The usage and adoption of cloud computing by small ...

International Journal of Information Management 33 (2013) 861–874

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International Journal of Information Management journal homepage: www.elsevier.com/locate/ijinfomgt

The usage and adoption of cloud computing by small and medium businesses Prashant Gupta a , A. Seetharaman a , John Rudolph Raj b,∗ a b

S P Jain School of Global Management, 10, Hyderabad Road, Singapore 119579, Singapore Faculty of Management, Multimedia University, Persiaran Multimedia, 63000 Cyberjaya, Selangor Darul Ehsan, Malaysia

a r t i c l e

i n f o

Article history: Keywords: Cloud computing Software-as-a-Service (SaaS) Platform-as-a-Service (PaaS) Infrastructure-as-a-Service (IaaS) Small and medium enterprises (SMEs’) Small and medium businesses (SMBs’)

a b s t r a c t Cloud computing has become the buzzword in the industry today. Though, it is not an entirely new concept but in today’s digital age, it has become ubiquitous due to the proliferation of Internet, broadband, mobile devices, better bandwidth and mobility requirements for end-users (be it consumers, SMEs or enterprises). In this paper, the focus is on the perceived inclination of micro and small businesses (SMEs or SMBs) toward cloud computing and the benefits reaped by them. This paper presents five factors influencing the cloud usage by this business community, whose needs and business requirements are very different from large enterprises. Firstly, ease of use and convenience is the biggest favorable factor followed by security and privacy and then comes the cost reduction. The fourth factor reliability is ignored as SMEs do not consider cloud as reliable. Lastly but not the least, SMEs do not want to use cloud for sharing and collaboration and prefer their old conventional methods for sharing and collaborating with their stakeholders. © 2013 Elsevier Ltd. All rights reserved.

1. Introduction Cloud computing has created the same paradigm shift as what was analogous to replacement of individual generators by the centralized electricity grid (Etro, 2011; Li, Wang, Wu, Li, & Wang, 2011). This is exactly how cloud differs from typical IT/IS, wherein the producers and consumers (of information) do not necessarily reside within the same physical proximity. Large enterprises have quickly adopted this cloud computing bandwagon (Klie, 2011; Li et al., 2011; Mahesh, Landry, Sridhar, & Walsh, 2011). However, many micro businesses and SMBs are still sitting on the fence and are contemplating whether to move to or not to move to the cloud computing trend, as highlighted by mindSHIFT (USA based company). In this research study, an attempt has been made to bring clarity to this paradigm shift affecting the local environment in Asia predominantly. With respect to the local Singapore context, SPRING Singapore is the statutory board in charge of promoting the growth of SMEs in Singapore. Maybank Singapore and SPRING Singapore define micro business (registered and incorporated in Singapore) as a business with 10 or less employees or annual sales not exceeding $1 million and a minimum 30% equity (local shareholding). SPRING Singapore defines SMEs as businesses with annual sales turnover of not more than $100 million or employing no more than 200 staff. As per this definition, there are 154,000 SMEs in Singapore,

∗ Corresponding author. Tel.: +60 3 8312 5681; fax: +60 3 8312 5590. E-mail address: [email protected] (J.R. Raj). 0268-4012/$ – see front matter © 2013 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.ijinfomgt.2013.07.001

which means that 99.3% enterprises in Singapore are SMEs. They contribute 46% to Singapore’s GDP (Gross Domestic Product) and employ 63% of the workforce (Low, 2005; Yeo, 2007). In OECD countries (Organization for Economic Cooperation and Development, Paris) more than 95% of the enterprises are SMEs. These SMEs provide 60–70% of jobs. Two thirds of all the EU (European Union) jobs are provided by SMEs. They provide 78% of the jobs in Japan (Bernroider, 2002). India has about 3 million SMEs accounting for 50% of its industrial output. SMEs are the 2nd largest employer after agriculture and contribute to 40% of exports. Indian government initiatives include setting up of MSMEs (Micro Small and Medium Enterprises) Development Act 2006. For the purpose of this study, ‘Micro businesses’ are defined as SOHO (Small Office Home Office) SMBs having 1–10 employees and ‘Small businesses’ are defined as SMBs having 11–99 employees. ‘Medium businesses’ are defined as SMEs having 100–200 employees. The literature review reveals that many studies were (and currently are being) conducted on the use of cloud computing by large scale enterprises primarily on their perceptions about cost reduction, ease of use and convenience, reliability, sharing and collaboration and lastly but not the least, security and privacy. The major contribution of this paper is to identify new factors as well as to develop a sense of the relative weight of existing factors like cost reduction, ease of use and convenience, reliability, sharing and collaboration, security and privacy on SMEs approach toward usage and adoption of cloud computing for their businesses.

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Table 1 Comparison of empirical studies on the usage and adoption of cloud computing by SMEs or SMBs. Literature details in chronological order

Inference on SMEs adoption of cloud computing

Importance of cloud computing parameters on SMEs adoption

Detailed discussion on features of each parameter

Expectations of SMEs from future usage and adoption of cloud computing

Rising above the din (Ferguson, 2008)

Alternate ways and SaaS model for revenues by DELL, focusing on providing services to SMBs, an untapped market Availability of secured IT infrastructure, minimal up-front investment, disaster recovery, software upgrades Security, reliability, trust, cost reduction, online collaboration are the major influences for cloud computing usage DELL launched three cloud based services for SMEs

Software and services needs of SMBs to help manage their emails, licensing of software, other assets etc.

No

Not analyzed

Cost reduction, avoiding natural disaster mishaps, better security but lack of reliability in using cloud computing are the most important parameters

Yes – emphasized on SMEs comfort with cloud computing

SMEs are showing positive inclination toward cloud

Trust in cloud providers, incremental cost and reliability are the most important parameters

Yes – the success of the cloud computing adoption and its image in the mind of SMEs discussed in detail

SMEs can explore cloud computing with relatively little risk

30% IT cost reduction for SMEs, customized services like storage and minimizing their email outage, security breaches and service disruption are the most important factors The importance of moving to cloud step by step is recommended using couple of tips for SMEs. Moving to cloud is emphasized

No

Major inclination toward SMEs by a big corporate like DELL, offering cloud services

Yes – with specific focus on privacy, availability, data loss, data mobility and ownership, tool robustness

Strongly emphasized for small businesses

Collaboration, data storage, backup, scalable, pay as you go are the primary factors

No

Awareness, acceptance, usage and adoption of cloud by SMEs is on the rise

SMEs have shown strong inclination for three out of the five core variables for using and adopting cloud, as per this research

Yes – future recommendations for the remaining two parameters have been discussed in detail that would help in designing the cloud framework for improved usage and adoption of cloud computing by SMEs

Five existing core factors and few new factors are identified and inference is drawn, using extensive quantitative survey across the APAC region using structural equation modeling (SEM)

Small businesses moving to cloud computing services (King, 2008)

SMEs can benefit most from the cloud (Clark, 2009)

Untitled (Grant, 2009)

Should You Move Your Business to the Cloud? (Martin, 2010)

Untitled (Grant, 2011)

This research paper

Security and privacy are top concerns of 51% SMBs, availability versus sudden downtime, migration across cloud services SMEs prefer to buy from a local cloud provider and are willing to pay Core variables have been focused and studied in detail

In addition, very limited research or literature has been found yet on this research topic in any developed country as well as in APAC (Asia-Pacific) region. This research study reveals the perceptions as well as the intentions of the SMEs toward factors like cost reduction, ease of use, reliability, sharing and collaboration, security and privacy in a quantitative manner, which are quite different as perceived by the worldwide cloud community especially in large enterprises. This research captured the actual decisions taken by the respondents rather than merely the eagerness and intention to adopt cloud computing. For practical reasons, this study focuses on the micro and small businesses (SMEs or SMBs) in Singapore and neighboring countries like Malaysia, India. The rest of this paper is organized as follows: Section 2 discusses the related literature reviewed for this research study; the subsequent sub-sections outlines the research methodology; discuss the empirical findings and presents the conceptual model and experimental hypothesis on which the model is based; Section 5 describes the analysis of the data to validate the model and the final Section 9 concludes the paper’s results. The implications for industry as well as for research and limitations and scope for future research have been discussed in last Sections 6, 7 and 8 respectively.

2. Survey of literature and theoretical development The literature review has been grouped under the variables (both independent and dependent) considered for this research study. The dependent variable has been identified as ‘Cloud computing adoption by micro and small businesses (SMEs or SMBs)’. The various independent variables (factors influencing dependent variable) have been identified as, (1) Cost reduction (economical) in terms of data storage, subscription, low upfront cost (capital expenditure), cost control via scalability, elasticity of resources (scale up and down in a very short time); (2) Convenience, easy to use implies simple in the form of accessibility and availability from anywhere and anytime; (3) Reliability indicates dependability to use it whenever needed (backup and least outage); (4) Sharing and collaboration; and (5) Security and privacy Table 1 illustrates the flow of research over the years and the additional value this research paper would add in helping SMEs with their existing and forthcoming usage and adoption of cloud computing to enhance their ROI (return on investment). This table captures how SMEs/SMBs got onto the cloud computing bandwagon over the period of couple of years as cloud computing evolved. This table clearly shows the increasing trend of the value being captured by small businesses in getting more inclined toward cloud computing.

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Fig. 1. Research framework.

This table also signifies the gradual shift in the attention of large enterprise like DELL, to start focusing on the needs of the SMEs/SMBs and how to fulfill them via cloud, rather than providing the custom-made licensed solutions and services, within the premises of small business. 2.1. Research methodology After the extensive literature survey, the research methodology has been centered on the already identified existing core variables. Hence a simple direct relationship of these core variables has been used to create the research model to understand which of them is the most dominant. To further quantify, a detailed questionnaire was used to gather the formal data (primary data) from the various micro and small businesses (SMEs/SMBs), primarily based in APAC region. The collected sample size was 211 during the first half of 2012. Finally, data collected from the final survey was analyzed. For statistical analysis, SmartPLS (a structural model based tool) was used to build, run and validate the process model. Partial least square (PLS) regression techniques were used to analyze the latent constructs. SmartPLS exhibits both the measurement model (outer model) and the structural model (inner model). 2.2. Research framework and hypotheses definition Fig. 1 is the research framework on which this research study is built upon. Cloud computing (dependent variable) is similar to an electricity grid, where resources like hardware, software, information are pooled and shared with the end-user via the internet, which is used as a medium of exchange (Li et al., 2011). Users do not know the exact location of their digital data (McAfee, 2011). The framework provided by cloud computing is in the form of high quality leased IT resources instead of building the IT infrastructure from scratch. Thus, the in-house versus cloud computing comparison is, analogous to the make or buy decision faced by SMBs. Cloud computing is analogous to outsourcing data center operations (Mahesh et al., 2011). This approach also typically implies renting software via the Internet instead of employing an in-house software development team (Payton, 2010). As a result, SMEs in-house IT parts are minimal (Li et al., 2011). Mahesh et al. (2011), Sultan (2011), Truong and Dustdar (2011), Ojala and Tyrvainen (2011), Creeger (2009), Li et al. (2011), Durkee (2010), Marston, Li, Bandyopadhyay, Zhang, and Ghalsasi (2011), Karadsheh (2012), Rath (2012), Neves, Marta, Correia, and de Castro (2011) and McAfee (2011) observe that cloud computing comprises three services:

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(1) Software-as-a-Service (SaaS): Instead of installing software on the client’s machine and updating it with regular patches, frequent version upgrades etc., applications like Word processing, CRM (Customer Relationship Management), ERP (Enterprise Resource Planning) are made available (hosted) over the internet for the consumption of the end-user. It can achieve economies of scale. This is the biggest and most mature cloud model. Commercial vendors are Yahoo Mail, Gmail, Hotmail, TurboTax Online, Facebook, Twitter, Microsoft Office Live, Google Apps, Salesforce.com, Cisco WebEx web conferencing, antivirus, SuccessFactors (HRM tool) etc., (2) Platform-as-a-Service (PaaS): Instead of buying the software licenses for platforms like operating systems, databases and middleware, these platforms and the software development kits (SDKs) and tools (like Java, .NET, Python, Ruby on Rails) are made available over the Internet. Commercial vendors include Microsoft Azure Services, Amazon Web Services (AWS), Salesforce’s Force.com, Google App Engine platform, IBM Cloudburst, Amazon’s relational database services, Rackspace cloud sites, (3) Infrastructure-as-a-Service (IaaS): This refers to the tangible physical devices (raw computing) like virtual computers, servers, storage devices, network transfer, which are physically located in one central place (data center) but they can be accessed and used over the internet using the login authentication systems and passwords from any dumb terminal or device. Commercial vendors include Amazon EC2 (Elastic Compute Cloud), Elastic Block Storage (EBS) and Simple Storage Service (S3), Rackspace cloud servers, Joyent and Terremark. One of the biggest advantages of moving to cloud computing is the opportunity cost of freeing up some of the IT administrative time, which can now be applied to the business aspects of growing the core business of SMBs (Creeger, 2009). Due to cloud computing, innovation is nurtured as the entry barrier (in terms of cost) gets lowered. Now, startups and small firms can use cloud computing resulting in introduction of these types of online applications and social-media services such as Facebook, YouTube, TripIT (travel), Mint (personal finance) (Marston, Li, Bandyopadhyay, Zhang, & Ghalsasi, 2011). There are four different cloud deployment models within organizations namely (Neves et al., 2011; Marston et al., 2011; Rath, 2012): (1) Public cloud: It is available from a third party service provider via Internet and is very cost effective for SMBs to deploy IT solutions. For example, Google Apps. (2) Private cloud: It is managed within an organization and is suitable for large enterprises (managed within the walls of the enterprises). For example, the US government cloud product is in a segregated environment, both physically and logically. It is certified by FISMA (Federal Information Security Management Act) and is being handled by a third party provider, Google. Private clouds provide the advantages of public clouds but still incur capital expenditures. (3) Community cloud: It is used and controlled by a group of enterprises, which have shared interests. For example, the US federal government using community cloud (built on Terremark’s Enterprise cloud platform) for forms.gov, flu.gov, cars.gov, USA.gov, Apps.gov. (4) Hybrid cloud: It is a combination of public and private cloud. The following steps are recommended regarding the adoption of cloud computing (Etro, 2011): (a) Data portability and free flow of data across geographical borders should be favored by international agreements; (b) A minimum set of standards and processes should be agreed upon by EU (European Union) and other global

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authorities to promote data security, privacy and portability; (c) Fiscal incentives and promotions should be provided for adoption of cloud computing by governments etc. by partly bearing the variable cost; and (d) To reallocate the employment within the IT sector should get public support. The discussion of the independent variables follows: 2.2.1. Cost reduction Due to the subscription model, there is a huge cost savings for small firms (Ankeny, 2011). The entry cost for small firms utilizing business analytics, which needs lots of computing power, has been lowered (Marston et al., 2011). A 70% cost reduction has been observed since adopting AWS (Amazon Web Services) as the cloud vendor (CC 2011). AWS has also reduced their prices a couple of time, in the past three years, in spite of the absence of competitive forces (McAfee, 2011). European SMEs, who are more risk averse, compared to USA SMEs, appreciate this reduction of fixed IT assets cost as well reduction of maintenance costs of IT assets, resulting in lowering the entry barrier (Etro, 2011). Due to the per user revenue model, small businesses could afford enterprise applications like Salesforce.com (CRM tool) (Klie, 2011; Mahesh et al., 2011). This is in line with the trend of software becoming a commodity (like hardware) due to stiff competition and availability of open source software. Downward pricing pressures have resulted in cloud services being used as a commodity now, hence large scale adoption of cloud computing has to be ensured, similar to volume sales but at a lower price (Durkee, 2010). Computing power is nowadays considered as a commodity due to the entry of various players providing it at an affordable cost (Marston et al., 2011). Startups and small businesses can now afford applications such as ERP (Enterprise Resource Planning), CRM (Customer Relationship Management), SFA (Sales Force Automation) and SCM (Supply Chain Management) due to economical subscription fees (Krell, 2011). For example, by adopting Google Apps, a European small business has saved 80,000 Euros annually (Payton, 2010). Reduction of operating and maintenance costs and improvements in efficiency by SMBs has been observed too (Li et al., 2011). Reduction of data center costs has also been cited (Swartz, 2011). Huge upfront investments can be reduced especially for SMEs (Marston et al., 2011; Stoller, 2011). Immediate access to hardware resources is available with no upfront capital investments resulting in faster time to market, with IT becoming an operational expense (instead of capital expense model) (Marston et al., 2011; Karadsheh, 2012). For the price of one cup of coffee/tea, small firms can now get their latest office applications from a reputed branded company like Microsoft (US$ 6 per user per month for up to 50 users) (Blum, 2011a, 2011b). This is an affordable price for small business (NZ$ 9.25 per user per month) (Kevany, 2011). On the other hand, Google Apps has small business pricing of US$ 5 per user per month or US$ 50 per user per year with no restrictions on number of users (Wenzel, 2011). Amazon (computing infrastructure provider) only has cost determining tools related to machine, storage and network usage (Truong & Dustdar, 2011). Adoption of IaaS reduces capital expenses and IT costs (Voith, Oberle, & Stein, 2012). Besides small business, massive cost reduction for the public sector (healthcare, education) has been observed, such as the 20% cost reduction by the Swedish Red Cross (Etro, 2011). Regarding cost effective scaling and elasticity, small businesses can move their components to the cloud step by step instead of in one single go and growth in the cloud happens at the pace of the business (Ankeny, 2011). Attraction of on-demand processing power and storage (dynamic scaling) by CFOs is becoming a reality (Swartz, 2011). Elasticity in ramping up (scalable infrastructure) and disposing of cloud capacity when not needed, is extremely budget friendly (Durkee, 2010). For risky business models, if the demand rises sharply at short notice, scalability of resources provided by cloud providers

(operational excellence) becomes a huge competitive advantage (Mahesh et al., 2011). For example, a US startup has ramped up from 50 to 3500 Amazon cloud servers. Nowadays, adding computing capacity has become as simple as adding building blocks to an existing grid. Another example is Smugmug (online photo website) whose workload increases five times during December/January, and is well handled by cloud computing (Marston et al., 2011). The hypotheses follow from the above discussion: Hypothesis 1 (H1). Cost reduction (resulting from scalability of resources and avoiding physical hardware setup) has a positive effect in terms of ease of use and convenience for SMEs. Hypothesis 2 (H2). Cost reduction achieved using digital files and documents, which can be delivered online using cloud (compared to physical assets) has a positive effect in terms of easier sharing and collaboration. Hypothesis 3 (H3). Cost reduction or cost saving achieved using cloud (by paying only for what is needed and thereby avoiding upfront costs for various resources) has a positive effect on the SMEs usage and adoption of cloud computing. 2.2.2. Ease of use and convenience Small business employees often work outside the actual office location and hence having easy access to their data (using their mobile devices) is a big plus (Ankeny, 2011; Jain, 2011). This need for employees to have access from remote locations as well as the increasing number of online transactions necessitates a cloud computing solution (Mahesh et al., 2011). Accounting and finance work has been outsourced to the cloud, leaving more time for small businesses executives to spend on strategic work and initiatives (Krell, 2011). Canadian SMEs are moving from PC-based accounting packages to cloud based ones (Stoller, 2011). This avoids continuous hardware upgrades by a small business thereby preventing maintenance woes for utilizing different machines (Mahesh et al., 2011). Accountants are using cloud technologies for their SMEs clients for a convenient monthly fee (Kevany, 2011). This ability helps to manage SOX (Sarbanes-Oxley) and other regulatory changes in billing in a flexible manner, as well as helps them manage their revenues better while using dynamic business models (Swartz, 2011). Replacement of FTP (file transfer protocol) by uploads to a cloud environment (like box.net) is easy (Devaki, 2011; Jain, 2011; McAfee, 2011). The Cloud approach helps eliminate administrative overhead and permits access from any geographical location, any device, and from any organization (McAfee, 2011). Less powerful devices (smartphones, netbooks) are able to make the most of the company’s backend IT systems via a simple web-based interface like AWS Management console (Marston et al., 2011). These hypotheses follow from the above discussion: Hypothesis 4 (H4). The ease of use and convenience in using the cloud infrastructure (via a simple and intuitive user-interface and round the clock accessibility) is positively related to improved sharing and collaboration. Hypothesis 5 (H5). The ease of use and convenience in using cloud solutions is positively related to SMEs use and adoption of cloud computing (as it makes them more productive and efficient). 2.2.3. Reliability Since the cloud is available round the clock, it is more reliable. Employees can even call up the cloud center (if needed) instead of depending on the in-house IT staff (Ankeny, 2011). Data redundancy is built-in by cloud storage solutions so that the files are always available, even during times of power failures, network downtime etc. (Devaki, 2011). This built-in redundancy helped Netflix to stay afloat online, in spite of AWS failure in 2011 (McAfee,

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2011). Even in 2010, Gmail had an uptime of 99.984%, which is 32 times more reliable than a typical widely used email system. On the contrary, for SMEs, the reliability of cloud services is definitely important but not as crucial as for large companies (Sultan, 2011). Sultan adds that portability of end-user data to another cloud provider (in case of failure of the primary provider) is extremely important. Lack of interoperability is an issue prevailing across the cloud computing landscape (Rath, 2012). Also, reliability gets impacted because of the downtime of various commercial cloud solutions like Salesforce.com, Amazon, Gmail and Google Docs, resulting in setting up of failsafe cloud systems. Efforts are underway by the FTC (Federal Trade Commission) and the Cloud Security Alliance to improve the reliability of these cloud providers (Mahesh et al., 2011). Needed reliability level has to be observed inspite of low prices of cloud services (Durkee, 2010). To provide 99.999% uptime, n + 1 redundancy is needed. He further states that quick phone support is needed under guaranteed SLAs by commercial enterprises. Providing automatic disaster recovery and back up provides confidence. The following hypotheses are based on the above discussion: Hypothesis 6 (H6). Better reliability or improvement in reliability of a cloud solution has a positive effect on cost cutting (as the small business owners can convert their capital expenditures to operating expenditures). Hypothesis 7 (H7). A higher degree of reliability in using cloud is positively related to the ease of use and convenience proposition for SMEs (as they can access their data anytime, anywhere via any device). Hypothesis 8 (H8). The reliability of cloud solutions has a positive effect on sharing and collaboration by SMEs. Hypothesis 9 (H9). The reliability of cloud providers is positively related to the usage and adoption of cloud by SMEs. 2.2.4. Sharing and collaboration With the proliferation of social media and smart phones (mobile devices), startups and small companies have improved collaboration within their companies (Krell, 2011). Cloud file storage allows various SMBs stakeholders to share information and data (via emails, shared web-links, IM-instant messengers), store and retrieve information with each other (Devaki, 2011; Jain, 2011). Google Apps, box and Jive are very good examples of sharing content and collaboration among stakeholders (McAfee, 2011; Sultan, 2011). Large data are being shared and collaboration with other CSE (Computational Science and Engineering) research groups is enabled (Truong & Dustdar, 2011). Exact same test scenarios setups can be easily reproduced using the cloud. Collaboration becomes easier with IMs (instant messaging) and video conferencing, enabled via the cloud (Payton, 2010). Document sharing and editing of the same document by several people at the same time (via Google Docs) and collaboration (via Skype, Google chat) is compelling for users to adopt cloud computing (Marston et al., 2011). Hypothesis 10 follows from the above discussion: Hypothesis 10 (H10). The need for sharing and collaboration in today’s highly competitive world has a positive effect on using and adopting the cloud computing by SMEs. 2.2.5. Security and privacy Organizations talking about cloud security are actually more concerned about having their own control (something like a private cloud) than any other serious issue (Payton, 2010). Cloud security is good as risk gets minimized due to authentication and encryption (Jain, 2011; Mahesh et al., 2011). Security is heightened by, for example, monitoring activities, tracking transactions, providing

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selective access to users, and utilizing strong password. Sultan reported that 75% of the CIOs reporting in his study are concerned about cloud security and argues that Google does not encrypt data on their servers (Sultan, 2011). On the other hand, Sultan also states that 66% of USB drives are lost; hence the cloud is more secure. Installation of security patches can be avoided thereby saving days and months. There may be some flexibility depending on the cloud solution chosen, for example, Google Apps allows certain users to specify the location of data storage to meet the Federal guidelines (Mahesh et al., 2011). Enhanced security is possible due to economies of scale as well as affordability of excellent security experts (Neves et al., 2011). Though data security is the main issue for SMBs, they are still adopting public clouds because a public cloud provides standard services at affordable cost (Li et al., 2011). The availability of secure e-banking (online banking) functionality is driving the growth of e-banking as it is very easy to use now by typical consumers, enhancing their convenience of getting their routine financial chores done from home rather than visiting an ATM (Featherman, Miyazaki, & Sprott, 2010; Jahangir & Begum, 2007; Lallmahamood, 2007). Online shopping through internet is gaining attention due to high security and ease of use (Islam & Daud, 2011). For international travelers, due to their confidence about security, internet is extremely easy to use, while traveling to different countries, thereby improving their accessibility to entertainment needs (Ryan & Rao, 2008). The individual motivation for bringing your own device (BYOD) into the workplace is arising due to privacy and data security. But, at the same time, it is enhancing the convenience of accessing the office emails on their own devices, rather than using the officially provided cumbersome laptops. This increases the performance of the employees (Chigona, Robertson, & Mimbi, 2012). Security directly contributes to the reliability of the system. A reliable software system is a system with reliable security. Hence, designing a highly secure cloud system is very important (Burtescu, 2010; Hanmer, McBride, & Mendiratta, 2007). The following hypotheses are based on the above discussion: Hypothesis 11 (H11). Security and Privacy improvements are positively related to cost reduction or cost savings by SMEs. Hypothesis 12 (H12). A better secured and privacy protected cloud solution is positively related to the ease of use and provides enhanced convenience to the SMEs (who can use this solution without worrying). Hypothesis 13 (H13). Security and Privacy is positively related to a better and solid reliability of the cloud solution adopted by small business. The higher is the cloud security and privacy, the higher is the probability of the cloud being reliable and available all the time. Hypothesis 14 (H14). A secured and reliable cloud solution has a positive effect on sharing and collaboration efforts (by keeping them minimal, simpler as well as trustworthy for small business). Hypothesis 15 (H15). The security and privacy is positively related to the usage and adoption of cloud by SMEs. 3. Methods The secondary data had been obtained from the literature survey, resulting in five core variables. A detailed discussion has already been captured in the literature survey section earlier. Subsequently, a questionnaire was used to collect the primary data from 211 respondents. 3.1. Data collection A pilot survey, using personal interviews with 30 respondents, was conducted to obtain holistic feedback about SMEs/SMBs usage

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and adoption of cloud computing. This pilot survey was developed by framing relevant questions under each of the 5 core variables identified from the literature survey. The survey included both qualitative and quantitative questions for latent constructs. Based on the feedback, the final survey questionnaire was formulated. This final survey was administered only to those small businesses that were well aware of the cloud. A note at the beginning of the questionnaire explained the purpose of this research and stated that the confidentiality of the data would be maintained. The questionnaire was divided into two parts. The first part of the survey captured influence, usage and adoption of cloud computing, assuming that the respondents do have the necessary awareness and acceptance of the cloud. For each latent construct, three to five questions (indicators) were formulated capturing the usage and adoption by SMEs. All the reflective indicators were measured on a 5-point Likert scale using scales from “Not at all (strongly disagree)” to “Very often (strongly agree)”. The second part of the survey captured the demographic details of the respondents. The data were collected through online survey (via Google Docs) and personal interviews (using hardcopy prints). This final survey questionnaire was sent to about 1100 participants (SMEs/SMBs) located in various countries primarily from APAC. Out of 1100 requests, a total of about 230 responded back positively. After editing, only 211 responses were found useful. The response rate was about 20% and the participants were recruited from the SMEs/SMBs in the APAC region. This survey was administered to them is different forms like email requests, hardcopy (paper-based) forms, face-to-face interviews. There was no incomplete response because all the Likert scale questions were mandatory but adding additional comments was optional. Finally, there were 211 complete and usable responses. Table 2 summarizes the demographic characteristics of the respondents. The respondents for this research are SMEs/SMBs in developed countries as well as from Asia-Pacific region. The responses were compared based on demographic variables, including employees’ strength, IT staff strength, country in which SMEs/SMBs are registered, annual turnover, availability of broadband (Internet) connection, usage of specific cloud layers, and mode of payment, to evaluate the response bias. For the 211 respondents, the demographics characteristics are described as per Table 2 given below. 4. Statistical techniques/tools for data analysis SEM (Structural Equation(s) Modeling) is a statistical technique for simultaneously testing and estimating causal relationships among multiple independent and dependent constructs. Exploratory factor analysis (EFA) using Smart PLS has been used for the initial set of 30 respondents. EFA was used to uncover the underlying structure of the five core variables. The assumption was that any independent factor could be more associated. There is no prior theory in EFA. Later, for 211 respondents, CFA (Confirmatory Factor Analysis) has been used.

Table 2 Demographic characteristics of respondents. Demographic characteristics of respondents Survey participants (n = 211) No. of employees 5 or less 6 to 10 11 to 20 21 to 99 100 to 200 No. of IT staff No IT staff 1 to 2 3 to 5 6 and more Country in which business is registered India Singapore/Malaysia USA Annual revenue (turnover) Less than USD 40,000 USD 40,000 – USD 1 million USD 1 million – USD 2 million USD 2 million – USD 8 million More than USD 8 million Confidential (cannot disclose) Do not know Broadband (Internet) connection Yes No Cloud computing layer usage IaaS PaaS SaaS Do not know Payment mode Pay for each transaction Pay for the time duration for which I am using the cloud solution Pay per user license Pay a fixed amount by subscription (monthly, yearly etc.) Single one-time payment for unlimited users Others (not applicable)

27 17 25 34 108

12.8% 8.1% 11.8% 16.1% 51.2%

42 38 31 100

19.9% 18.0% 14.7% 47.4%

76 111 24

36.0% 52.6% 11.4%

19 38 20 13 64 34 23

9.0% 18.0% 9.5% 6.2% 30.3% 16.1% 10.9%

208 3

98.6% 1.4%

54 13 51 93

25.6% 6.1% 24.2% 44.1%

31 44

14.7% 20.9%

29 55

13.7% 26.1%

23 29

10.9% 13.7%

& Sorbom, 1993) as recommended by Segars and Grover (1993). SmartPLS 2.0 M3 software http://smartpls.com (Ringle et al., 2005) is used for path modeling with latent variables. The tool is used to measure the validity and reliability of the constructs. Besides PLS Algorithm, Bootstrapping is used with 211 cases (sample size) and 170 samples (resamples) to generate the standard error of the estimate and t-values. SmartPLS uses the PLS technique to simultaneously examine theory and measures (Hulland, 1999).

5. Discussion, analysis and findings 4.1. Data analysis PLS (Partial Least Square) technique has been used to validate the measurements and to test hypotheses using SmartPLS 2.0M3 software (Ringle, Wende, & Will, 2005). The PLS technique employs a component-based approach for model estimation and is best suited for testing complex structural models. The PLS technique was selected because it does not impose any normality requirements on the data. A two-step approach has been used to first assess the quality of measures (as per this research study) using the measurement model (outer model), and then to test the hypotheses using the structural model (inner model) (SEM stage, Joreskog

An important conclusion of this research is that cost savings and cost reduction are not the most important factor for small business (SMEs or SMBs) to adopt cloud. ‘Ease of Use and convenience’ and ‘Security and privacy’ are considered to be the top two priorities for them to adopt cloud, followed by cost reduction or cost savings. This indicates that SMEs/SMBs are happy to adopt cloud due to its easy use, convenience and better security and privacy besides reducing their investment. A confirmatory factor analysis (CFA) has been conducted to assess reliability, convergent validity and discriminant validity of the scales, as given below:

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Table 3 Reliability Validation for Latent Constructs. Overview

Ave

Composite reliability

Cronbach’s alpha

R square

LV index values

Cost savings Ease of use Reliability Security and privacy Sharing and collaboration Usage and adoption of cloud computing

0.633 0.536 0.663 0.776 0.633 0.685

0.873 0.822 0.907 0.912 0.873 0.867

0.808 0.711 0.872 0.856 0.809 0.768

0.316 0.464 0.197 0.000 0.409 0.480

3.793 3.829 4.030 3.606 3.590 3.679

5.1. Measurement validation and reliability The reliability of these research measurements has been evaluated using Cronbach’s alpha and composite reliability scores. The constructs are considered adequate when the Cronbach’s alpha scores are above the minimum recommended value of 0.6 (Hair, Black, Babin, & Anderson, 2010; Malhotra, 2010; Robinson, Shaver, & Wrightsman, 1991) and composite reliability scores are above the recommended cut-off of 0.7 (Gefen, Straub, & Boudreau, 2000; Nunnally, 1978). Composite reliability is considered a more rigorous estimate for reliability (Chin & Gopal, 1995). As shown in Table 3, the composite reliability scores exceed 0.8 and Cronbach’s alpha values exceed 0.7. Thus the model can be considered as reliable. 5.2. Convergent validity For testing the convergent validity, each item’s loading on its underlying construct should be above 0.70 (Chin, Marcolin, & Newsted, 2003). Also, the average variance extracted (AVE) for each construct should be above the minimum recommended value of 0.50 (Bagozzi & Yi, 1988; Dillon & Goldstein, 1984; Fornell & Larcker, 1981). As observed in Table 3, the AVE values are above 0.53. Also, each item’s loading constructs are above 0.7, as shown in Table 4. These two tests prove the convergent validity is satisfactory for the measurement model. Also, as shown in Table 5 the item-to-construct correlation vs. correlations with other constructs, shows that the indicators are the part of the highlighted constructs only and are not part of other constructs. 5.3. Discriminant validity Discriminant validity was investigated to indicate the extent to which the measures in the model are different from other measures in the same model. In the PLS context, the criterion for discriminant validity is that a construct should share more variance with its measures than it shares with other constructs in the given model (Hulland, 1999). The discriminant validity was examined by testing the correlations between the measures of potentially overlapping constructs and must be different from unity (Anderson & Gerbing, 1988). Also, as shown in Table 5, the correlation between any two constructs is greater than 0.7. The highest correlation between any two constructs should have a minimum recommended value of 0.60. Next, as shown in Table 6, the square root of the AVE of each construct is larger than all the cross-correlations between the construct and other constructs (Fornell & Larcker, 1981). These tests suggest that discriminant validity is satisfactory for the measurement model. 5.4. Assessment of the structural model Next, the hypotheses generated out of this research was tested by examining the structural model using SmartPLS software. The structural model includes estimating the path coefficients, which

indicates the strength of the relationships between the independent variables and dependent variable and R-square value (variance explained by the independent variables). A bootstrapping resampling procedure (Davison & Hinkley, 1997; Efron & Tibshirani, 1993) of 170 samples was used to determine the significance level of the paths defined within the structural model (Chatelin, Vinzi, & Tenenhaus, 2002; Chin & Gopal, 1995). Bootstrapping results in a larger sample which is claimed to model the unknown population (Henderson, 2005). The corresponding t-values show the level of significance using the magnitude of the standardized parameter estimates between the constructs. A 5% significance level (p < 0.05) is used as a statistical decision criterion (Fisher, 1925; Cowles & Davis, 1982). The results of the structural model are summarized in Table 7. Out of the fifteen hypotheses, eleven are supported. The variance explained ranges from 0.19 to 0.48. As observed, Hypothesis H1 is supported because the path from cost reduction to ease of use and convenience is significant (b = 0.178, p < 0.01). This is further supported by the following quote from SMEs who took this survey, “Benefits of auto backup and saved and managed centrally”. Hypothesis H2 is supported (b = 0.174, p < 0.01). This is because the greater is the cost reduction due to the usage of cloud tools; the better is the sharing and collaboration among stakeholders. Hypothesis H3 is supported indicating cost reduction is one of the primary reasons for SMEs to use and adopt (b = 0.194, p < 0.05) cloud. This is further supported by the following quotes from SMEs who took this research survey, “Hiring an employee who can handle the IT matters and can also take up operational responsibility, so to best utilize the manpower.”, “Elimination of data sharing overheads”, “Data storage and backup costs”, “Cut the costs on printed material, motivate employees and clients to be environmental friendly”, “Cost efficiency in hardware cost”. Hypothesis H4 (b = 0.274, p < 0.01) is supported because higher the ease of use and convenience in using the cloud, the higher is the sharing and collaborations aspects with the stakeholders. Hypothesis H5 (b = 0.417, p < 0.01) is strongly supported because the ease of use and convenience (like easy access while on the move) achieved by SMEs while using the cloud is the primary reason for driving them to use and adopt cloud. This is further supported by these quotes from SMEs, “Convenient when visiting clients and when we participate in various activities beyond the four walls of the office”, “When a new process is adopted with less cost in terms of time and money”, “For a new startup, the advantage with cloud is greater”, “Independent of the office physical location for decentralized operations”, “Seamless data access”, “Contact the employees anytime at anywhere or sharing in house knowledge on issues”, “Accessing the data or other documents from any machine anywhere (cloud services are especially useful for technical personnel in the field)”, “Data can be reviewed anytime and anywhere as the cloud office has no office time. And you don’t need assistant to take out the document files”, “Various online tools to manage the cloud instances”, “Increase in efficiency, especially when you are on the move”, “Everything is online and there is no

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Table 4 Item loading for indicators of latent constructs. Construct

Item definition

Loadings

Ave

Composite reliability

Cronbach’s alpha

R square

Usage AND adoption of cloud computing

2. Its ease of use 3. Its reliability 5. Security and privacy

0.776 0.8826 0.8203

0.685

0.867

0.768

0.480

Cost savings

8. Reduction of the operating costs of my organization by using cloud computing tools and techniques 9. Using cloud infrastructure instead of buying and deploying physical machines and software 10. Elimination of hiring expensive IT expertise in-house 11. Improvement of the scalability of IT infrastructure (ramp up or ramp down at will)

0.8032

0.633

0.873

0.808

0.316

12. Negligible learning time for all employees 13. The ability to use and access cloud tools as well as my data anywhere 14. Increased focus of our energy and time on other more critical issues 15. Good internet connection speed of cloud services

0.7269

0.536

0.822

0.711

0.464

17. Provision of excellent ‘backup’ for my organization’s data against hard-disk crash 18. Better and reliable ‘storage’ solution for my office data instead of thumb drive (USB) or portable hard disk 19. Provision of excellent disaster recovery (in-case of an unforeseen event) with uninterrupted access 20. The ability of the cloud computing service provider to backup my office data safely even if it gets corrupted due to spam/malware 21. High uptime and availability of the cloud services round the clock 24x7x365

0.8582

0.663

0.907

0.872

0.197

0.633

0.873

0.809

0.409

0.776

0.912

0.856

0.000

Ease of use

Reliability

Sharing and collaboration

Security and privacy

22. Sharing my work (company data or files) with other supply chain partners (like customers 23. Usage of the same set of data or documents with other partners 24. Cutting business travel (both domestic and international) due to easy sharing 25. Easy tracking 26. No loss or manipulation of my company’s data by online criminals or predators 27. Non-usage of my official data for their own commercial benefits by cloud providers 28. Better security

need to maintain multiple database”, “Data backup”, “Synchronization/compatibility of the hardware with my systems”, “Integration of information is smooth”, “Lack of need to have a dedicated support staff”, “Functionality or diversity of features”, “It’s effectiveness to connect and contact employees and clients”, “Globally accessible via any device”. Hypothesis H6 (b = 0.572, p < 0.01) is supported because improvements in reliability of cloud would increase the confidence of SMEs to move to cloud resulting in obvious cost savings. Hypothesis H7 (b = 0.473, p < 0.01) is supported because better reliability in cloud usage improves the ease of use and is highly convenient for SMEs, who are always hard-pressed for managing

0.8692

0.7281 0.7749

0.71 0.7528 0.7378

0.7722

0.86

0.8276

0.7459

0.7677

0.8114 0.7702

0.832 0.902

0.8649

0.8748

their time and can now access their business data from anywhere, anytime. Hypothesis H8 (b = 0.146, p > 0.1) is not supported because currently the SMEs do not find the cloud as reliable as it should be, hence these SMEs are not willing to share and collaborate using cloud. Hypothesis H9 (b = 0.025, p > 0.1) is not supported from reliability to usage and adoption of cloud because SMEs perception about cloud reliability is extremely low resulting in non-usage and non-adoption of cloud. This is further supported by these quotes from SMEs, “I would prefer to have a backup of the data in my own server”, “Bandwidth: see how much longer now Google takes

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Table 5 Item-to-construct correlation vs. correlations with other constructs. Construct

Item definition

Cost reduction

Ease of use

Reliability

Sharing and collaboration

Security & Privacy

Cost reduction

8. Reduction of the operating costs of my organization by using cloud computing tools and techniques 9. Using cloud infrastructure instead of buying and deploying physical machines and software 10. Elimination of hiring expensive IT expertise in-house 11. Improvement of the scalability of IT infrastructure (ramp up or ramp down at will)

0.8032

0.4605

0.5361

0.4345

0.2435

0.4177

0.8692

0.3987

0.48

0.317

0.1575

0.3773

0.7281

0.3568

0.3871

0.3505

0.2005

0.3005

0.7749

0.2818

0.3397

0.2719

0.1059

0.3083

0.2666

0.7269

0.3914

0.3832

0.372

0.4799

0.4892

0.71

0.5387

0.4033

0.2099

0.358

0.4225

0.7528

0.5234

0.4237

0.251

0.4251

0.2366

0.7378

0.4434

0.3998

0.3987

0.5397

0.495

0.5733

0.8582

0.4247

0.3513

0.4301

0.4676

0.4973

0.7722

0.3814

0.3129

0.4244

0.4531

0.5526

0.86

0.4404

0.4382

0.431

0.4534

0.5374

0.8276

0.4903

0.42

0.4062

0.4152

0.4721

0.7459

0.391

0.2673

0.3497

0.2799

0.4309

0.3779

0.7677

0.2401

0.2329

0.3371

0.4363

0.392

0.8114

0.2926

0.2955

0.3176

0.3969

0.3629

0.7702

0.366

0.2931

0.4381

0.4796

0.5079

0.832

0.49

0.4107

0.1537

0.3913

0.4086

0.3911

0.902

0.411

Ease of use

Reliability

Sharing and collaboration

Security and privacy

Usage and adoption of cloud computing

12. Negligible learning time for all employees 13. The ability to use and access cloud tools as well as my data anywhere 14. Increased focus of our energy and time on other more critical issues 15. Good internet connection speed of cloud services 17. Provision of excellent ‘backup’ for my organization’s data against hard-disk crash 18. Better and reliable ‘storage’ solution for my office data instead of thumb drive (USB) or portable hard disk 19. Provision of excellent disaster recovery (in-case of an unforeseen event) with uninterrupted access 20. The ability of the cloud computing service provider to backup my office data safely even if it gets corrupted due to spam/malware 21. High uptime and availability of the cloud services round the clock 24x7x365 22. Sharing my work (company data or files) with other supply chain partners (like customers 23. Usage of the same set of data or documents with other partners 24. Cutting business travel (both domestic and international) due to easy sharing 25. Easy tracking

Usage & Adoption of Cloud Computing

26. No loss or manipulation of my company’s data by online criminals or predators 27. Non-usage of my official data for their own commercial benefits by cloud providers 28. Better security

0.2075

0.3383

0.3364

0.3775

0.8649

0.3993

0.2429

0.3795

0.4207

0.4224

0.8748

0.4992

2. Its ease of use 3. Its reliability 5. Security and privacy

0.363 0.4056 0.3444

0.5531 0.549 0.4286

0.3781 0.4698 0.3954

0.3376 0.2905 0.3652

0.2978 0.4088 0.5303

0.776 0.8826 0.8203

Note: The highlighted boldface numbers are the item loadings on the constructs. Table 6 Reliability and inter-construct correlations for reflective scales. LV construct

Cost savings

Ease of use

Cost savings Ease of use Reliability Security and privacy Sharing and collaboration Usage and adoption of cloud computing

0.795 0.482 0.562 0.230 0.441 0.449

0.732 0.648 0.421 0.550 0.617

Note: Value on the diagonal is the square root of AVE.

Reliability

0.814 0.444 0.524 0.503

Security and privacy

Sharing and collaboration

Usage and adoption of cloud computing

0.881 0.452 0.499

0.796 0.398

0.827

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Table 7 Summary of hypotheses tests (path coefficients and hypotheses testing). p < 0.1 p < 0.05 p < 0.01

Significance values

1.652 1.971 2.599

Hypothesis No.

Hypothesis (direction)

Path coefficient

T-value

Significance (one-tailed)

Supported?

H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 H13 H14 H15

Cost reduction → ease of use Cost reduction → sharing and collaboration Cost reduction → usage and adoption of CC Ease of use → sharing and collaboration Ease of use → usage and adoption of CC Reliability → cost reduction Reliability → ease of use Reliability → sharing and collaboration Reliability → usage and adoption of CC Sharing and collaboration → usage and adoption of C -C0.064 Security and privacy → cost reduction Security and privacy → ease of use Security and privacy → reliability Security and privacy → sharing and collaboration Security and privacy → usage and adoption of CC

0.178 0.174 0.194 0.274 0.417 0.572 0.473 0.146 0.025 0.917 −0.024 0.170 0.444 0.232 0.297

2.764 2.974 2.476 3.082 5.135 8.848 6.005 1.458 0.326 n.s. 0.457 2.303 6.128 2.802 4.045

p < 0.01 p < 0.01 p < 0.05 p < 0.01 p < 0.01 p < 0.01 p < 0.01 n.s. n.s. No n.s. p < 0.05 p < 0.01 p < 0.01 p < 0.01

Yes Yes Yes Yes Yes Yes Yes No No

to load”, “High availability is still a question”, “In one scenario, we dropped the cloud computing due to bandwidth unavailability”, “Business continuity and availability of the right software, packaged or otherwise on the cloud”, “Downtime and SLAs on the cloud”, “All SaaS are focusing on fat bandwidth nations, huge problem from developing world locations”, “Testimonials from other users is expected”, “It is more time consuming”, “Bandwidth hogs, it does not work in Africa”. In other words, a reliable cloud provider improves the chances of small business moving to, using and adopting cloud computing. Hypothesis H10 (b = −0.064, p > 0.1) is not supported from sharing and collaboration to usage and adoption of cloud because of the following quotes from SMEs, “Ability for version control for documents on the cloud is needed”, “IP protection, correct segregation of information from different organizations using the same CSP (Cloud Service Provider) are also important considerations”, “Not ready to explore geographical independence access at this point in time due to data protection and confidentiality issues”. So, SMEs are deterrent to share and collaborate via cloud unless their above concerns are addressed, as indicated by the negative path coefficient too. Hypothesis H11 (b = −0.024, p > 0.1) is not supported because SMEs are aware of the face that the higher the security and privacy they expect from the cloud, the higher is the price they have to pay. This is also indicated by the negative path coefficient depicting that SMEs are fine to adopt cloud, even if it does not provide the best in class level of security and privacy, compensated by higher cost savings. Hypothesis H12 (b = 0.170, p < 0.05) is supported because a better secured and privacy controlled cloud environment enhances the ease of use and convenience for SMEs, as they could be more productive, free from worry and more efficient now. Hypothesis H13 (b = 0.444, p < 0.01) is strongly supported since a secured and privacy friendly cloud increase the reliability of the cloud multiple times. Hypothesis H14 (b = 0.232, p < 0.01) is supported because an improvement in security and privacy of the cloud solutions builds up the trust and strong faith in the minds of SMEs so that they can share and collaborate more with their stakeholders. Hypothesis H15 (b = 0.297, p < 0.01) is strongly supported because the higher and better the security and privacy regulations of the cloud, the higher is the usage and adoption of the cloud. This is also as indicated by the following quotes of SMEs, “Data is not corrupted and adequate backup is created”, “Cloud security is a joke right now”, “Customizable access control”, “Security and Privacy is still a grave concern of cloud computing”, “Don’t forget,

No Yes Yes Yes Yes

my hard-disk won’t be sold to marketers or FBI/CIA etc.”, “Still clients are not confident if their data is really secured”, “Cloud computing is proved to be a next level in computing, but the security and privacy are the concerns for now.”, “Security and will the cloud provider stick to the SLAs on downtime so that business is not affected?”, “Reason not to adopt cloud computing is user is unsure about the security of clients data which cannot be breached”, “I look for the best security provided so that my data does not leak to unauthorized user”. As of today, SMEs are quite satisfied with the security and privacy of the cloud resulting in faster adoption of cloud. Inspite of the above comments, this research study reveals that SMEs are very much satisfied with the existing security and privacy provided by the cloud and hence have accepted and adopted cloud to a larger extent. This is very much in contrast to the general belief in the industry about cloud security concerns, which is mostly shared by large enterprises. The following figures exhibit the findings using PLS structural modeling (Figs. 2–4): 5.5. Assessment of fit The goodness-of-fit (GoF) measure has been conducted for assessment of this research PLS path modeling (Amato, Esposito Vinzi, & Tenenhaus, 2004). GoF is suggested as a global fit measure for PLS path modeling (Tenenhaus, Vinzi, Chatelin, & Lauro, 2005). GoF (0 < GoF < 1) is defined as the geometric mean of the average communality/AVE and average R2 (for endogenous constructs). GoF =



AVE ∗ R

2

Following the guidelines of Wetzels, Odekerken-Schröder, and van Oppen (2009), the GoF value has been calculated, which validates the PLS model of this research study. The GoF value for this research model is 0.450 (geometric mean of average communality/AVE was 0.650 and average of R2 was 0.311). The GoF value for the model exceeds the minimum cut-off value of 0.36 for large effect sizes of R2 . The GoF value provides adequate support to validate the PLS model (Wetzels et al., 2009). The baseline values for validating the PLS model globally are GoFsmall = 0.1, GoFmedium = 0.25 and GoFlarge = 0.36 (Akter, D’Ambra, & Ray, 2011). 6. Implications for the industry This study focused on the core variables in detail. Contrary to the generic belief, cost reduction (or cost savings) is not the top

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Fig. 2. Results of PLS structural model analysis (SmartPLS snapshot).

Fig. 3. The stars represent those four hypotheses which are not supported.

Fig. 4. Results of PLS structural model analysis Note: Significant relation (→), Insignificant relation (

).

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two factors for SMEs to move to cloud. However, it is definitely the third crucial factor forcing the move to cloud by SMEs. The other major findings of this study are that for SMEs, security and privacy (second major factor) of the existing cloud solutions is acceptable and they are more than willing to move to cloud. This is a much stronger proposition for SMEs to move to cloud compared to cost reduction (third major factor). The ease of use and convenience in using the cloud scores the topmost slot. This is primarily fueled by the exponential growth of tablets and smartphones. The cloud service providers should focus on improving the reliability (fourth factor) of the cloud, which would expedite the cloud adoption by SMEs. A better reliable cloud would also increase the chances of sharing and collaboration (last fifth factor which has a negative relationship with cloud adoption) among the stakeholders by SMEs. The industry players providing cloud computing should focus on high uptime and availability of cloud, make the cloud the default choice to SMEs for storage and backup as well as for SMEs to look forward to, during times of disaster. It is more about providing SMEs worry-free days and nights that their business data is kept in a highly reliable place accessible at any time. The forthcoming usage and adoption of cloud by SMEs is very much dependent on how the cloud providers are able to build the trust, faith, confidence and reliability of their cloud services for SMEs to positively contribute toward sharing and collaboration via cloud tools. A lot more emphasis is needed on this aspect by the industry players. Regarding mode of payment, SMEs are most comfortable paying as subscription fees or for the time duration during which the cloud services are being used for. Making a one-time lump sum payment is not favored by SMEs. About 25% of the micro & SMEs using IaaS as the cloud layer indicate use of the bare metal and computing power (available at an affordable price) as well as the availability of IT-savvy developers with the right skillsets to harness this raw power themselves.

7. Implications for research The findings of this research paper are multifold. Firstly, it indicates few variables (ease of use and convenience, security and privacy, cost reduction) which are intuitively in favor of SMEs using and adopting cloud. Secondly, this research indicates one variable (reliability) that needs immediate attention by the industry leaders. This is like a catalyst for the cloud providers, which if improved, can result in immediate usage and faster adoption of cloud by SMEs. This is further supported by the fact that in the next few years, European Union is proposing data protection regulations for data processing, cloud computing service provider security requirements and mandatory notifications of data breaches. This would improve the reliability of cloud services for SMEs (Tarzey, 2012). Thirdly, this research indicates a specific variable (sharing and collaboration) which is counter-intuitive to the generic understanding prevalent in the market today. Lastly but not the least, this research points to several other new variables which are also prompting SMEs to use and adopt cloud besides the core variables discussed in this paper. This research proves that various other inter-relationships do exist between the five core variables, which are significant, as explained by the various hypotheses above. So, even though the primary latent variable relationship with usage and adoption of cloud is insignificant but that same latent variable has very strong relationship and significance with other latent variables. For example, the ease of use and convenience in using cloud is positively related to the sharing and collaboration with other SMEs, even though sharing and collaboration is not the main factor resulting in usage and adoption of cloud, as per this research study.

8. Limitations and scope for further research This research has been primarily conducted in Singapore, Malaysia and India and may not be representative of the entire APAC (Asia Pacific) region. This research is limited to in-depth study of only five (core) latent variables, supported by the existing literature survey. During the survey, other variables and observations are mentioned by SMEs to use and adopt cloud at the present time but they have not been covered in this study. These other factors are, Internal testing being done using cloud by SMEs before releasing their solution to their customers; Trial-run (alpha and beta releases) of their solutions or services deployed in the cloud, being used by their customers; Duration of cloud implementation; Smooth integration of information and integration with other services should be simpler; Use of latest original software; Data synchronization; Attracting talent – top developers want to work in the cloud today; Tools on the cloud are usually general and therefore, customizing them to suit the organization’s needs is a problem (especially true for CAD editing applications); For generic tools, usage of cloud is acceptable. As for specific requirements, customization may not be possible and therefore, difficult to be relied on; (1). Business should run unhindered also on the cloud as it would run if the software is totally in control of in-house IT. (2). Are enough business ready software based packages available on the cloud? For example, say SAP and its modules available on the cloud? Are CAD/CAM/PLM (Computer Aided Design/Computer Aided Manufacturing/Product Lifecycle Management) packages available on the cloud? Will the performance be just as good? If any software crashes on the cloud how do we recover and restart the application? (3). Are enough integration methods available on the cloud? For example, integration buses like TIBCO, MQ should also be available on the cloud. Are all BI (business intelligence) packages available on the cloud?; Conflict resolution, every country wanted to host servers to gain the latency advantage. Also, at times, IT does not want to go extra miles to host servers as they think they will have to bear the anger of business if things are not working, internal organization politics etc. The above details signify that there is tremendous scope for further research in this area which includes further investigation into these new variables.

9. Conclusions Cloud computing is definitely making waves with micro as well as SMBs or SMEs and is slowly creeping into their business strategy formulation and implementation now and in the near future. SMBs or SMEs are not hesitant to incorporate cloud into their business strategy inspite of the few concerns being cited by industry pundits. On similar lines, Desmond (2012) cites that ‘cloud is really just for SMBs’ is a myth. The perceptions of the small business (SMEs or SMBs) in different geographies are different. For example, European businesses have different behavior compared to US businesses as well as Asian businesses. As per TCS (Tata Consultancy Services, India) cloud study, USA and Europe lag behind the rest of the world in cloud computing adoption. On the other hand, Latin American and Asia-Pacific companies are the most aggressive adopters of cloud computing. As per this research study, the ease of use and convenience is the biggest factor cited by SMEs to adopt cloud. The second factor to use and adopt cloud is improved security and privacy. The third factor for the usage and adoption of cloud is the cost reduction. This means that SMEs or SMBs find the cloud easy to use, convenient, adequately secured for their business, their business privacy is well protected and lastly but not the least is that the cloud helps SMEs to bring down their cost in

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a significant way. This observation is supported by and builds on the arguments of Jain (2011), Mahesh et al. (2011), Krell (2011), Robuck (2011) and Murphy (2012) stating ease of use and convenience. Regarding security and privacy, this observation agrees with Sultan (2011), Blum (2011a, 2011b), Wenzel (2011), Bennett (2012) and Marks (2012) but is in contrast to the generic IaaS security risks explored by Karadsheh (2012). As per Desmond (2012), ‘cloud services aren’t secure’ is a myth. This has been quantitatively proved and supported by this research paper too. Regarding cost reduction, it is in line with reduction of operational expenses by Voith et al. (2012), Sultan (2011), Mahesh et al. (2011), Harnish (2011), Devaki (2011), Kevany (2011), Wang (2011), Shivakumar and Raju (2010), Narayanan (2010), Rash (2011), Ohlhorst (2012), Savitz and Vogels (2012), Hawser (2009), Coughlin (2011), Lamont (2011) and Kuhl (2012) etc. but is in contrast with the observations shared by Marks (2012). According to Marks, in 2012, the cloud is not yet a viable option for most small businesses because the rent is still very high but might become affordable in the next three to five years. The fourth factor, reliability is not an important factor for SMEs to adopt and use cloud because SMEs do not consider cloud as reliable as it should be for their business. SMEs are concerned about cloud downtime and rely more on their physical devices within their physical proximity for backup, storage etc. This reliability factor is in-line with Mahesh et al. (2011), Sultan (2011), Kevany (2011), Blum (2011b), Durkee (2010), Kelly (2011). AWS outage for four days (due to human error) in April, 2011 leading to 0.07% data getting lost permanently is in synch with this observation (Butler, 2012). But, this is also against the thoughts shared by Rash (2011). The fifth and the last negative factor is sharing and collaboration which indicates that SMEs who have a higher need for sharing and collaboration do not go for cloud, instead they prefer face to face meetings, phone calls, business travel, possessing physical devices etc. for their business needs. This is against the observations of Creeger (2009), Li et al. (2011), Wenzel (2011) and Portsmouth (2010). Few other positive factors cited for using and adopting cloud by SMEs/SMBs are: Easy to use, cost efficient, no physical office space is needed, no need to carry storage devices; Cloud is an excellent choice for small applications; Scalability of service and faster content delivery; Crowd sourcing and multiple revenue models; Branding effort to keep up with technology with intangible benefits such as confidence and trust from investors and customers; Cloud is clearly the technology of the future; the faster we adapt and accept this the better positioned we are; Lesser trained manpower and hassle free; Scalability and reliability; Cheap, easy access via any OS (operating system); any machine, any continent; Time to deploy solution and conflict resolutions when you are present in multiple countries; Piloting is essential for gaining customer confidence; Ability of the cloud to achieve clients trust and commitment by proving the effectiveness of the company; Cloud provides lean startup principles; Low licensing fee and payments be made in installments – which plays very critical for a small IT company. The actionable items for a manager for adopting cloud computing is to make the best use of cloud computing as it is being provided by various cloud vendors (both local and global) in a reliable and affordable way. Especially with micro & SMEs based in Singapore, where broadband connectivity well-established, accessing the cloud should become second nature for these managers. Based on this research we foresee the adoption of cloud computing to grow exponentially and provide huge benefits to micro & SMEs in the days to come. References Akter, S., D’Ambra, J., & Ray, P. (2011). Trustworthiness in mHealth Information Services: An Assessment of a Hierarchical Model with Mediating and Moderating

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