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Adoption of Cloud ERP - Empirical investigation of EU and Indian SMEs

Thesis

Adoption of Cloud ERP - Empirical investigation of EU and Indian SMEs

Abstract and Figures

Enterprise Resource Planning (ERP) adoption factors have been studied quite extensively over the years. However, this master thesis tries to investigate upon the less explored area of Cloud ERPs. Relatively less research has been conducted, when it comes to adoption of Cloud ERP especially in Small and Medium sized Enterprises (SMEs). SMEs of the European Union (EU) and India are specifically targeted, as they both represent non-homogeneous markets which make a significant contribution in the respective economies. Primarily, the Cloud ERP adoption factors are identified and classified into different dimensions using the Technology, Organization and External task environment (TOE) framework. Important dimensions of ‘Awareness’ and ‘Company characteristics’ are also added to this research model. Furthermore, the data analysis is done to understand the demographics, mean agreement levels, correlations and standard deviations among the identified factors of Cloud ERP adoption. The research findings indicate that ‘Cloud awareness’ is the major barrier of Cloud ERP adoption, for SMEs of the EU and India. Moreover, some Technical, Organizational and External factor correlations are also discovered with respect to ERP adoption. Furthermore, evidences are dispensed to support some of the previous research done in Cloud ERP domain. All the results are presented in a comparative manner, where SMEs of the EU and India are compared and contrasted. However, due to a low statistical power, the significance of some results could not be established. Despite the research limitations, the findings confirm a high potential for the Cloud ERP market within EU and Indian SMEs, and further recommend the Cloud ERP vendors to focus on Cloud awareness. Finally, the research also makes literature contributions and advocates the future scope of research in the Cloud ERP landscape.
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Master thesis
Adoption of Cloud ERP - Empirical investigation of
EU and Indian SMEs
Kushal Agrawal
Student ID: h1337062
Department: Information Systems and Operations
Institute: Information Management and Control
Supervisor: Univ. Prof. DI Dr. Edward W.N. Bernroider
Date of Submission: 19 December 2016
Vienna University of Economics and Business, Welthandelsplatz 1, 1020 Vienna, Austria
Adoption of Cloud ERP - Empirical investigation of EU and Indian SMEs ® WU ID: h1337062
Abstract
Enterprise Resource Planning (ERP) adoption factors have been studied quite
extensively over the years. However, this master thesis tries to investigate upon the less
explored area of Cloud ERPs. Relatively less research has been conducted, when it
comes to adoption of Cloud ERP especially in Small and Medium sized Enterprises
(SMEs). SMEs of the European Union (EU) and India are specifically targeted, as they
both represent non-homogeneous markets which make a significant contribution in the
respective economies. Primarily, the Cloud ERP adoption factors are identified and
classified into different dimensions using the Technology, Organization and External
task environment (TOE) framework. Important dimensions of ‘Awareness’ and
‘Company characteristics’ are also added to this research model. Furthermore, the data
analysis is done to understand the demographics, mean agreement levels, correlations
and standard deviations among the identified factors of Cloud ERP adoption. The
research findings indicate that ‘Cloud awareness’ is the major barrier of Cloud ERP
adoption, for SMEs of the EU and India. Moreover, some Technical, Organizational and
External factor correlations are also discovered with respect to ERP adoption.
Furthermore, evidences are dispensed to support some of the previous research done in
Cloud ERP domain. All the results are presented in a comparative manner, where SMEs
of the EU and India are compared and contrasted. However, due to a low statistical
power, the significance of some results could not be established. Despite the research
limitations, the findings confirm a high potential for the Cloud ERP market within EU
and Indian SMEs, and further recommend the Cloud ERP vendors to focus on Cloud
awareness. Finally, the research also makes literature contributions and advocates the
future scope of research in the Cloud ERP landscape.
Keywords: Cloud ERP, Cloud ERP adoption, Cloud ERP adoption in SMEs, Cloud
ERP adoption in the EU, Cloud ERP adoption in Europe, Cloud ERP adoption in India,
Cloud ERP adoption in EU and India, On-premise vs. Cloud ERP
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Table of Contents
Chapter 1: Introduction to ERP . . . . . . 04
1.1 Cloud Computing . . . . . . . 05
1.2 Cloud ERP . . . . . . . . 08
1.3 ERP adoption factors . . . . . . . 09
1.4 On-premise vs. Cloud ERP . . . . . . 11
1.5 Research questions . . . . . . . 13
1.6 Research objectives . . . . . . . 14
1.7 Research methodology . . . . . . 15
Chapter 2: Research background . . . . . . 20
2.1 SMEs in the Europe Union . . . . . . 21
2.2 Cloud adoption in the European Union . . . . 22
2.3 SMEs in India . . . . . . . . 23
2.4 Cloud adoption in India . . . . . . 24
2.5 Less considered aspects of ERP adoption . . . . 25
Chapter 3: Research framework . . . . . . 30
3.1 TOE Framework . . . . . . . 30
3.2 Cloud ERP awareness. . . . . . . 32
3.3 Technical pressures in SMEs . . . . . . 33
3.4 Organizational pressures in SMEs . . . . . 38
3.5 External pressures in SMEs . . . . . . 41
3.6 Other factors . . . . . . . . 45
3.7 Research hypothesis summary . . . . . 46
Chapter 4: Data and research analysis . . . . . 47
4.1 Demographic presentation . . . . . . 48
4.2 Company characteristics presentation. . . . . 51
4.3 Cloud awareness and evaluation impact on ERP adoption . . 54
4.4 Technical environment impact on ERP adoption . . . 57
4.5 Organizational impact on ERP adoption . . . . 60
4.6 External environment impact on ERP adoption . . . 63
4.7 TOE factor composition . . . . . . 66
4.8 Cloud ERP vs On-premise ERP performance . . . 69
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Chapter 5: Research conclusions . . . . . . 71
5.1 Research results . . . . . . . 71
5.2 Research limitations . . . . . . . 73
5.3 Research discussions . . . . . . . 74
5.4 Future scope of research . . . . . . 77
References . . . . . . . . . 78
Acknowledgements . . . . . . . . 85
Appendix . . . . . . . . . 85
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Chapter 1: Introduction to ERP
Enterprise Resource Planning, commonly know as ERP today, has its roots in the 1960s
when manufacturing companies tried to optimize their inventory control [22]. ERP is
not a modern term anymore, it was first used by Gartner in 1990s. Today, ERP has
evolved as an information system that serves as a single point of integration for all
business processes that drives the enterprise towards its strategic goals [3]. ERP is used
by managers to efficiently serve the organizational needs right from planning,
purchasing, accounting to sales [3]. It is quite evident that ERP has its applications in
various functions of the organization like in Customer Resource Management (CRM),
Human Resource Management (HRM), Procurement etc. and is used across industries.
As the organizations grow, ERP becomes an essential requirement for managing
different organizational resources coherently. ERP enables a holistic business dashboard
for enterprises and also gives them a complete organizational database [22]. Simply put,
in most cases the ERP systems serve as a backbone for organizations.
Broadly speaking there are three different types of ERP implementations in which an
organization can deploy the ERP system today:
1. Purchase a license from a ERP vendor and have a completely On-premise ERP:
This implies that the organization is responsible for having an On-premise
server, application and maintenance for the ERP.
2. Outsource some part of the On-premise ERP, like development and/or service
component: This is also referred to as a hosted ERP where the ERP is
On-premise however the administration is done by a vendor which is over the
internet or private network.
3. ERP as SaaS (Software as a Service) package where only the ERP software is
accessible for the enterprise: The software can be over the Cloud as well, which
then makes it a Cloud ERP.
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Some researches claim that although the ERP SaaS turns out to be the first choice of
SMEs due to upfront costs, there are several downsides to it, like that of data security,
customer lock-in, license fees etc. On the other hand, having a ERP On-premise gives
an enterprise flexibility and security, but it comes at a high upfront cost that is often not
feasible for SMEs [3, 4, 5]. Studies have shown strengths and weaknesses of each type
of ERP system implementation [3]. A successful ERP implementation depends on
various factors, some of those factors are: (a) Understanding of strategic goals, (b)
Excellent top management skills, (c) Data accuracy, (d) Performance measure, (e)
Employee training, etc. [22].
1.1 Cloud Computing
To understand Cloud ERP, let us first try to understand how cloud computing works,
and what are the benefits and drawbacks of cloud computing in general. The NIST
definition of ‘Cloud Computing’ as per a study done in 2011 was, “Cloud Computing
(CC) is a model for enabling ubiquitous, convenient, on-demand network access to a
shared pool of configurable computing resources (e.g., networks, servers, storage,
applications, and services) that can be rapidly provisioned and released with minimal
management effort or service provider interaction” [1]
.
Cloud computing is gaining significant importance considering the different dimensions
it relates to in the broad Information Technology (IT) sector. These different dimensions
range from the Information and Communication Technology (ICT) world to Internet of
Things (IoT). Cloud computing is powered by many enablers like hardware
virtualization, grid computing, web services, system management and so on [3].
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CC has five essential characteristics [1]:
1. On-demand self-service: A consumer can access the Cloud services without
human intervention.
2. Broad network access: Capabilities of Cloud services and accessibility through
standard mechanisms like mobile phones, computers etc.
3. Resource pooling: Flexibility of the Cloud to store and retrieve the resources on
demand, irrespective of the client type, number of clients, or client location.
4. Rapid elasticity: Optional scalability with ease of accessibility.
5. Measured service: Cloud systems can automatically control and optimize
resource use. Moreover, the resource usage can also be monitored, controlled,
and reported. This enables transparency, for both - the provider and the
consumer, for the utilized service which further enables accountability.
CC has three basic service models [1]:
1. Software as a Service (SaaS). SaaS enables the client’s feasibility to use the
applications and services on a Cloud infrastructure. The applications or services
are accessible from client devices through interfaces like for example a web
browser. The consumer is decoupled from the responsibility of underlying Cloud
infrastructure including network, servers, operating systems, storage, or
sometimes even the individual applications.
2. Platform as a Service (PaaS). PaaS enables the client’s capability to deploy
applications to the Cloud infrastructure, typically realized through pay-per-use
or charge-per-application basis.
3. Infrastructure as a Service (IaaS). IaaS enables the client’s flexibility of
processing, storage, networks, and other fundamental computing resources,
where the client is able to deploy and run arbitrary softwares and applications.
The client is free from responsibility to manage or control the underlying Cloud
infrastructure but retains control of owned resources and accessibility.
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CC has four deployment Models [1]:
1. Private Cloud: The Cloud infrastructure is customized for limited use by a single
organization consisting of multiple clients (e.g., business units). However, it
may be managed by a third party or a combination of two or more business
units.
2. Community Cloud: The Cloud infrastructure is customized for restricted use by
a specific community of individuals or organizations that have shared concerns
like for example missions, policies, compliance organizations. It may be
managed by one or more organizations in the community.
3. Public Cloud: The Cloud infrastructure is provisioned for open use by the
general public. It may be managed by a business, university, or government, or
even a combination of them.
4. Hybrid Cloud: The Cloud infrastructure is composed of two or more distinct
Cloud infrastructures that are coupled together by standardized or proprietary
technology.
CC is and will make the IT industry more efficient, as it gives better resource
management to the organizations. For Small and Medium sized Enterprises (SMEs)
Cloud computing helps at the inception stage, because it removes the large capital
requirement of software systems and provides the services on demand over the Cloud.
Furthermore, CC gives flexibility to choose over the service usage or hosting on
different pay scales, like pay-per-user or pay-per-service which gives the businesses
flexibility to choose their business models according to their business needs [2].
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1.2 Cloud ERP
Simply put, Cloud ERP is an ERP system deployable in the Cloud i.e. over the internet.
Today, if not all, most of the Cloud ERP systems are centered around the load balancing
technology, which means that they share multiple server tiers and database resources
over the Cloud. Moreover, the scope of Cloud computing looks fascinating,
acknowledging that updates to the systems becomes more easy and that there is no
downtime for system upgrades. This saves considerable amount of cost, especially in
certain industries where the system downtime directly affects the company sales. When
it comes to cost, ERP systems take up to almost 50% of the budget of an SME [4] and
therefore, the selection process of an ERP system for any SME is very crucial and a
critical one. Cloud ERP systems have proven to reduce the upfront and maintenance
cost. This is mainly because it is supported by an external vendor and does not require
any additional server upfront cost by the client. However, Cloud ERPs are often accused
for the ‘data security breaches’ and give rise to numerous other security concerns.
Today there are multiple types of Cloud implementations: (a) Private Cloud (b) Public
Cloud and (c) Hybrid Cloud. These Cloud implementation techniques can be used to
decide which type of Cloud implementation of ERP suits the best for a particular type of
SME [4]. At this point, it is also important to understand the different types of Cloud
ERP implementations. Cloud ERP implementations can be classified into 3 types: (1)
Cloud Infrastructure, (2) Cloud Platform and (3) Complete Cloud Application. Cloud
Infrastructure ERP (CI-ERP) would provide only the client with a virtualized hardware
over the internet, where the ERP application and the Operating System (OS) are still
physically installed on the client’s premise. Cloud Platform ERP (CP-ERP) would
provided the client with Cloud infrastructure (hardware) and Cloud platform (operating
system), however the ERP application would still reside on the client side. Complete
Cloud ERP (CC-ERP) is a Cloud ERP solution where the ERP application, platform and
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the infrastructure resides in the Cloud and is accessed via the client browser. In all of
the above implementations the client would access the ERP by the client browser [3].
There is a thin line of difference between Hosted ERP (H-ERP), CI-ERP and CP-ERP.
If the H-ERP is hosted via the internet then it becomes a CI-ERP or CP-ERP depending
on the amount of service layers provided over the internet. CC-ERP is the complete or
most modern form of ERP where the client needs only a browser to access the ERP
system. Moreover, at this point it is important to mention that the Cloud ERPs in
essence are hosted ERPs, as they are both provided by an external vendor over the
internet for the client [7]. However, given the scope of the research topic, it was decided
to consider all types of Cloud implementations of ERP as Cloud ERP.
1.3 ERP adoption factors
A study done in 2005 about factors that affect the ERP adoption in the SMEs and large
corporations stated, that 'business complexity' as a whole was a weak predictor for ERP
adoption, but 'company size' was a good predictor. The study further claimed not the
financial constraint but organizational reasons become a barrier for ERP adoption
specifically for SMEs [23]. However, the research model of this study was based on the
assumption that 'business complexity' and 'organizational change' are the influencing
factors for ERP adoption which is yet to be proven. Furthermore, the classification of
factors seem to overlap as 'business complexity' and 'company size' both are the factors
that can be categorized under organizational factors of the TOE framework [19].
A comparative study of SAP ERP systems, On-premise and Cloud ERPs conducted in
2012 showed, that when it comes to implementation cost, implementation time, user
friendliness and scalability, Cloud ERP turned out to be a better option than an
On-premise ERP system. However, from security perspective, On-premise ERP system
stands a firm ground [5]. Furthermore, the selection of an ERP system also depends on
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numerous other factors like resources at disposal, requirements, infrastructure etc. The
selection of ERP highly impacts from the availability and type of ERP vendors. One
may choose traditional ERP vendors that provide migration services from On-premise
and Hosted ERPs to the Cloud ERP, for example ‘Microsoft Dynamics’. Alternatively,
one can also take services from the new Cloud ERP vendors that provide only the latest
ERP systems with new technology like SAP ByDesign [6].
From the literature research done so far, it can be identified that migrating or installing a
Cloud ERP is more beneficial than a bottleneck for SMEs. However, surprisingly we
have not seen the amount of migration that should have taken place from On-premise
ERP to Cloud ERP. According to Aberdeen Group’s 2011 report [8], more than 70% of
SMEs, despite of acknowledging the benefits of Cloud ERP, still own an On-premise
ERP. SMEs sole justification was that they do not want their customer data in the hands
of a third party. Moreover, they seemed to be further concerned with their data privacy
and internet downtime. This was observed across industries. Furthermore, this survey
also noticed that there was a steady decrease in willingness to move to Cloud ERP from
2009 to 2011 among the respondents from across industry [8]. An argument can be
made that the survey may be biased towards the U.S.A SMEs, owing to its target group.
It has been previously found that the geographic location plays a crucial role in deciding
upon an ERP solution.
However, despite the acknowledged benefits of Cloud ERP, specially for SMEs, the
non-migration and non-adoption of Cloud ERP, both have generated questions for
research and development in this area. Furthermore, there are also studies on which type
of ERP, On-premise or Cloud ERP, is better. For understanding the adoption of Cloud
ERP in SMEs, it is first essential to look at the comparisons done between On-premise
and Cloud ERP from different perspectives.
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1.4 On-premise vs. Cloud ERP
Over the past decade, there have been many studies that have tried to understand the
differences between the traditional On-premise ERP systems and the Cloud based ERP
systems. These studies have adopted different research perspectives to compare the
On-premise and the Cloud based ERP. Some studies [3, 6, 7, 62] have tried to identify
the benefits and challenges of the Cloud ERP or Cloud based technologies in general,
whereas others [7, 8, 58, 61, 64] have focused towards understanding the adoption of
Cloud based technologies and its challenges among SMEs and individuals.
Furthermore, some studies have also made technical comparisons between On-premise
and Cloud based ERP systems [7, 63].
The below table 1.4 represents a comprehensive composition of these research findings,
that have previously contributed to create a landscape from different viewpoints on
comparisons between On-premise ERP and Cloud based ERP systems. Table 1.4 is
adapted from an in-depth research finding [7] from 2012, that analyses the On-premise
ERP and Cloud based ERP from a multidimensional research perspective, and is further
correlated with other relevant literatures mentioned. This clearly outlines the need to
classify the adoption factors of Cloud ERP, using a framework that encompasses the
most significant variables which enable the adoption of the technology in a particular
given context.
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Features
On-
premise
ERP
Cloud
based
ERP
Sources
Lower upfront cost
3, 6, 7, 8, 61, 64
Lower operating costs and efforts
6, 7, 8, 58, 61, 64
No subscription fees
6, 7, 63
Scalability, faster time to market
3, 6, 7, 8, 58, 61
Rapid implementation, easier to switch among
IT providers
3, 6, 7, 8, 58
Enables enhanced focus on core competencies
6, 7, 61, 64
Higher level of independency from the ERP
provider
3, 6, 7, 8, 62, 64
Functionally rich to satisfy the back-office
needs of organizations in all types of
industries
6, 7, 63
Rapid acquisition of bug fixes and new
functionality
3, 6, 7, 61
Improved accessibility, mobility, and usability
3, 7, 58, 64
Enables extensive customization and complex
integration
3, 6, 7, 58, 61,
63, 64
Easier integration with other cloud services
7
Low dependency on deficiency of network
reliability and speed
6, 7, 8, 61
Ease of retaining legacy systems
3, 7, 61, 63
Enables high level of security and
confidentiality
3, 6, 7, 8, 58, 61,
62, 63, 64
Easier compliance to data & environmental
regulations
6, 7, 58, 61, 64
Table 1.4 adapted from [7] and correlated with [3, 6, 8, 58, 61, 62, 63, 64]
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1.5 Research questions
Based on the initial literature review, and considering the comparisons between
On-premise ERP and Cloud ERP adoption factors, the following research questions
were raised:
[RQ1]
Do the company characteristics like ‘number of employees’ play a crucial
role for EU SMEs, when it comes to adoption of Cloud ERP?
[RQ2]
Which among the identified ‘Technical’, ‘Organizational’ and ‘External’
pressures, is the most influential enabler, for EU SMEs, to adopt Cloud
ERP?
[RQ3]
Which among the identified ‘Technical’, ‘Organizational’ and ‘External’
pressures, is the most influential barrier for SMEs of the EU and India, to
adopt Cloud ERP?
[RQ4]
Does ‘Cloud awareness’ have a major influence on adoption of Cloud ERP
in the case of SMEs of the EU and of India?
[RQ5]
Does external pressure in terms of ‘macro environmental’ factors have
influence on the adoption of Cloud ERP?
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1.6 Research objectives
There are many factors that influences the decision making of ERP adoption in the
SMEs, and a substantial amount of research has already been done in identifying the
strengths and weaknesses of On-premise and Cloud ERP systems [3, 4, 5, 6, 7].
However, most of these studies follow a qualitative research model and miss out on the
quantitative result to get a statistical significance on their results. Furthermore, the
literature review conducted so far shows, there is a lack of proper classification factors
that lead to adoption of ERP systems specifically for SMEs. In addition, a proper
quantitative research focused towards Cloud ERP adoption among SMEs did not come
to light given the scope of literature review.
Building upon this unexplored area of research, this research aims at understanding the
following: (a) The awareness level among the SMEs about Cloud ERP (b) The decision
making factors for SMEs that influence the adoption of Cloud ERP and (c) The decision
making factors for SMEs that become a barrier in Cloud ERP adoption. The research
aims to focus at the young SMEs, which are defined as the ones which have an age of
10 years or less [34, 35, 36, 37]. However, the research it is not restricted to this, as it
depends on the number of responses obtained. The most common reasons for SMEs to
adopt technologies are discovered to be: (a) Market survival instincts, (b) Staying
competitive, and (c) Being innovative [38]. Young SMEs are targeted in particular
because empirical evidences suggest that young SMEs are more innovative, have a
higher risk appetite and a greater growth rate, compared to older SMEs [33].
This research is targeted across the industries to get a holistic understanding of Cloud
ERP adoption. Moreover, for understanding the enablers and barriers of Cloud ERP
adoption, respective factors were identified with the help of literature review and then
classified into three dimensions of (a) Technology, (b) Organizational and (c) External
task environment, according to the TOE framework. The overall objective of this
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research is thus to get a statistical significance on the ‘financial’ as well as the
‘non-financial’ decision making factors for SMEs, that affect the adoption of Cloud
ERP or become a barrier in the adoption of Cloud ERP.
1.7 Research methodology
The research methodology was divided into a simple five stage process as shown in the
figure 1.7
Figure 1.7
1.7.1 Literature review
To understand the factors that influence the adoption of Cloud ERP, an in depth
literature review was done using the famous online search engines and libraries. Based
on this literature review, all the common factors that influence the decision making of
having an ERP in SMEs, were then classified according to the TOE framework [19]. As
the topic is yet unexplored there was little less done in this field. The literature review
was conducted using the interdependent technique. The adoption factors and barriers of
the following were looked upon (a) ERP and Cloud ERP, (b) Cloud, (c) Internet and so
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on. All of the literature review was conducted with respect to SMEs in EU member
states and in India. However, as there was less specific literature about Cloud ERP
adoption in SMEs in the region, the research work also refers to the studies done on
different continents of the globe on the same topic. Some industrial and company
reports from authentic sources are also cited in this research for statistical significance.
The investigation of this study should not be compared or confused with the previous
work done in understanding the adoption factors of ERP, comparison of ERP and Cloud
ERP, or strengths and weakness of Cloud ERP. As said earlier, the clear objective of the
research was to understand the decision making of SMEs in adoption of Cloud ERP,
based on the three dimensions of the TOE framework.
1.7.2 Application of TOE framework
For understanding the factors that influence the decision making of an SME, in terms of
adoption of Cloud ERP, the technology adoption framework, TOE framework [19] is
used. This framework allows us to understand what are the various technological,
organizational and external factors that act as an enabler of the technology. In this
research context, the TOE framework was used to understand the Technical,
Organizational and External pressures SMEs have, that lead them to adopt or not adopt
the Cloud ERP.
1.7.3 Empirical survey
To identify the factors that influence the adoption of ERPs among young SMEs, a
survey based on the literature work was conducted. The email addresses of young SMEs
of EU member states in particular, those incorporated on or after the year 2005, were
fetched from the Orbis database [31] using the WU (Vienna University of Economics
and Business) network [32]. This database can only be accessed by the WU students
and researchers strictly for research purpose. The search strategy to retrieve the email
addresses of SMEs was based on the European Commission’s definition of Small and
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Medium sized Enterprises (SMEs) [26]. Only those that fit the criteria according to the
European Commission's definition of SME [26] and the ones that were incorporated on
or after the year 2005 were contacted via email. However, the Orbis database [31] is a
huge database and has many data discrepancies in terms of email address duplications,
incorrect or misspelled email addresses and so on. Therefore, data cleaning was a
crucial step, where the incorrect data was cleansed and furthermore, only unique and
private email addresses were used to contact the Chief Executive Officer (CEO), Chief
Operating Officer (COO), Chief Financial Officer (CFO) and other such top
management executives of young SMEs of EU, to get a better response rate. The Indian
SMEs were contacted based on a convenience sample that was generated based on the
contacts in manufacturing industry. All of these EU and Indian SMEs were then
contacted using the popular email marketing service provider - mailchimp [53]. Several
email campaigns were designed and rolled out in the first two weeks of November
2016.
The survey was divided into ten sections (ten pages), where the first section contained
only the basic information and survey instructions. In the second section, the
respondents (SMEs) begin by giving some basic demographic information about
themselves and their company, however, this section was optional and could be skipped
by the respondents. The third and fourth sections measured the Cloud and Cloud ERP
awareness of the survey audience. In the fifth section the respondents were asked to
give their current situation of ERP. The sixth and the seventh sections measured the
respondent's current ERP performance and satisfaction. These were dependant sections,
which would only appear to the survey audience, should they confirm that they have an
ERP system in section five. If the respondents said that they did not have an ERP in the
section five, they would be skipped to section eight directly. In the sections eight, nine
and ten, Technological, Organizational and the External pressures of the enterprises
were evaluated respectively. At the end of the section ten, the respondents were further
asked if they had any other form of pressures in terms of their company. This was an
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optional question, where the respondents could have stated any other pressures they
face, which was not already asked to them.
1.7.4 Data analysis
The survey data was collected through google forms [52] in comma separated values
(.csv) format and downloaded as an excel file. Some variables in the data had to be
coded for data analysis purpose. For example, the gender, existing ERP system, annual
revenue and so on, this has been mentioned in the research instrument, please refer to
appendix. In the data analysis, firstly a data summary of the emails sent, emails opened,
and other email statistics are presented. Secondly, a summary of the basic demographics
of the data collected is presented. Finally, the core data analysis was done in terms of
understanding the mean values of the respondent opinions. This was classified under
two groups: (a) EU SMEs and (b) Indian SMEs, for comparing and contrasting.
Furthermore, correlations (Pearson’s R) analysis between the existing ERP status of
SMEs, with different dependant and independent variables was performed to meet the
research objectives. The dependent variables used were: the existing ERP performance
and ERP satisfaction level, and the independent variables were: the Technical,
Organizational and External environmental pressures that the SMEs faced. Apart from
these, some other interesting correlations of Cloud ERP adoption were analysed and
presented in the data analysis report. A significance level of 0.05 (where p < 0.05) was
used to check the validation of results along with the standard deviations. Based on the
data analysis and literature findings, the research questions were answered. There were
certain limitations to the research that have been elaborated in the final chapter under
the title ‘Research limitations’.
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1.7.5 Final results
During the data analysis, the research hypotheses are validated and the final results are
presented. Based on these validations and correlations, and after comparing the research
findings with existing literature, the concluding remarks are drawn along with research
discussions. Finally, the limitations to the research work and the future scope of
research is presented.
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Chapter 2: Research background
Enterprise Resource Planning (ERP) is a dimension that can be viewed upon from
different perspectives. ERP is mostly used in terms of a software product, however it
can also be viewed as a roadmap for the organization to plan and structure their
resources. According to the major ERP vendors today, such as SAP, Oracle, PeopleSoft
etc. ERP can support almost all the organizational modules like finance, production,
marketing, sales, distribution, human resources etc. Traditional ERP systems can be
deployed in two ways: (a) On-premise ERP (OP-ERP) (b) Hosted ERP (H-ERP). In
OP-ERP the deployment takes place via the licensing model. The software is installed
on the client server which is physically on the client's location along with the client
machine. The client is then responsible for the infrastructure and the platform.
Furthermore, the responsibility of maintenance remains with the consumer. However, in
H-ERP, the ERP acts as a service which is offered to the client. In this case, the server is
not located at the client side and they are no longer responsible for the server
maintenance. Furthermore, the client is given the access to the ERP system via a private
network that may or may not take place through the internet [7].
If the ERP system access is given to the consumer via the public network (Internet),
then this type of infrastructure is known as Cloud ERP. The Cloud ERP can be further
divided into different types of Cloud ERP implementations [3] as explained earlier.
However, considering the scope of the research topic, all of these Cloud ERP
implementations have been considered as Cloud ERP.
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2.1 SMEs in the European Union
ERP adoption in large corporations has come to a saturation since 2000, simply because
they have already adopted their ERP systems and are now looking to reuse it as their
e-business model. However, the Small and Medium sized Enterprises (SMEs) are still a
major market for ERP vendors, because SMEs still have to make their decision for
having an ERP system [24]. SMEs contribute a fair share in country’s growth and
industrial economy [25]. Specifically in the EU, SMEs constitute of about 99% of all
businesses and serve as backbone of the European economy. The European SME
market is an attractive and unexplored one for ERP vendors. Primarily because of the
Small Business Act (SBA) by the European Commission that aims to improve the
entrepreneurship in the EU by removing the economic development barriers.
Furthermore, there are many such promotion and development policies that enable
growth and opportunities for the SME market within the European Union [26].
The definition of Small and Medium sized Enterprises (SMEs) vary depending on the
country and its economy. However, the European Commission has defined the SMEs
definition for EU member states in the EU recommendation 2003/361 as follows, “The
main factors, that determine whether an enterprise is an SME, are: (1) Staff headcount
and (2) either turnover or balance sheet total” [27]
. According to this law, an SME in
the EU can be categorized in the following three ways: (a) ‘Micro’ if the staff headcount
is less than 10, and either turnover or ‘balance sheet total’ is less than 2 million euros,
(b) ‘Small’ if the staff headcount is less than 50 and either the turnover or ‘balance sheet
total’ is less than 10 million euros, (c) ‘Medium-sized’ if the staff headcount is less than
250 and either the turnover is less than 50 million euros or the ‘balance sheet total’ is
less than 43 million euros [26]. This uniform definition of SMEs in the
non-homogeneous market in the European Union, which consists of 28 countries, makes
this market a very unique and exciting one for research and development.
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2.2 Cloud adoption in the European Union
Cloud computing in general are the information technology services that a client can use
over the internet on demand. Services over the Cloud have a huge impact on the fixed
cost, which are critical for any businesses especially for SMEs. Today major
expenditure for modern firms are related to their Information and Communication
Technology (ICT) needs. Cloud computing plays a huge role for reducing these ICT
expenses across industries [28]. It is difficult to understand the adoption of a particular
technology in a particular context, but understanding the adoption of technology in
general is still possible to an extent.
The European e-Business report 2008 [29] confirmed that by 2008 almost 50% of
companies in EU member states, that were surveyed across industries, said that at least
some of their business processes were conducted electronically and approximately
20-35% of those companies confirmed that their entire business processes were
conducted electronically. Specifically in the case of ERP systems the report [29] stated
that, there is a clear gap in ERP adoption between small and medium-sized corporations
versus the large corporations. However, the overall ERP adoption trend in the EU
member states since 2003 is still a positive one. This statistics provided further
motivation to investigate the adoption of Cloud ERP specifically in the EU member
states.
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2.3 SMEs in India
SMEs in India face several challenges in terms of business environment and
infrastructures. Although, there has been constant encouragement from the government,
for entrepreneurs to start their own ventures, the required infrastructure is not
compatible enough for them to compete in the global market. This severely affects the
adoption and perceived utility of technology. Previous findings [54] indicate that
technology adoption is severely affected by the macro-environmental factors such as:
(a) Social, (b) Political, (c) Legal and so on. Cultural and religious beliefs of people
have further been identified as critical factors determining the acceptance of a product
or service in the market [54]. This has led India into the problem of digital divide.
On the bright side, because of cheap labour in the country, the IT industry in India has
flourished. Primarily, because developed countries have outsourced their IT services in
India, there are plenty of opportunities in IT. However, the main barriers in the Indian
SME sector are: (a) Niche players, (b) Resources at disposal, (c) Market strategy, (d)
Long term vision and (e) Lack of transformation or rigid attitude towards change
management [55]. Moreover, the Indian SMEs are also found to be inflexible to change
which causes them to be less competitive compared to developed economies. Findings
from previous studies [56] reveal that due to lack of awareness, Indian SMEs lead to
non-adoption of ERP systems. Moreover, the upfront cost was also identified to be a
key barrier for ERP adoption in Indian SMEs. Furthermore, though the Indian SMEs are
able to understand the impact of Information Systems (IS), the adoption was not as high
as it should have been. Majorly, the adoption of IS by Indian SMEs was seen in the
fields of Accounting, Sales and Order management to streamline their daily operational
tasks [56].
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2.4 Cloud adoption in India
From large enterprises like Tata Motors, HDFC Bank, Welspun to SMEs we have seen
some significant adoption of Cloud computing in India. Previous literature
investigations suggest that there is a fascinating scope of Cloud computing in different
sectors of India [57]. However, when it comes to adoption of Cloud within the Indian
SMEs, the situation is slightly different. The same study [57] that found the scope of
Cloud computing fascinating, revealed that the inhibitors of Cloud computing in the
case of Indian SMEs were: (a) Data security, (b) Vendor lock-in, (c) Data backup and so
on. However, ‘awareness’ was found to be the major barrier in terms of adoption of
Cloud based technologies in the Indian SMEs [57]. This lack of awareness further
generates a lack of trust in the technologies and dampens the possibilities of growth.
Furthermore, SMEs report [58] that ERP packages usually contain many sets of
features, that are quite often complex for them to understand and moreover are
unnecessary for their business requirements. Moreover, due to these increased set of
features, the cost of ERP packages increases, that is often not affordable by the SMEs.
But despite the barriers, a high spending for adoption of traditional ERP systems can be
seen in Indian SMEs. A cost oriented study [58] done in 2010, provided results to show
that Cloud based ERP solutions reduce the cost for ERP implementations in Indian
SMEs to a great extent. However, despite the added benefit of cost reduction, the
adoption of Cloud based ERP in the case of Indian SMEs is next to negligible.
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2.5 Less considered aspects of ERP adoption
Apart from cost and data security, there are several other factors that currently play, or
in future will play an important role, for SMEs and for large corporations, in the
decision making of their ERP system. These aspects are the less explored space of
Cloud ERP dimension. Considering the research objective, it was important to identify
these factors that influence or may influence the decision making of SMEs in terms of
ERP adoption.
2.5.1 Big data and Internet of Things impact on future ERPs:
Another less viewed dimension is the Big Data impact on ERP systems. Everyone talks
about it, but there has been almost negligible effort in alignment of Big Data and ERP
systems. Undoubtedly, the ERP system of the near future will need the capability for
handling the huge amount of data that organizations and the world would generate.
Reports from 2014 show that 90% of the world data has been generated from 2012 to
2014. This implies that if external data is what the organization seeks for gaining
competitive advantage in the market, their ERP systems should be capable of doing so.
First logical approach in this scenario would be the Cloud ERP solution, as they are
much cheaper and can be scaled easily. On-premise ERP systems would be a bottleneck
in this case in terms of cost, implementation and maintenance [12].
Furthermore, if we talk about Internet of Things (IoT), another widely used buzzword
which focuses basically on real-time analysis of data and enables device communication
without human intervention, again ERP systems have not yet been seen as a part of their
ecosystem. In this future scenario, the ERP systems should be capable of heavy
customizations, as new tools will be required for reporting and managerial aspects that
helps organizations keep track of their products or services in the IoT domain.
On-premise ERP systems as the research illustrates so far, are more flexible in
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customization compared to Cloud ERP solutions. But then again, IoT produces Big
Data and On-premise ERP are not capable of processing or even storing that amount of
data. This certainly will alarm lot of ERP vendors, both in On-premise and Cloud ERP
services, as there seems to be a clear need for further development.
2.5.2 Environmental impact on ERPs:
Another important issue today is the environmental footprint of servers, data storage
devices, networking and so on. A recent study done by Microsoft in Cloud computing
and sustainability showed, that organizations that outsourced the applications reduced
their energy consumption significantly. The study also revealed that this was especially
true in small businesses where the reduction in computing emission reduced up to 90%
in case of Cloud solutions [13]. This shows one different aspect while making a choice
for ERP system deployment. Cloud ERP would significantly reduce the carbon footprint
for the organization than having an On-premise ERP. Sustainability is what an
organization looks for in terms of growth and profit, however, the young organizations
should additionally look for sustainability in terms of ecological impact. Cloud ERP
solution providers also need to consider the costs associated with running the multiple
clients, which directly affects their competitiveness compared to On-premise ERP,
majorly in terms of cost [14]. However, considering the sustainability aspect, Cloud
ERP seems to be a much better sustainable model compared to On-premise ERP, as
Cloud ERP minimizes the use of hardware resources. A study done in 2011 revealed
that the use of Cloud solutions, when compared to the use of On-premise solutions, are
much more durable in terms of economic, social and ecological aspects [14].
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2.5.3 Business model / Customization impact on ERPs:
A study from 2011 evaluated two popular business models in Cloud computing namely,
Cloud Cube Model (CCM) and Hexagonal Model, and proposed a new Cloud
Computing Business Framework (CCBF). CCM enables secure collaboration that meets
the business needs and Hexagonal model on the other hand is researched and practiced
upon in the industry for negotiations, operations, strategies etc. The proposed CCBF
then highlights the gist of both the models for Cloud computing. The study revealed that
the main stream business models like IaaS (Amazon), PaaS (Microsoft, Google Search)
and SaaS (Google Docs, Google App engine Salesforce) still have unexploited areas for
services and profits, however data privacy is a bottleneck for this model and high
competition is expected [15]. This clearly indicates the potentials of Cloud ERP
deployment and challenges it faces. ERP deployment in the Cloud often becomes target
to challenges like customization, data security, Software Development Kit (SDK)
absence, etc. Customization plays an important role, as some organizations are
interested in modifying their Cloud solutions based on their specific business
requirements. However, maintaining these customizations becomes a major challenge
for Cloud service providers. They need to establish backward and upfront compatibility
with the upgrades and their existing client-base [16]. On the other hand, Cloud ERP has
proven its potential in terms of cost, scalability and so on, from the research done so far.
2.5.4 Dependence impact on ERPs:
Another important aspect brought up in the Cloud vs. On-premise ERP solutions
frontier is about the dependency. On-premise solution is dependant on an external IT
consultant i.e. it needs expertise maintenance once the ERP solution is installed. In
Cloud ERP, the maintenance and support remains completely with the solution
provider. This has a significant impact for SMEs, as in case of On-premise deployment
the system maintenance role becomes crucial and finding long term personnel is in itself
a challenge for SMEs. On the other hand, having a Cloud ERP solution would result
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into the external solution provider dependency, that may not be available on demand,
constraining the business process for SMEs [9].
A recent study done in 2014 identified other important factors that influence the
decision of SMEs as well as large corporations while adapting to ERP solutions. These
factors were external in nature like geographical spread of activities, seasonality,
country and industry that impacts the decision making process for a SME significantly.
The study further revealed that SMEs benefit or exploit the most from the Cloud ERP
solutions than large corporations in general. They can further profit from the latest
updates and technology in Cloud solutions, as it is feasible to reengineer their business
processes when compared to large corporations and therefore adapting to changes is
much easier. However, the study develops some interesting conclusions that may be
challenged. For instance, one of the concluding remarks of the study is that the data
processing, storing and security may not be a big concern for SMEs while adopting to
Cloud ERP solutions. However, for those SMEs which are in the health sector or in any
such industries where they transact with sensitive customer data, this could be
problematic. [17]
2.5.5 ERP vendor impact:
A joint study from Microsoft, IBM, and others done in 2010 revealed that one of the
major concerns of data center managers was the large number of applications and
complexity to manage and run these applications. These manager confirmed that one of
their objectives in the coming years would be to reduce the data center cost. Public
Cloud computing was seen to be as a viable option from the survey respondents of the
study. However, most were still in the planning stage. Furthermore, the study revealed
that there is little known fact about performance over the Cloud, as it would be affected
by the network speed, server uptime and so on. Moreover, industry specific
‘regulations’ and ‘national data privacy laws’ may further influence the decision of the
clients to move to Cloud solutions. Hybrid Cloud solutions which are partially hosted
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over the Cloud have gained significant interest in the industry. These architectures claim
to offer a right balance between keeping important and sensitive information
On-premise and leverage from the Cloud applications as well [18]. However, hybrid
solutions may not really pay-off for SMEs, as they have little knowledge about which
are the applications to keep On-premise and which of those to host. Moreover, hybrid
solutions require more cost than Cloud ERP solutions and therefore the core value for
the decision making process seems to fade out there.
2.5.6 Cloud ERP and Data protection:
Cloud ERP is often considered as a last resort especially when it comes to the data
security. On-premise ERP has its own security concerns in terms of vulnerable
infrastructure, where the organization can be affected with natural hazards, a rogue
employee or similar such reasons that are secure in terms of Cloud ERP
implementation. However, data security is constantly improving in Cloud ERP domain,
as Cloud computing itself has evolved over the years and encryption over the basic
internet browsing has gotten more secure than ever. A case study [11] done in 2011,
showed that three studied SMEs implemented Cloud ERP solution and saw
improvement in numerous factors such as: (a) Cost (b) Customizations (c) Data
processing time (d) System runtime etc [11].
Less considered aspects of ERP
Sources
Big data and Internet of Things impact on future ERPs
[12]
Environmental impact on ERPs
[13, 14]
Business model / Customization impact on ERPs
[15, 16]
Dependence impact on ERPs
[9, 17]
ERP vendor impact
[18]
Cloud ERP and Data protection
[11]
Table 2.5
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Chapter 3: Research framework
The literature so far illustrates that when looked upon on a holistic level, Cloud ERPs
outweigh the strengths of On-premise ERPs significantly. However, for certain crucial
factors like data security, customization etc. On-premise ERP is found to be a better
option. This brings us to certain use cases that are not given considerable importance in
Cloud ERP solution. One of such use cases is that of migration from Cloud ERP to any
other ERP implementation [6]. A study done in 2012 [10] identified several challenges
that are faced during the Cloud ERP implementation: (a) Difficulty in data extraction
from Cloud, (b) Legal issues and liability, (c) Customization, (d) Awareness, (e)
Perception etc. Another insight from the same study was that the Cloud ERP over the
period of 5 years can save up to 50% of the cost as compared to On-premise ERP [10].
However, this was a particular use case and whether it can be generalized or not remains
open for further investigation.
3.1 TOE Framework
To test this and several other use cases it was decided to use the Technology,
Organization and Environment (TOE) framework. The TOE framework is an
organizational level framework which helps the firm in decision making of the
technology adoption from three distinct yet interrelated dimensions. These dimensions
are: (a) External task environment, (b) Organization and (c) Technology [19].
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Image taken from Tornatzky, Louis G., Mitchell Fleischer, and Alok K. Chakrabarti.
Processes of technological innovation
.” 1990 [20]
The TOE framework was first proposed by DePietro, Wiarda, and Fleischer in 1990
[19] where they explain and prove that the processes, by which a firm adopts and
implements the technological innovations, are influenced by (a) The technological
context, (b) The organizational context, and (c) The environmental context.
(a) The technology dimension consists of the internal and external technologies that
are important to the organization. In this regards, the technologies may include
equipment as well as the processes.
(b) The organization dimension consists of the characteristics and resources of the
organization, including the organization’s size, degree of centralization, degree
of formalization, managerial structure, human resources, amount of slack
resources, and linkages among employees.
(c) The environment dimension consists of the size and structure of the industry, the
organization’s competitors, the macroeconomic context, and the regulatory
environment.
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These three dimensions represent both, the challenges and the opportunities for
technological innovation. Thus they influence the way an organization uptakes: (a) The
need for new technology, (b) Searches for new technology and (c) Adopts to the new
technology [19]. The TOE framework is ideal for understanding the decision making
factors when it comes to adoption of technology in organizations. With the help of this
framework, the identified factors that influence the adoption of Cloud ERP have been
classified under Technology, Organizational and External task environment dimension.
This classification further helps to understand if there exists any correlations between
the different influencing factors of Cloud ERP adoption.
3.2 Cloud ERP awareness
Top managements, who have the required knowledge and awareness about existing IT
solutions for their business requirements, are more likely to adopt new IT solutions for
their organization, compared to unaware organizations [44]. An empirical study of
SMEs done in 2005, reveals that awareness (knowledge capture) ‘if done properly’ can
save huge costs, and also generate organizational growth [60]. Since the inception of
Cloud based technologies, the skepticism in adoption of Cloud technologies, especially
in the Business world, has been evident. Some of the common occuring reasons for
non-adoption of Cloud based technologies are: (a) Security risks of the Cloud and (b)
Fear of not knowing where the organizational data resides and as a result facing any
legal or regulatory issues [61]. This has been identified a major challenge for vendors of
Cloud based services as well.
Similar scenario is true in the case of Cloud ERP as well. Awareness and knowledge
about Cloud ERP raises skepticism, which in turn causes non-adoption of Cloud ERP.
According to an exploratory research [61] done in 2012, SMEs have shown strategic,
operational and technical intentions to have Cloud ERP. These reasons ranged from
reduced IT costs, scalability to faster market time, automatic upgrading and so on.
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These evidences suggest a huge potential market of Cloud ERP, making it interesting
for research especially in the case of SMEs. Therefore, it was very important to check if
‘Cloud awareness’ was one of the major barriers of Cloud ERP adoption in EU and
Indian SMEs.
Research hypothesis
[H1]
[H2]
3.3 Technical pressures in SMEs
Figure 3.3
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3.3.1 Providing many different IT solutions for a range of business requirements
Although SMEs have limited market scope compared to large enterprises, they still have
to provide customized IT solutions for a range of business requirements they inhabit.
This is majorly because of the high competitive market they operate in. The adoption of
technology in an SME highly depends on the perceived benefits and organizational
readiness [44]. Sometimes, the businesses also change their working according to
software, so that they do not have to spend money on the software customizations [43].
However, this might also happen because SMEs may lack the understanding of their
existing business processes. It has been discovered that the SMEs implement ERP
system based on the “business opportunity” they have in the moment, rather than
thinking of ERP as a long term enterprise solution [41]. Moreover, the ERP adoption in
SMEs is found to be highly correlated with the technological and organizational factors
[48].
3.3.2 Developing or reconfiguring IT to meet changing business needs
One of the major challenges that any SME faces is developing or reconfiguring their IT
to meet the changing business needs [41, 43]. Understanding the evolving business
requirements and accordingly bringing the required IT changes in the firm, is one of the
top agendas for most of the top managements today. These changes are required to be
managed in a coherent way, so that the existing business processes are not disturbed and
can be mapped in a correct and smooth way. ERP systems play a crucial role, by
facilitating smooth transition for such dynamic environment in organizations [43]. Thus,
there is a pressure on SMEs to develop or reconfigure their IT systems to meet their
changing business needs.
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3.3.3 Developing IT for information sharing (internally and/or externally)
Communicating internally between employees, top management, or externally, with
customers, vendors, suppliers, partners, has been identified as a critical organizational
success factor [41, 44]. For developed economic markets such as U.S.A, the simple
adoption of internet has created better market reach and further improved the
operational efficiency of the SMEs [40]. When it comes to ERP implementation, the
business requirements needs to be clearly conveyed to all the associated business
entities, so that an effective utilization of ERP is achieved to meet the business goals
[43]. Often we observe that the communication barriers, within the organization -
internally or externally, further hinder the adoption of technology in the organizations.
Therefore, the SMEs face the pressure for developing IT, for information sharing both
internally and externally.
3.3.4 Providing secure solutions for data protection, storage, analysis etc.
Empirical evidences from a study [40] done in 2004, suggest that the prior use of
technology by SMEs, plays a crucial role in understanding the adoption of Internet in
SMEs. Moreover, an investigation done in 2002, that evaluated the consumer
perceptions about purchasing on the internet [51], found that the consumer’s primary
concern for not purchasing over the internet was security, whereas the consumers who
did purchase on the internet wanted a reliable source to do so. The major barriers of
e-commerce activities as identified by an Australian study [47] done in 2003 are: (a)
Security and privacy of transactions, (b) Cost of consultants and (c) Lack of IT
expertise. Often we also observe skepticism about the Cloud based technologies
(products or services offered over the Internet), and therefore there is a high pressure on
SMEs to provide secure solutions for data protection, storage and analysis and so on.
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3.3.5 Online business transactions and digital marketing
Empirical evidences from a study [40] done in 2004 suggest that, SMEs are inclined to
adopt to online business transaction and digital marketing in terms of owning a website
or promoting their content online, owing to the highly competitive environment they
operate in. The study further revealed that, this adoption was also influenced by the
prior use of technology in the organization. Digital marketing takes place exclusively
via the internet, and many studies have confirmed that the internet in general has plenty
of benefits such has global reach, online selling, checking competitions, price
comparisons, consumer demands and so on. To avail these benefits and to be
competitive in the global market of today, a firm has to establish its digital presence
[44]. To establish the digital presence of SMEs that have not yet adopted internet,
means to have a dynamic company culture and change management in place. Moreover,
it has been previously identified that a ‘company’s culture’ and the ‘change
management policies’ also play an important role in adoption of ERP system [43].
Furthermore, when it comes to ERP adoption, the SMEs have found to take the
advantage of the moment, rather than looking at the business related factors [41].
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Dimensions
Technical pressures of SMEs
Sources
IT requirements
Developing or reconfiguring IT to meet
changing business needs
[41, 43, 44, 48]
IT requirements
Providing many different IT solutions for a
range of business requirements
[41, 43]
IT requirements
Developing IT for information sharing
(internally and/or externally)
[40, 41, 43, 44]
Data Management
Providing secure solutions for data protection,
storage, analysis etc.
[40, 47, 51]
Internet adoption
Online business transactions and digital
marketing
[40, 41, 43, 44]
Table 3.3
Research hypothesis
[H3]
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3.4 Organizational pressures in SMEs
Figure 3.4
3.4.1 Avoiding high upfront costs for providing IT solutions
It is not a myth that the SMEs avoid a high upfront cost for any investment they seek.
An Australian study of SMEs [40] done in the late 1990s, revealed that there are
primarily three IT acquisition phases for an SME: (a) Assessment of IT benefits,
organisational culture and IT compatibility, (b) Sufficient internal resources for IT
implementation and (c) External environment evaluation for the lacking in-house
resources. Moreover, higher perceived benefits, organizational readiness, risk appetite
and management support, lead to a quicker adoption of enterprise systems [48].
Furthermore, previous studies [40, 48] have confirmed that the investment of SMEs
depends on various aspects like: (a) Disposable financial resources, (b) Prior use of
technology in the firm, and so on. Furthermore, the research findings [40, 48] also
indicate, the higher the financial resources and the technical exposure, the greater is the
technology adoption in the SME. Therefore, it was relevant to understand if upfront cost
was actually a driver to adoption of Cloud ERP.
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Adoption of Cloud ERP - Empirical investigation of EU and Indian SMEs ® WU ID: h1337062
3.4.2 Working on low budgets for operating, changing or scaling IT solutions
Today’s SMEs operate in a global environment with high competition where low
budgets are a primary concern. To overcome this challenge, SMEs try to adopt
technology, for cost cutting benefits and operational efficiencies. However, the cost is a
critical feature for SMEs to adopt the technology. Previously, studies [45] have found
cost to be the primary hindrance of technology adoption. ERPs help to reduce the
operating costs of SMEs by improving their business processes [48]. However, ERPs in
general are not a cheap software tool, often they incur an high upfront cost that is not
affordable by SMEs. Therefore, the working (operating) budgets are another dimension
to cost, and are evaluated separately to understand its influence on adoption of Cloud
ERP.
3.4.3 Team collaboration and cooperations (internally and/or externally)
Team collaboration and corporations has become a rule of thumb for organizational
success today. Presently, firms operate in different geographies, have a diversified
product portfolio, dispersed customer base and dynamic business requirements. To cope
up with this dynamic business processes, the SMEs need a better team collaboration and
corporations. This information exchange may happen internally among the employees
of the organization, or externally among the organization and its customers or suppliers
etc [41, 46]. This information exchange can be done in an easy, efficient and cheaper
way through the digital means (Internet). However, the adoption of Internet in the SMEs
depends on the prior use of technology by the firm [40]. Moreover, the ERPs demand
that the team collaboration takes place on an organizational level. Several literature
studies done previously in ERP domain, have also identified ‘Team collaboration’ and
‘Cooperations within and outside the organization’ as one of the critical ERP adoption
factors in the enterprise [43]. Moreover, empirical evidences also suggest that the
perceived use of technology is influenced by shared beliefs of technology users and
training, which is further influenced by project (internal) communication [42].
Copyright © 2016 Kushal Agrawal Page | 39
Adoption of Cloud ERP - Empirical investigation of EU and Indian SMEs ® WU ID: h1337062
3.4.4 Lack of IT skills and experience in the organisation
It is a known fact that there is a clear gap between large corporations and SMEs. One of
the reasons for such a gap is the access and know-how of technologies in SMEs as
compared to