M. (1994) Technological Discontinuties, Organizational Capabilities, and Strategic Commitments. Industria and Corporate Change 3 (3), 655-685. Ross, J. W. (2003) Creating a Strategic IT Architecture Competency: Learning in Stages. MIS Quarterly Executive 2 (1), 31-43. 22
Shapiro, S. P. (1987) The Social Control of Impersonal Trust. American Journal of Sociology 93 (3), 623-658. Swanson, B. E. and Ramiller, N. C. (1997) The Organizing Vision in Information Systems Innovation. Organization Science 8 (5), 458-474. Swanson, E. B. (1994) Information systems innovation among organizations. Management Science 40 (9), 1069. Tornatzky, L. G. and Fleischer, M. (1990) The Process of Technological Innovation. Lexington Books, Lexington, MA. Tutti, L., Rothery, M. and Grinnell, R. (1996) Qualitative Research for Social Workers. Allyn and Bacon, Needham Heights, MA. Wade, M. and Hulland, J. (2004) Review: The Resource-based View and Information Systems Research: Review, Extension, and Suggestions for Future Research. MIS Quarterly 28 (1), 107-142. Wernerfelt, B. (1984) A Resource-Based View of the Firm. Strategic Management Journal 5 (2), 171. Williamson, O. (1979) Transaction Cost Economics: The Governance of Contractual Relations. The Journal of Law and Economics 22, 233-261. Yin, R. (1994) Case Study Research: Design and Methods. Sage Publications, CA. Zaheer, A., Mcevily, B. and Perrone, V. (1998) Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance. Organization Science 9 (2), 123-159. Zhu, K. and Kraemer, K., L. (2005) Post-Adoption Variations in Usage and Value of E-Business by Organizations: Cross-Country Evidence from the Retail Industry. Information Systems Research 16 (1), 61-84. Zhu, K., Kraemer , K. and Xu, S. (2003) Electronic business adoption by European firms: a cross-country assessment of the facilitators and inhibitors. European Journal of Information Systems 12 (4), 251-268. Zucker, L. (1986) Production of Trust: Institutional Sources of Economic Structure, 1849-1920. Research in Organizational Behavior 8 (1), 53-111.
23
