1. INTRODUCTION
Over the last several decades, businesses and consumers alike have
seen an explosive growth of computing products and services available
via the Internet and its infrastructure. These services are often
reliably available and delivered on 24/7/365 basis. An example is email
services offered to users by several providers. These services, in
particular, are helpful to small and medium-sized enterprises that do
not have a significant amount of resources and technical expertise to
set up the appropriate infrastructure to be able to compete with their
larger competitors.
The term "Cloud Computing" has appeared on the radar
screen of information systems/information technology and business
professionals over the last few years. The term "Cloud" refers
to the Internet and "Computing" refers to the use of
technology. Cloud Computing integrates concepts from grid, utility, and
distributed computing into several major services. Since around 2006, a
range of Cloud Computing definitions have appeared in the literature.
Hartig (2009) describes Cloud Computing as delivering services,
applications, and data over the Internet. Fingar (2009) states that:
"Cloud Computing is a massive distributed computing model
consisting of three tiers: infrastructure, platform and services, and is
about using swarms of computers to deliver unprecedented computing power
to people and organizations across the globe." Vaquero et al.,
(2009) explain that "Clouds are a large pool of easily usable and
accessible virtualized resources such as hardware, development platforms
and/or services."
The National Institute of Standards and Technology (www.nist.gov)
classifies Cloud Computing into the categories of public, private,
community, and hybrid services. With the public Cloud, an organization
owns the computing and communications infrastructure and makes them
available to users for a fee. Amazon.com, for example, makes its
infrastructure available to other organizations to use for a fee. An
advantage of the public Cloud is scalability. In contrast, the
infrastructure in a private Cloud is only available to one organization.
This organization may operate the Cloud or may outsource the operation
to a third party. Cloud Computing services provided by Dataline
(www.dataline.com) for the US Department of Defense is an example in
this category. The private Cloud is also referred to as "Enterprise
Cloud" or "Tactical Cloud," (Fingar, 2009). Better level
of security is an advantage of the private compared with the public
Cloud services.
In the community type of Cloud Computing, the required
infrastructure is shared by a number of organizations who have a common
goal, a specific project, or a similar objective. The community Cloud
may be managed by one of the organizations or by a third party. With the
current discussions on the need for a national electronic medical
record, for example, creating a health care related community Cloud for
this purpose is a good example in this category. The infrastructure of a
hybrid type of Cloud Computing consists of more than one Cloud that are
integrated using appropriate technology for inter-operability. This kind
of Cloud will be very useful in large organizations with
state-of-the-art as well as legacy systems. The hybrid Cloud consists of
both the public and private Cloud Computing environments.
Wang et al., (2008) divide Cloud Computing services into three
areas of Hardware-as-a-Service (HaaS), Software-as-a-Service (SaaS), and
Data-as-a-Service (DaaS). Cellary and Strykowski (2009), Fingar (2009)
classify Cloud Computing services into three major areas of: Software as
a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a
Service (IaaS). Iyer and Henderson (2010) identify two more types of
Cloud Computing services: Collaboration Services and Consulting
Services. Software as a Service provides access to various business
software applications that are hosted at remote locations (Woloski,
2008). Businesses subscribe and pay for this service. An example of this
service is the Customer Relationship Management (CRM) platform provided
by Salesforce (www.salesforce.com). Google Maps and Google docs are
other examples in this category.
Platform and Infrastructure as a Service refers to renting of these
facilities. In Platform as a Service, organizations such as Google or
Salesforce provide users with a development environment for application
development. In the case of Infrastructure as a Service, an organization
such as Amazon, provides services such as computer processing and
storage capabilities which a user has full control and can use it until
(s)he terminates the service. The collaboration services consist of
social networking applications that support collaboration. Examples of
these kinds of services include Facebook, LinkedIn, MySpace, Sonico, and
Orkut. Cloud Computing service layer consists of companies that provide
consulting and other related services about Cloud Computing. Examples of
these kinds of Cloud Computing consulting services providers include
Touchstone Group, and Booz Allen Hamilton.
In the next section, we will review the business applications of
Cloud Computing for SMEs. In section three, the potential advantages and
risks associated with the use of Cloud Computing for SMEs are discussed.
In section four, we conduct a SWOT analysis of the use of Cloud
Computing for SMEs. The last section includes summary, conclusions,
business, and managerial implications associated with the use of Cloud
Computing by SMEs as well as findings of this paper and future research
suggestions.
2. BUSINESS APPLICATIONS OF CLOUD COMPUTING FOR SMEs
Over the last couple of decades, information systems and technology
played a major role in drastically changing businesses. This is, in
particular, the case for larger businesses that have the resources and
technical expertise to take advantage of new technologies.
Unfortunately, small to medium-sized enterprises (SMEs) have not been
able to compete with their larger competitors regarding the access and
use of these technologies. With the availability of Cloud Computing,
this is about to change. Cloud Computing has the potential to provide
services to SMEs that allow them entry into new markets and provide SMEs
with the opportunity to compete with their larger competitors. More
widely availability of broadband Internet services, globalization
pressures, and availability of technologies such as grid computing and
service-oriented architecture (SOA) facilitate applications of Cloud
Computing for SMEs.
To fully succeed in improving business conditions, SMEs need to
find ways to keep up with technological innovations and advances in
information technology. Further, SMEs need to be able to use innovation
and technology without the need to invest significant amounts of their
limited resources in information systems infrastructure and operational
costs. Cloud Computing allows SMEs to take these important steps.
The SMEs need to adopt an appropriate Cloud Computing strategy that
fits and adds value to their business model. An SME can adopt a Cloud
strategy and build an information technology unit from the bottom up
hiring consultants with the required kinds of expertise to, for example,
design the required network infrastructure. Another SME may want to
adopt the strategy of leasing all of the hardware and software instead
of purchasing them. Similarly, an SME may adopt the strategy of using
software as a service as needed instead of purchasing the software.
Fingar (2009) states that: "when small and midsized businesses
learn of the potential benefits of Cloud Computing, they will be able to
tap IT infrastructures, platforms and software that only huge
enterprises could deploy in the past, making the Cloud the great
leveler." The SMEs, in particular newer start-ups, need to find a
way to keep up with the rapid advances in information systems and
information technology. Further, they must accomplish these important
goals without spending significant amounts of resources investing in
information technology, hardware, and software. The SMEs have to use the
current advances in information technology and the Internet to reduce
information technology costs while gaining access to advanced software
applications which are vital to their growth.
According to the Office of Advocacy, the United States Small
Business Administration, an SME is an independent organization having
less than 500 employees. According to the same office, in the United
States alone, the SMEs make up about 97% of all firms. In the European
Union this number reaches about 99.7% (Fingar, 2009). As a result, the
combined market share potential and managerial implications of using
Cloud Computing by SMEs are very significant. Indeed, the sheer size of
SMEs worldwide using Cloud Computing could create a major global
computing transformation.
Most of the current Cloud Computing related publications to date
deal with the technical and not business and managerial aspects of Cloud
Computing. Iyer and Henderson (2010) suggest that businesses need to
develop a suitable Cloud strategy that fits their needs. They identified
seven Cloud Computing capabilities as follows: "controlled
interface, location independence, sourcing independence, ubiquitous
access, virtual business environments, addressability and traceability,
and rapid elasticity" and suggest that understanding these
capabilities are essential for businesses to be able to develop their
Cloud strategy.
The "controlled interface" capability allows SMEs to
create an information technology infrastructure that is responsive to
user requirement changes. The "location independence"
capability allows SMEs access to various information and services from
anywhere within the entire enterprise. The "source
independence" capability of Cloud Computing allows SMEs the ability
to switch to a different service provider easily and without significant
costs. The "ubiquitous access" allows SME employees access to
services from any platform or device using simple tools such as a
browser. The "virtual business environment" capability gives
SMEs the means of creating an integrated access to all tools to
facilitate various decision making capabilities. The
"addressability and traceability" of Cloud Computing allows
SMEs to trail every user and usage of Cloud Computing services in the
organization. Finally, the "rapid elasticity" of Cloud
Computing allows SMEs to quickly scale up or scale down Cloud Computing
services.
As we described above, Cloud Computing has significant general
business potential for SMEs. Providers of Cloud Computing Services
include well established companies such as Google, Microsoft, IBM,
Oracle, Amazon, Sun, 10Gen, Salesforce, and Dataline to newer companies
like Netsuite Corporation, Appistry, AppRiver, Boomi, Carbonite, and
Enomaly. In the next section we review more specifically some of the
advantages of the Cloud Computing technology for SMEs but also will
review potential risks that SMEs need to consider when implementing
Cloud Computing services.
3. POTENTIAL ADVANTAGES AND RISKS OF CLOUD COMPUTING FOR SMEs
Iyer and Henderson (2010) suggest that organizations should focus
on "Cloud strategy" not "technology." They further
suggest that the strategic uses of Cloud Computing may result in
"cost savings" as well as "organizational agility."
SMEs need to maintain their databases, need storage, infrastructure, and
processing capabilities. All of these are now available as Cloud
services. In addition, these services may be provided globally as a
self-service and on-demand basis hence potentially minimizing costs with
little to no up-front expenditure. Using Cloud Computing services free
SMEs from the need to install, manage, or maintain servers. Cloud
Computing services are available virtually with unlimited scalability
and in most cases are even available in the case of a disaster. Cloud
Computing services can be automated to make services user friendly. In
many cases, all of these benefits can be achieved with lower total cost
of ownership compared with the traditional computing.
The benefits of Cloud Computing for small to medium-sized
enterprises seem to offer returns on investment that have never been
possible before. Iyer and Henderson (2010) suggest that the main purpose
of Cloud Computing is "to reduce complexity, minimize costs, and
improve organizational agility."
The tangible benefits, such as costs savings through a lower budget
for information technology staff, services, and equipment are the most
noticeable. The intangible benefits such as scalability is invaluable
and a much welcomed capability for small to medium-sized enterprises.
Although there is a great potential for success, SMEs also need to be
aware of the costs and risks involved when implementing Cloud Computing
services. Similar to other outsourcing services, care must be taken to
protect the business from the potential risks if the provider fails to
come through. Data protection, interoperability, reliability, and
compliance are just a few issues that should be addressed in a service
level agreement. It must also be understood that threats exist and must
be mitigated properly.
Scott (2009) identifies system and process failures as potential
risks of Cloud Computing services. Security has also been cited (Clarke,
2010; Brunette, 2009) as a major Cloud Computing potential risk.
However, Panko (2004) states that a high percentage of all convictions
of cybercrime involves employees or ex-employees of organizations, so
the security risk may not be as high as it is generally perceived to be
the case. Dependability on a third party for computing services is
another risk factor that Avizienis, et al., (2004) have cited.
In this section we reviewed and compared the benefits and risks
associated with the use of Cloud Computing by SMEs. In the next section
we will use the SWOT analysis to look at applicability of Cloud
Computing services for SMEs.
4. SWOT ANALYSIS FOR ADOPTING CLOUD COMPUTING SERVICES IN SMEs
The acronym SWOT stands for Strengths, Weaknesses, Opportunities,
and Threats. The SWOT analysis has been used extensively in various
decision making processes. The approach is a good framework to organize
relevant information to be able to develop strategy and facilitate
business decision making processes. Chapman (2009) developed a SWOT
analysis template with extensive list of general criteria examples
relevant to strengths, weaknesses, opportunities, and threats related to
various and general decision making processes. In the template below
(Tables 1 and 2), the first and the last columns show these general
criteria examples. In the middle two columns we have developed the
criteria that we believe are relevant to the adoption of Cloud Computing
in SMEs. We have developed our criteria based on extensive review of
existing literature on Cloud Computing services. Further, we have listed
criteria that we believe are relevant to Cloud Computing use in SMEs.
As shown in Tables 1 and 2, the strengths and opportunities of
using Cloud Computing services for SMEs far exceed the weaknesses and
threats.
In the next section, we summarize our findings and present business
and managerial implications of using Cloud Computing for SMEs.
5. SUMMARY, CONCLUSIONS, BUSINESS, AND MANAGERIAL IMPLICATIONS
Most of the current publications to date related to Cloud Computing
focus on the technical aspects rather than business and managerial
implications of using Cloud Computing in SMEs. In this paper we focused
our attention to the strategic value of Cloud Computing services for
SMEs. We explored some of the uses of Cloud Computing and Cloud
Computing services with emphasis on how small to medium-sized
enterprises can gain a competitive advantage to compete on a global
scale against large businesses. A comparison of benefits and risks, as
well as the alignment of strategies, were discussed to provide a clear
path for implementing Cloud Computing services in SMEs. Cloud Computing
is an evolution and not a revolution of the Internet services.
In many organizations, it will take time to fully understand the
importance of this new phenomenon. Cloud Computing is gaining momentum
and small to medium-sized enterprises that are able to implement its
services should do so sooner than later. The return on investment of
adoption is very high due to the very low initial expenditure compared
with traditional computing services. Scalability that Cloud Computing
provides is very valuable for SMEs. With Cloud Computing, SMEs can
fairly compete with their much larger competitors. Pay per usage and low
maintenance costs associated with Cloud Computing are also significant
advantages for SMEs. Extensive storage and backup and disaster recovery
provided to SMEs as a part of Cloud Computing services are usually at a
lower cost compared with the traditional data storage and disaster
recovery service providers. In addition, limited upfront costs and a
lower upgrade costs of Cloud Computing Services compared with the
traditional computing services are among major benefits of Cloud
Computing for SMEs.
The SMEs are able to take advantage of opportunities that Cloud
Computing provides to create value networks and provide global market
access to their customers. These value networks also allow SMEs to
increase collaboration with their business partners globally with much
lower costs than it is required for traditional network infrastructure.
The SME managers need also to be aware of the fact that Cloud
Computing services are not free of risks. There is a real risk of the
lack of information and system security if proper actions are not taken
to safeguard information and system security. This is a bit more
difficult with Cloud Computing due to the potential lack of information
and system control compared with traditional computing. More
importantly, managers need to carefully evaluate the dependability to
external resources and expertise that Cloud Computing creates for SMEs.
Future research needs to focus on finding ways to reduce or eliminate
the potential risks associated with the use of Cloud Computing for the
SMEs.
REFERENCES:
Avizienis, A., Laprie, J. C., Randell B., and Landwehr, C.,
"Basic Concepts and Taxonomy of Dependable and Secure
Computing," IEEE Transactions on Dependable and Secure Computing, 1
(1), 2004, 11-33.
Brunette G, M. R., "Security Guidance for Critical Areas of
Focus in Cloud Computing," Cloud Security Alliance, 2 (1), 2009,
1-76.
Cellary, W., and Strykowski, S., "E-government Based on Cloud
Computing and Service-Oriented Architecture," ACM International
Conference Proceedings Series, 2009, 5-10.
Clarke, R., "Computing Clouds on the Horizon? Benefits and
Risks from the User's Perspective," 2010, available from
http://www.rogerclarke.com/II/CCBR.html
Chapman, A., SWOT Analysis Template, 2005-2009, Available at:
www.businessballs.com/swotanalysisfreetemplate.htm
Fingar, P., Dot Cloud: The 21st Century Business Platform on Cloud
Computing, Meghan-Kiffer Publishing, Tampa, Florida, 2009.
Hartig, K., "What is Could Computing," Cloud Computing
Journal, December 13, 2009, available at:
http://Cloudcomputing.sys-con.com
Iyer, B., and Henderson, J. C., "Preparing for the Future:
Understanding the Seven Capabilities of Cloud Computing," MIS
Quarterly Executive, 2010, 117-131.
Panko, R. R., Corporate Computer and Network Security, Prentice
Hall, New Jersey, 2004.
Scott, A., "Cloud Computing for Financial Firms: Is it
Compliant?" March 2009, available at:
http://www.zdnetasia.com/Cloud-computing-for-finance-firms-is-it-
compliant-62050739.htm
The National Institute of Standards and Technology, www.nist.gov
The Office of Advocacy, Small Business Administration,
www.sba.gov/advo.
Vaquero, L. M., Rodero-Merino, L., Caceres, J., and Lindner, M.,
"A Break in the Clouds: Towards a Cloud Definition," ACM
SIGCOMM Computer Communication Review, 39 (1), 2009, 50-55.
Wang, W., Tao, T., Kunze, M., Castellanos, A. C., Karmer, D., and
Karl, W., "Scientific Cloud Computing: Early Definition and
Experience," The 10th IEEE International Conference on High
Performance Computing and Communication (HPCC), 2008), 825-830.
Woloski, M., "SaaS Taxonomy Map," July 2008, available
at: http://blogs.southworks.net/mwoloski/2008/07/10/saas-taxonomy-map
Rassule Hadidi, University of Illinois Springfield, Springfield,
Illinois, USA
AUTHOR PROFILE:
Dr. Rassule Hadidi earned his Ph.D. at the University of
Missouri--Columbia in 1981. He is currently Hanson Professional Services
Faculty Scholar, Professor and Chair of the Department of Management
Information Systems at the University of Illinois Springfield. He is
also the past president of the Midwest United States Association for
Information Systems.
TABLE 1
SWOT ANALYSIS OF USING CLOUD COMPUTING IN SMEs
(Strengths and Weaknesses)
General Criteria Strengths for SMEs Weaknesses for SMEs
examples
(Chapman, 2009)
Advantages of Competition Leveler Real and Perceived
proposition Lack of Information
and Systems Control
Capabilities Scalability Real and Perceived
Lack of Information
and Systems Security
Competitive Low Maintenance Lack of On-site
advantages IT/IS Support
USP's (unique Limited Upfront Costs Information Systems,
selling points) Architecture, and
Infrastructure are
not Physically
Located On Site
People Back up and Disaster Depends on SMEs
Recovery
Experience, Extensive Storage Depends of SMEs
knowledge, Data
Financial reserves, High Return on
likely returns Investment
Marketing--reach, No Barriers to Entry
distribution,
awareness
Innovative aspects Pay Per Usage
Location and Widely Available
geographical
Price, value, quality Less Expensive Dependability
to Upgrade
Accreditations, Widely Accepted
qualifications,
certifications
Processes, systems, Legacy Systems
IT, communications Supported
Cultural, Organizationally
attitudinal, Acceptable
behavioral
Management cover, Mainly Managed
succession Externally
Philosophy and values High Degree
of Agility
General Criteria General Criteria
examples examples
(Chapman, 2009) (Chapman, 2009)
Advantages of Disadvantages of
proposition proposition
Capabilities Gaps in capabilities
Competitive Lack of competitive
advantages strength
USP's (unique Reputation, presence
selling points) and reach
People Financials
Experience, Own known
knowledge, Data vulnerabilities
Financial reserves, Timescales, deadlines
likely returns and pressures
Marketing--reach, Cash flow, start-up
distribution, cash-drain
awareness
Innovative aspects Continuity, supply
chain robustness
Location and Effects on core
geographical activities, distraction
Price, value, quality Reliability of data, plan
predictability
Accreditations, Morale, commitment,
qualifications, leadership
certifications
Processes, systems, Accreditations, etc
IT, communications
Cultural, Processes and systems,
attitudinal, etc
behavioral
Management cover, Management cover,
succession succession
Philosophy and values
TABLE 2
SWOT ANALYSIS OF USING CLOUD COMPUTING IN SMEs
(Opportunities and Threats)
General Criteria Opportunities for Threats for SMEs
examples SMEs
(Chapman, 2009)
Market developments Global Market Access Real and Perceived
Lack of Information
and Systems Security
Competitors' Global Service
vulnerabilities
Industry or lifestyle Increase
trends Collaboration
Technology Increase Innovation
development and
innovation
Global influences Interoperability with
Business Partners
New markets, Eliminate Barriers to
vertical, horizontal Entry
Niche target markets Cloud Computing is a
Natural Evolution of
Networking and the
Internet
Geographical, export, Off-site Data Centers
import and Resources
New USP's
Tactics: e.g., Dependability
surprise, major
contracts
Business and product Local, Regional, and Real and Perceived
development Global Business Lack of Information
Relationship and Systems Control
Information and
research
Partnerships, New Business Model
agencies,
distribution
Volumes, production,
economies
Seasonal, weather,
fashion influences
General Criteria General Criteria
examples examples
(Chapman, 2009) (Chapman, 2009)
Market developments Political effects
Competitors' Legislative effects
vulnerabilities
Industry or lifestyle Environmental effects
trends
Technology IT developments
development and
innovation
Global influences Competitor intentions--
various
New markets, Market demand
vertical, horizontal
Niche target markets New technologies,
services, ideas
Geographical, export, Vital contracts and
import partners
New USP's Sustaining internal
capabilities
Tactics: e.g., Obstacles faced
surprise, major
contracts
Business and product Insurmountable
development weaknesses
Information and Loss of key staff
research
Partnerships, Sustainable financial
agencies, backing
distribution
Volumes, production, Economy--home, abroad
economies
Seasonal, weather, Seasonality, weather
fashion influences effects