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Exploring the use of SWOT analysis in the adoption of Cloud Computing services for small and medium-sized enterprises (SMEs).
Abstract:
This paper explores the use of Cloud Computing in small and medium-sized enterprises (SMEs). A SWOT analysis is conducted to evaluate feasibility of Cloud Computing applications for SMEs. The benefits as well as the risks associated with using Cloud Computing for SMEs are reviewed. To date, most publications in the area of Cloud Computing have focused on the technical aspects of this technology. Our focus here is on the applicability and the added value of Cloud Computing for enterprises and, in particular, for SMEs. We emphasize the alignment of strategies for SMEs to take advantage of opportunities that Cloud Computing provide. We believe that this technology can support creating new business value networks. Business and managerial implications of using Cloud Computing for SMEs are presented.

Keywords: Cloud Computing, SWOT Analysis, SMEs

Article Type:
Report
Subject:
Small and medium sized companies (Research)
Cloud computing (Analysis)
Cloud computing (Methods)
Information services (Buildings and facilities)
Information services industry (Buildings and facilities)
Author:
Hadidi, Rassule
Pub Date:
09/01/2010
Publication:
Name: European Journal of Management Publisher: International Academy of Business and Economics Audience: Academic Format: Magazine/Journal Subject: Business, international Copyright: COPYRIGHT 2010 International Academy of Business and Economics ISSN: 1555-4015
Issue:
Date: Sept, 2010 Source Volume: 10 Source Issue: 3
Topic:
Event Code: 310 Science & research; 440 Facilities & equipment Computer Subject: Information services industry
Product:
Product Code: 7399200 Info Services ex Database NAICS Code: 514199 All Other Information Services
Organization:
Company Name: Amazon.com Inc. Ticker Symbol: AMZN
Geographic:
Geographic Scope: United States Geographic Code: 1USA United States
Accession Number:
260256392
Full Text:
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
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