Sciknow Publications Ltd.

ITAR 2013, 1(2):18-24

Internet Technologies and Applications Research DOI: 10.12966/itar.09.02.2013
©Attribution 3.0 Unported (CC BY 3.0)

Using Porter Five Forces and Technology Acceptance Model to

Predict Cloud Computing Adoption among IT Outsourcing Ser-
vice Providers
Han Ping FUNG
No. 35, Jalan Megah 16, Taman Megah Cheras, 43200 Cheras, Selangor, Malaysia

Corresponding author (Email: han-ping.fung@hp.com)

Abstract – As IT outsourcing services are crossing path with cloud computing services in the new dawn of cloud computing era,
there is a lacking of research and framework to explain how IT outsourcing service provider will intend to adopt cloud computing
based on some competitive analyses of its business environments. This research developed a conceptual framework to measure
such intention underpinned on both Porter Five Forces (Porter, 1980) and revised Technology Acceptance Model (Venkatesh &
Davis 1996). This paper is only the first phase of this research. Literature review is conducted, research problem is identified,
research objective and questions are provided. Conceptual framework, hypotheses as well as the research methodology are also
explained in this paper. Lastly, contribution, limitation and conclusion are also included.
Keywords – Porter Five Forces, Technology Acceptance Model, Cloud Computing, IT Outsourcing, Perceived Benefits of
Cloud Computing, Perceived Ease of Adoption of Cloud Computing, IT Outsourcing Service Provider’s Intention to Adopt
Cloud Computing

Cloud Computing in 2010s are distinctly visible. Cloud

1. Background
According to a research conducted by Computer Economics
(2012), Information Technology (IT) Outsourcing cost as a
percentage of total IT budget continues to increase from 6.1%
in 2009 to 8.6% in 2012. IT outsourcing refers to the con-
tracting out of an organization’s IT functions to an external
service provider by paying a fee for an agreed period of time
(Kern & Willcocks, 2000). The outsourcing scope sometimes
include the selling of an organization’s IT assets and staff to
the service provider, who in return manages those assets and
provide IT services to the organization (Kern & Willcocks,
2000). IT functions to outsource also changed from routine
tasks like service desk, data entry, data center operations et al.
to complex analytical work, product design and development
functions (Lahiri & Kedia, 2011). Main reasons why organ-
izations outsource their IT functions include: a) cost reduction,
b) operational flexibility, c) service level improvement, d)
management overhead reduction, and e) rapid deployment of
new capabilities (Computer Economics, 2011; Dhar, 2012).
According to KPMG (2011), there were Techtronic
changes of IT since 1970s in which disrupting technology
paradigms keep popping up from time to time e.g. from
mainframe in 1970s, Personal Computer in 1980s, Client
Server Architecture in 1990s, and Internet in 2000s to now
computing is an IT model capable to enable convenient and
on-demand network access to a shared pool of configurable
computing resources e.g. servers, storage, network, applica-
tions and services that can be rapidly provisioned and released
with minimal management effort or service provider’s inte-
raction (NIST, 2011). Cloud computing as a disruptive
technology paradigm has caused many organizations to adopt
cloud computing to manage their IT functions (PwC, 2011).
The rationale to adopt cloud computing includes: a) faster
delivery of IT functions to business requirements, b) access-
ible to superior technical skills to satisfy new requirements,
and c) reduction of total cost of IT department (PwC, 2011).
2. Literature Review and Research
Problem
2.1 IT Outsourcing and Cloud Computing
According to Computer Economics (2012) and Dhar (2012),
cloud computing has significant influence on IT outsourcing.
As cloud technologies are getting more mature, IT outsourc-
ing service providers need to embrace cloud services as part
of their offering or delivery (Gartner, 2010; Dhar, 2012). If
not they are risk being left behind in the competition. IT
outsourcing service providers should consider cloud compu-

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 Internet Technologies and Applications Research (2013) 18-24
ting as a necessary competitive advantage as cloud computing
offers many benefits that IT outsourcing cannot deliver. For
many organizations, cloud computing offers the following
benefits over IT outsourcing: a) only paying for what you use,
b) only paying for the functionality that you really need, c)
faster deployment of IT services, d) easier integration of IT
services (Gartner, 2010). According to PwC (2011), IT out-
sourcing service providers need to provide both traditional IT
outsourcing and cloud services in order to stay competitive in
future. Reason being customers that had outsourced their IT
functions are also expecting the traditional IT outsourcing
service providers to improve their services through cloud
services. Secondly, traditional IT outsourcing service pro-
viders that offer cloud services can capture more market share
as customers are looking forward for this type of services.
Thirdly, traditional IT outsourcing service providers that do
not offer cloud services are risking their relationships with the
existing customers. This is because if they do not offer that,
their customers will take their businesses to other cloud ser-
vice providers. Lastly, the cloud services can yield better
performance which is beneficial to both supplier and customer.
This is because cloud services can reduce the supplier’s op-
erational costs which can translate into lower price to the
customer (PwC, 2011).
According to Gartner (2010), in the new dawn of cloud
computing era, only some large IT outsourcing service pro-
viders are adopting cloud computing as part of their services.
There are many IT outsourcing service providers still yet to
embrace cloud computing. Also according to Gartner (2011),
while cloud computing continues to mature, it is still the most
hyped subject in IT today. This is because not all cloud ser-
vices are based on genuine cloud solutions. For example,
even though some hosting solutions are labeled as pay-per-use
per month pricing model, but actually without the shared
elastic capabilities are also called cloud. Some organizations
inclusive of IT outsourcing service providers also view cloud
computing as hype (PwC, 2011). This is because they view
cloud computing investment is simply pushing for more
spend with uncertain Return on Investment (ROI). Hence,
these may be part of the reason some IT outsourcing service
providers have not deployed cloud computing as part of their
IT service offering or delivery.
From literature on cloud computing adoption, most of the
studies were focusing on the importance of technological
factors (Banerjee, 2009; Buyya, Yeo, Venugopa, Broberg &
Brandic, 2009; Grossman, Gu, Sabala & Zhang, 2009). Misra
and Mondal (2010) had developed business models that
measured cloud services adoption from financial perspective
for cloud user organizations. In terms of competitive factors
in business environment, Low, Chen & Wu (2011) had par-
tially considered two competitive factors i.e. competitive
pressure and trading partner pressure from the total eight
factors in their Technology, Organization and Environment
(TOE) framework. Moreover, the TOE framework was only
measured cloud computing adoption among end users in
high-tech industry.
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19
From literature review, IT outsourcing service providers
adopt or reject cloud computing based on its technological
capabilities, competitive advantage and ROI. There is still
lacking of a holistic theoretical framework to explain how IT
outsourcing service provider intends to adopt cloud compu-
ting based on validated competitive analyses of its business
environments.
2.2 Porter Five Forces
Porter (1980) suggested that five underlying forces of com-
petition determine an industry’s attractiveness. The indus-
try’s attractiveness in this research context refers to the value
or profitability created by IT outsourcing industry. Porter
Five Forces is a framework for an organization (IT out-
sourcing service provider in this case) to perform strategic
analysis on the nature of competition within an industry or
sector whereby the five forces include: buyer and supplier
bargaining powers, threat of new entrants, threat of substitute
products or services as well as competitors’ rivalry (Porter,
1980). Following Figure 1 depicts the Porter Five Forces
Framework:
Figure 1. Porter Five Forces Framework (Porter, 1980)
In the context of this research, buyer or IT outsourcing
customer’s bargaining power is an influence that can impact
an IT outsourcing service provider’s profit. Examples of such
bargaining power include customers’ size and their concen-
tration in certain geographical areas (Karagiannopoulos,
Georgopoulos & Nikolopoulos, 2005). According to Porter
(2001), IT literacy enables customers with easier access to
information about products, services and their suppliers which
can increase their bargaining power. This might explain why
customers are demanding their existing IT outsourcing ser-
vice provider to improve their services through other means
like cloud computing et al. The increased bargaining power
of customers might reduce the IT outsourcing industry’s
profitability. As a result, the existing IT outsourcing service
provider’s profitability also might be impacted.
Supplier bargaining power is an influence from an IT
outsourcing service provider’s suppliers who can supply raw
resources e.g. subcontractors, services, hardware, software et
20 Han Ping FUNG Postal: Using Porter Five Forces and Technology Acceptance Model to Predict Cloud
Computing Adoption among IT Outsourcing Service Providers
al. to the provider (Porter, 1980). This supplier’s influence
can impact the provider’s profits. For example, when demand
for a specific supplier’s product or service more than what the
supplier can supply e.g. Internet Service Providers (ISP), data
center collocation, Telco WAN Connectivity Providers et al,
the supplier can command higher price or higher bargaining
power which can reduce the IT outsourcing industry’s prof-
itability. Other examples of such influence include suppliers’
size and their concentration (Karagiannopoulos et al, 2005).
Threat of new entrants is a pressure from new product or
service provider that can enter easily into the industry to in-
fluence the competitiveness of an IT outsourcing service
provider e.g. entry of cloud computing service provider or
new IT outsourcing service providers, legal obstacles, scale of
investment et al. (Porter, 1980). According to Karagianno-
poulos et al (2005), key measurement to analyze the threat of
new entrants is the entry barriers. IT advancement does not
reduce the barrier of entry because informational products or
IT services attract high initial fixed cost which can be a barrier
of entry into the IT outsourcing competition landscape (Ka-
ragiannopoulos et al, 2005). But when the new entrants
armed with disruptive technologies like cloud computing,
they might leap frog the competition by reducing the IT out-
sourcing industry’s profitability.
Threat of substitute products or services is a pressure from
other products or services that offer similar benefits to an IT
outsourcing provider’s services (Porter, 1980). The former
products or services can reduce the demand for the IT out-
sourcing provider’s services as its customers switch to the
former alternatives. According to Karagiannopoulos et al
(2005), this threat depends on relative price-to-performance
ratios of different types of products or services as well as the
customer’s switching costs. Based on literature reviewed,
cloud services can be a substitute that poses a threat to the
traditional IT outsourcing service providers (Gartner, 2010;
PwC, 2011; Computer Economics, 2012; Dhar, 2012). Hence,
this might also reduce the IT outsourcing industry’s profita-
bility.
Competitors’ rivalry is a pressure arises from other IT
outsourcing providers’ services which aims at the same cus-
tomer group that the current IT outsourcing service provider is
targeting (Porter, 1980). According to (Karagiannopoulos et
al, 2005), head-to-head competition results the value created
by IT outsourcing industry to be dissipated. But when rivals
embrace cloud computing first, this might impact the profit-
ability of the entire industry as well as the traditional IT out-
sourcing service provider.
Porter Five Forces Framework indicates that cloud com-
puting adoption might be a business strategy in IT outsourcing
industry that encompasses some economical and competition
factors for consideration. The framework still does not ex-
plain how IT outsourcing service provider will perceive and
adopt cloud computing in which additional framework or
model is required.
Electronic copy available at: https://ssrn.com/abstract=2539720
2.3 Technology Acceptance Model
According to Chuttur (2009), despite there are different
models to predict user acceptance of technology, only Tech-
nology Acceptance Model (TAM) which is still capturing the
attention of information systems community. TAM itself has
gone through several iterations since the original TAM pro-
posed by Davis (1985). These include a revised version of
TAM as depicted in the following Figure 2.
Figure 2. Revised TAM (Venkatesh & Davis, 1996)
Revised TAM is a model that explains how users come to
accept and use a new IT system (Venkatesh & Davis, 1996).
A user’s acceptance level is based on his or her psychological
state with regards to the user’s voluntariness or intention to
adopt a particular technology (Hendrick, Hendrick, Foote &
Slapion-Foote, 1984). This model posits that there are nu-
merous factors that can influence a user’s intention and actual
usage of the technology which includes external factors,
perceived usefulness and perceived ease of use.
There are numerous research studied how users come to
accept different technologies using TAM e.g. telemedicine
technology (Hu, Chau, Sheng & Tam, 1999), on-line con-
sumer behavior (Koufaris, 2002), Internet utilization behavior
(Shih, 2003), wireless Internet (Lu, Yu, Liu & Yao, 2003),
on-line social networking behavior (Willis, 2008), web-based
online learning courses (Ku, 2009), m-Banking applications
(Lule, Omwansa & Waema, 2012), cloud computing in de-
veloping countries (Hailu, 2012) et al. Literature still silent on
using TAM on cloud computing adoption (i.e. implement and
use, not merely use as in other research) in IT outsourcing
service provider’s environment. The revised TAM also
suggested there are external factors that a researcher needs to
consider in which Porter Five Forces can fit into the picture.
Albeit revised TAM also included a dependent variable called
“actual system use”, but it is excluded from this research
because “intention to use” may not be representative of the
“actual system use” (Bagozzi, 2007). This is because duration
between “intention to use” and “actual system use” is full of
uncertainties in which other factors might influence a user
decision to adopt the technology (Bagozzi, 2007).
By combining both the Porter Five Forces and Revised
TAM, there is still lack of research whether buyer and sup-
plier bargaining powers, threat of new entrants, threat of
substitute products or services as well as competitors’ rivalry
 Internet Technologies and Applications Research (2013) 18-24
have any impact on: a) perceived benefits of cloud computing,
b) perceived ease of adoption of cloud computing, and c) IT
outsourcing service provider’s intention to adopt cloud
computing.
2.4 Research Problem
Generally, literature is silent on whether the combination of
Porter Five Forces (Porter, 1980) and Revised TAM (Ven-
katesh & Davis, 1996) have any influence on cloud compu-
ting adoption among IT outsourcing service providers. Hence,
problem statements of this research are: a) there is a con-
flicting view among IT outsourcing service providers whether
they should adopt cloud computing as part of their service
offering or delivery, b) there is a lacking of research and
framework to explain how IT outsourcing service provider
will intend to adopt cloud computing based on validated
competitive analyses of its business environments, c) It is
unknown whether a combined new conceptual framework
that consists of both Porter Five Forces and Revised TAM can
explain how cloud computing can predict its adoption among
IT outsourcing service providers.
3. Research Objective and Questions
This research intends to contribute some understandings on
how a new conceptual framework that underpin on both
Porter Five Forces (Porter, 1980) and Revised TAM (Ven-
katesh & Davis, 1996) can predict the intention to adopt cloud
computing among IT outsourcing service providers. Research
questions include: a) Do Porter Five Forces positively predict
perceived benefits of cloud computing among IT outsourcing
service providers? b) Do Porter Five Forces positively predict
perceived ease of adoption of cloud computing among IT
outsourcing service providers? c) Does perceived ease of
adoption of cloud computing positively predict perceived
benefits of cloud computing among IT outsourcing service
providers? d) Do both perceived ease of adoption of cloud
computing as well as perceived benefits of cloud computing
positively predict the intention to adopt cloud computing
among IT outsourcing service providers?
4. Conceptual Framework and Hypo-
theses
Following Figure 3 depicts the conceptual framework used in
this research which underpins on both Porter Five Forces and
Revised TAM:
Electronic copy available at: https://ssrn.com/abstract=2539720
21
Figure 3. Research Conceptual Framework
Following are the operational definition for each variable:
Buyer Bargaining Power is an influence from an IT
outsourcing service provider’s immediate customers that can
impact the provider’s profits (Porter, 1980).
Supplier Bargaining Power is an influence from an IT
outsourcing service provider’s suppliers who can supply raw
resources e.g. human resources, services, hardware or soft-
ware to the provider that can impact the provider’s profits
(Porter, 1980).
Threat of New Entrants is a pressure from new product
or service providers that can easily enter the industry which
can influence the competitiveness of an IT outsourcing ser-
vice provider e.g. cloud computing service providers or new
IT outsourcing service providers (Porter, 1980).
Threat of Substitute Products or Services is a pressure
from other products or services that offer similar benefits to
an IT outsourcing provider’s services whereby the former
products or services can reduce the demand for the IT out-
sourcing provider’s services as its customers switch to the
former alternatives (Porter, 1980).
Competitors’ Rivalry is a pressure arises from other IT
outsourcing provider’s services which aim at the same cus-
tomer group that the current IT outsourcing service provider is
targeting (Porter, 1980).
Perceived Benefits of Cloud Computing are a degree
that an IT outsourcing service provider believes that the ben-
efit of cloud computing can improve its performance (Davis,
Bagozzi & Warshaw, 1989).
Perceived Ease of Adoption of Cloud Computing is a
degree to measure how easy an IT outsourcing service pro-
vider perceives when it adopts cloud computing in delivering
its IT services to its customers (Davis et al., 1989).
IT Outsourcing Service Provider’s Intention to Adopt
Cloud Computing is a degree of an IT outsourcing service
provider’s intention to adopt cloud computing in delivering its
22 Han Ping FUNG Postal: Using Porter Five Forces and Technology Acceptance Model to Predict Cloud
Computing Adoption among IT Outsourcing Service Providers
IT services to its customers. This operational definition is
adapted from Venkatesh, Morris, Davis & Davis (2003).
Hypotheses for this research are as follows:
H1: Buyer Bargaining Power can positively predict Per-
ceived Benefits of Cloud Computing
H2: Buyer Bargaining Power can positively predict Per-
ceived Ease of Adoption of Cloud Computing
H3: Supplier Bargaining Power can positively predict
Perceived Benefits of Cloud Computing
H4: Supplier Bargaining Power can positively predict
Perceived Ease of Adoption of Cloud Computing
H5: Threat of New Entrants can positively predict Per-
ceived Benefits of Cloud Computing
H6: Threat of New Entrants can positively predict Per-
ceived Ease of Adoption of Cloud Computing
H7: Threat of Substitute Products or Services can posi-
tively predict Perceived Benefits of Cloud Computing
H8: Threat of Substitute Products or Services can posi-
tively predict Perceived Ease of Adoption of Cloud Compu-
ting
H9: Competitors’ Rivalry can positively predict Perceived
Benefits of Cloud Computing
H10: Competitors’ Rivalry can positively predict Per-
ceived Ease of Adoption of Cloud Computing
H11: Perceived Ease of Adoption of Cloud Computing can
positively predict Perceived Benefits of Cloud Computing
H12: Perceived Benefits of Cloud Computing can posi-
tively predict Intention to Adopt Cloud Computing
H13: Perceived Ease of Adoption of Cloud Computing can
positively predict Intention to Adopt Cloud Computing
5. Research Methodology
5.1 Sampling and Procedure
Based on the deductive research question of this study, cross
sectional quantitative research with online survey method is
used. Both pilot and actual study will be conducted on some
of the members of International Association of Outsourcing
Professionals (IAOP) and Outsourcing Institute (OI) who are
playing the roles as IT outsourcing service providers. Target
respondents that fill up the self-administered online survey
consist of mid-level outsourcing managers like Outsourcing
Solution Managers, Outsourcing Delivery Managers, Certi-
fied Outsourcing Professionals et al. The target respondents
will be randomly selected from both IAOP and OI after ap-
proval received from these two organizations. Emails will
send out to the target respondents in which structured ques-
tionnaire hyperlink will be embedded within each email.
Three waves mailing is used and survey should be completed
in 4 to 6 weeks. It is expecting to receive total 200 – 300
useable samples for quantitative data analysis.
5.2 Questionnaire Design
The online survey questionnaire consists of 50 question items.
10 items to collect information pertaining to demographics
Electronic copy available at: https://ssrn.com/abstract=2539720
and 40 items to collect answers based on variables depicted in
the conceptual framework. Bipolar scale from 1 to 7 is used
whereby 1 = Strongly Disagree and 7 = Strongly Agree.
Some questions in the questionnaire required reverse coding.
Survey questions for Porter Five Forces (the five inde-
pendent variables) are adapted from Alrawashdeh, Mobai-
deen & Nawaiseh (2012). Examples of questions for “Buyer
Bargaining Power” are:
1) My organization’s services represent a large portion of
expenses for our customers,
2) My organization’s services are unique to our custom-
ers.
Examples of questions for “Supplier Bargaining Power”
are:
1) There are large numbers of potential suppliers to my
organization,
2) My organization is well informed about our suppliers’
products and markets.
Examples of questions for “Threat of New Entrants” are:
1) There are high start-up costs for business similar to our
business,
2) There will be difficulties for my organization’s com-
petitors to acquire / obtain our customers.
Examples of questions for “Threat of Substitute Products
or Services” are:
1) There is small number of substitute products / services
in the market that can replace my organization’s services,
2) It is costly for my organization’s customers to switch to
another products or services.
Examples of questions for “Competitors’ Rivalry” are:
1) My organization is facing small numbers of competi-
tors,
2) It is easy for my organization’s competitors to abandon
their products or services.
Survey questions for Revised TAM are adapted from Da-
vis et al. (1989). Examples of questions for “Perceived Ben-
efits of Cloud Computing” are:
1) Cloud computing will enhance my organization’s
competitiveness,
2) Cloud computing will increase my organization’s
productivity in delivering the IT services to our customers.
Examples of questions for “Perceived Ease of Adoption
of Cloud Computing” are:
1) Cloud computing is easy to be adopted in my organi-
zation,
2) Learning to use cloud computing to deliver IT services
would be easy for my organization.
Lastly, examples of questions for “IT Outsourcing Ser-
vice Provider’s Intention to Adopt Cloud Computing” are:
1) My organization intends to adopt cloud computing in
next 12 months,
2) My organization intends to use cloud computing fre-
quently to deliver its IT services to customers.
5.3 Data Analysis Techniques
Statistical Package for Social Sciences (SPSS) v17 will be
used for normality test, descriptive statistics analysis, relia-
 Internet Technologies and Applications Research (2013) 18-24
bility test and validity test. Partial Least Squares (PLS) or
sometimes commonly known as Variance-based Structural
Equation Modeling (SEM) or PLS-SEM will be used for
factor analysis, multiple regression analysis, path analysis and
total effects analysis. PLS, which is a form of SEM is used
because it can evaluate a series of interrelated relationships
among latent constructs and their respective measured varia-
ble as well as the relationships among the latent constructs
(Hair, Black, & Balbin, 2010). Software SmartPLS v2 will be
used to run the PLS.
6. Conclusion
In this paper the author had presented the first phase of this
research i.e. the literature review, research problem, objective,
questions, conceptual framework as well as the research me-
thodology. Based on the literature reviewed, research gap has
been identified in which a framework is developed to explain
what are some of the competitive factors in the business en-
vironment that can influence an IT outsourcing service pro-
vider’s intention to adopt cloud computing. This research is
timely in the new dawn of cloud computing era as many IT
outsourcing service providers are undecided whether to invest
into cloud computing as part of their IT offering or services
(Gartner, 2011; PwC, 2011). Another contribution of this
research is once IT outsourcing service providers know which
specific Porter Five Forces had significant influence on their
intention to adopt cloud computing, this can help them to
justify to top management for investment in cloud computing.
There are a number of limitations in this research. Firstly,
quantitative research is adopted to test the pre-established
research hypotheses and evaluate the conceptual framework
underpinned on Porter Five Forces and Revised TAM. Col-
lection of quantitative and qualitative data might increase the
robustness of results by triangulating why and how Porter
Five Forces and Revised TAM in predicting IT outsourcing
service provider’s intention to adopt cloud computing. Se-
condly, the survey for this research is conducted on members
of IAOP and OI who might come from different countries of
the world. Respondents from different countries might re-
spond to the survey differently due to different cultural values
in which this research did not consider. Thirdly, the research
is conducted in IT outsourcing service provider’s environ-
ment, which may limit the research’s generalizability to end
user organizations that adopt cloud computing.
In conclusion, this research will attempt to fill an impor-
tant gap currently present among IT outsourcing service pro-
viders in the new dawn of cloud computing era. Investing into
a new disruptive technology can be a challenge to many IT
service providers as there are many unknowns or risks they
need to consider as part of their business decision making.
Through ameliorating competitive strategy and technical
know-how, it might help decision makers to justify and make
a better decision.
Electronic copy available at: https://ssrn.com/abstract=2539720
23
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Electronic copy available at: https://ssrn.com/abstract=2539720