firm characteristics and propensity for cloud computing adoption

Firm Characteristics and Propensity for Cloud Computing Adoption

Niki Kyriakou ([email protected] ) • Euripidis Loukis ([email protected] )

Cloud Computing (1/3)

*NIST: National Institute of Standards and Technology**Marston, S., Li, Z., Bandyopadhyay, S., Zhang, J. & Ghalsasi, A. (2011). Cloud Computing – The Business Perspective. Definition Support Systems, 51(1), 176-189.

“A model for enabling ubiquitous, convenient, on-demand network access to as hared pool of computing resources (e.g., networks, servers, storage, applications, services) that can be rapidly provisioned and released with minimal management effort or service provider interaction*.

[…] computing services (both hardware and software) required by a firm are delivered by an external provider on

an on-demand basis over the Internet, independent of device and location; users pay for the service as an

operating expense, based on the real use of it, without having to make significant initial capital expenditures (e.g. for servers and software), and also without having to incur

operation, support and maintenance costs**.

”


Benefits to Firms:

Reduction of IT ownership and operation costs

Conversion of related capital investments to operating costs

Provision of practically infinite computing resources available on demand

Provision of flexible cost-effective computing capacity to support growth IT services’ quality improvement

IT Services’ Quality Improvement

Flexibility to Respond to Fluctuating IT loads

Quick and Low Cost Development of New IS to Support Innovations

Reduction of IR Related Barriers to Entry of New Firms

Quick and Low Cost Access to New Technologies


Cloud Computing Risks:

Service availability

Performance risks

Data security risks (e.g. lack of control of, unauthorized access to or modification of firm’s data resources)

Economic Risks (associated with ‘hidden costs’ and also CC services provider ‘lock-in’)

Literature ReviewThere has been some empirical research concerning the effects of various factors on CC adoption

1st Stream of Cloud Computing adoption (Technology Acceptance Model - TAM)

Classical factors (perceived usefulness, perceived benefits, perceived ease of use, attitude, behavioral intention of future use)

Specific factors (security, trust)

2nd Stream of Cloud Computing adoption (Technology, Organization and Environment - TOE)

Technological factors (relative advantage, uncertainty, privacy risk, compatibility, observability, complexity, trialability)

Organizational factors (top management support, innovativeness, prior similar technology experience)

Environmental factors (competitive pressure, external support)

3rd Stream of Cloud Computing adoption (Synthesis of different theoretical frameworks)

Research Contribution

Extensive empirical research on the effects of the perceived technological characteristics of CC on its adoptionLimited research in the effect of firm characteristics on CC adoptionEmpirically investigates and compares the effects of a wide range of firm characteristics on the propensity to adopt CC:

Firm’s strategy

Processes

Technology

Personnel

Theoretical framework: Leavitt’s Diamond framework

Research Hypotheses (1/3)Research hypotheses concerning Cloud Computing Adoption

H1: The adoption of an IT investment reduction strategy has a positive effect on the propensity for Cloud Computing Adoption

H2: The adoption of an innovation-oriented strategy has a positive effect on the propensity for Cloud Computing adoption

H2a: The adoption of a product or service innovation oriented strategy has a positive effect on the propensity for Cloud Computing adoption

H2b: The adoption of a process innovation oriented strategy has a positive effect on the propensity for Cloud Computing adoption

H3: Operational complexity has a positive effect on the propensity for Cloud Computing adoption

H3a: Having multiple production locations has a positive effect on the propensity for Cloud Computing adoption

H3b: Having an international scope of sales has a positive effect on the propensity for Cloud Computing adoption

H3c: Having an international geographical scope of procurement has a positive effect on the propensity for Cloud Computing adoption

Research Hypotheses (2/3)

Research hypotheses concerning Cloud Computing Adoption

H4: The use of telework has a positive effect on the propensity for Cloud Computing adoption

H5a: The degree of sophistication of firm’s IT infrastructure has a positive effect on the propensity for Cloud Computing adoption

H5b: The degree of sophistication of firm’s IT infrastructure has a negative effect on the propensity for Cloud Computing adoption

H6a: The degree of electronic interconnection of firm’s IT infrastructure with suppliers and customers has a positive effect on the propensity for Cloud Computing adoption

H6b: The degree of electronic interconnection of firm’s IT infrastructure with suppliers and customers has a negative effect on the propensity for Cloud Computing adoption

Research Hypotheses (3/3)

Research hypotheses concerning Cloud Computing Adoption

H7: Interest in adopting data warehousing and data mining technologies has a positive effect on the propensity for Cloud Computing adoption

H8: Interest in providing mobile services has a positive effect on the propensity for Cloud Computing adoption

H9: The employment of IT personnel has a positive effect on the propensity for Cloud Computing adoption

H10: Previous experience of IT outsourcing has a positive effect on the propensity for Cloud Computing adoption

Data and Method (1/3)

Data 676 enterprises 6 European Countries

(Germany, France, Italy, Poland, Spain, England)

e-Business Market W@tch e-Business Survey 2009

Method Sommer’s D Kendall tau-b

8/17


Dependent VariableCloud Propensity to adopt Cloud Computing

Independent VariablesIT Inv_

Red_Strat IT Investment Reduction StrategyProd_Innov Product Innovation StrategyProc_Innov Process Innovation Strategy

Employ_IT_Person Employment of IT Personnel

IT_Outs Existence of Previous Experience of IT Outsourcing

Data_Ware Interest in Data Warehousing/ Data MiningMob_Serv Interest in Mobile Services


Independent VariablesIntern_Scope_Pr

oc International Scope of SalesScope_Proc International Scope of Procurement

Mult_Prod_Loc Multiple Production LocationSoph_IT_infra Sophistication of IT Infrastructure

Elect_Inter_Supp

Degree of Electronic Interconnection with Suppliers

Elect_Inter_Cust Degree of Electronic Interconnection with Customers

Telework Use of Telework

Results (1/5) – All CasesSommers’ d Kendall’s

tau-bResearch

HypothesisIT Inv_ Red_Strat .162 .166 H1

Prod_Innov .106 .113 H2aProc_Innov .091 .099 H2b

Mult_Prod_Loc .033 .035 H3aIntern_Scope_Sales .003 .003 .H3bIntern_Scope_Proc -.028 -.029 H3c

Telework .068 .074 H4Soph_IT_infra .144 .163 .H5

Elect_Inter_Supp .133 .139 .H6Elect_Inter_Cust .141 .143 H6

Data_Ware .280 .294 H7Mob_Serv .185 .205 H8

Employ_IT_Person .158 .164 H9IT_Outs .123 .123 H10

Results (2/5) – Small FirmsSommers’ d Kendall’s

tau-bResearch

HypothesisIT Inv_ Red_Strat .180 .186 H1

Prod_Innov .087 .097 H2aProc_Innov .134 .152 H2b

Mult_Prod_Loc .015 .015 H3aIntern_Scope_Sales -.039 -.040 .H3bIntern_Scope_Proc .053 -.056 H3c

Telework .074 .082 H4Soph_IT_infra .115 .129 H5

Elect_Inter_Supp .156 .165 H6Elect_Inter_Cust .135 .135 H6



Results (3/5) – Medium & Large Firms

Sommers’ d Kendall’s tau-b

Research Hypothesis

IT Inv_ Red_Strat .120 .123 H1Prod_Innov .092 .096 H2aProc_Innov .013 .013 H2b

Mult_Prod_Loc -.012 -.013 H3aIntern_Scope_Sales -.002 -.002 .H3bIntern_Scope_Proc -.108 -.108 H3c

Telework .001 .001 H4Soph_IT_infra .123 .136 H5

Elect_Inter_Supp .090 .093 H6Elect_Inter_Cust .113 .115 H6



Results (4/5)Research hypotheses concerning Cloud Computing Adoption

H1: The adoption of an IT investment reduction strategy has a positive effect on the propensity for Cloud Computing Adoption (SUPPORTED)

H2: The adoption of an innovation-oriented strategy has a positive effect on the propensity for Cloud Computing adoption adopt CC.

H2a: The adoption of a product or service innovation oriented strategy has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

H2b: The adoption of a process innovation oriented strategy has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

H3: Operational complexity has a positive effect on the propensity for Cloud Computing adoption

H3a: Having multiple production locations has a positive effect on the propensity for Cloud Computing adoption adopt CC (REJECTED)

H3b: Having an international scope of sales has a positive effect on the propensity for Cloud Computing adoption (REJECTED)

H3c: Having an international geographical scope of procurement has a positive effect on the propensity for Cloud Computing adoption (REJECTED)

H4: The use of telework has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

Results (5/5)Research hypotheses concerning Cloud Computing Adoption

H5a: The degree of sophistication of firm’s IT infrastructure has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

H5b: The degree of sophistication of firm’s IT infrastructure has a negative effect on the propensity for Cloud Computing adoption (REJECTED)

H6a: The degree of electronic interconnection of firm’s IT with suppliers and customers has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

H6b: The degree of electronic interconnection with suppliers and customers has a negative effect on the propensity for Cloud Computing adoption (REJECTED)

H7: Interest in adopting data warehousing and data mining technologies has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

H8: Interest in providing mobile services has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

H9: The employment of IT personnel has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

H10: Previous experience of IT outsourcing has a positive effect on the propensity for Cloud Computing adoption (SUPPORTED)

ConclusionsCC adoption by firms has been lower than the initial expectations.Quite important to conduct research on CC adoption by firms and identify factors that affect it positively or negativelyThe strongest driver of CC adoption is firm’s interest in adopting and exploiting two important new IT (data warehousing/data mining), considering CC as a good way to proceed to that direction rapidly, at a low cost, with respect to operating expenses, without having to apply reduction strategy, for this purpose.IT investment reduction strategy is also a strong driver, while the impact of the adoption of products/services and process innovation strategies is much lower.Another equally strong driver of CC adoption is the employment of IT personnel, who are important in order to examine existing CC services and providers in the market, that fit the firm’s needs.Slightly weaker drivers include the sophistication of firm’s IT infrastructures and their interconnection with suppliers and customers.Previous experience of IT outsourcing positively affects the propensity to adopt CC, as the collective knowledge and intelligence developed is useful to advance to the Cloud.

Thank You!Niki Kyriakou ([email protected])

mailto:[email protected]