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Cloud Computing Adoption Intention by MSMEs in the Philippines

Article in Global Business Review · June 2021

DOI: 10.1177/0972150918818262

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DOI: 10.1177/0972150918818262
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Junrie B. Matias1
Alexander A. Hernandez2

Abstract
A paradigm shift in computing has been created and it has changed the way IT services development
provision and implementation take place with the advent of cloud computing. However, cloud comput-
ing is not widely adopted especially in third world countries like the Philippines. As a result, the goal of
the study is to evaluate the factors that affect micro, small and medium enterprises’ intention to adopt
cloud computing using technology organization environment framework. Findings suggest that competi-
tive pressure and regulatory support influences firms to adopt cloud computing. The study contributes
to technology adoption literature by providing a different perspective to cloud adoption.

Keywords
Cloud computing, technology adoption, TOE framework, developing country

Introduction
To keep up with the market demands, it is a vital and a prerequisite for the organization to determine its
readiness to adopt innovations of this evolving and volatile environment (Aboelmaged, 2014). To
improve business competitiveness, organizations are forced to conform and transform their environment,
adapt innovations and achieve continuous improvement (Uygun, Canvar Kahveci, Taşkin, & Piriştine,
2015). These changes include implementing information technologies that will keep businesses in the
competitive environment; especially for small- and medium-sized enterprises, it will enable them to
compete with large firms. However, traditional information technology (IT) environments have a
challenging management task; it requires physical space for IT equipment and people for implementing
and maintaining IT services. With the advent of cloud computing through its guaranteed benefits, these
requirements will reduce. A paradigm shift in computing has been created by cloud computing as it has
changed the way IT services development, provision and implementation take place (Phaphoom, Wang,
Samuel, Helmer, & Abrahamsson, 2015). Information producers and consumers are not necessarily

1
College of Computing and Information Sciences, Caraga State University, Ampayon, Butuan City, Philippines.
2
College of Information Technology Education, Technological Institute of the Philippines, Manila, Philippines.

Corresponding author:
Junrie B. Matias, College of Computing and Information Sciences, Caraga State University, Ampayon, Butuan City, Philippines.
E-mail: jbmatias@carsu.edu.ph
2 Global Business Review

within the same physical space which is entirely different from traditional IT (Gupta, Seetharaman, &
Raj, 2013). Due to the traditional IT environment constraints (Priyadarshinee, Jha, Raut, & Kharat,
2016), cloud computing can be very attractive for small to medium-sized enterprises (SMEs). They can
now access this services through the cloud without having an in-house IT equipment’s and specialist, and
these can minimize operating cost (Garrison, Wakefield, & Kim, 2015) and maximize the return on their
investment (Alshamaila, Papagiannidis, & Li, 2013). Though there are promising benefits of this new
technology, not all businesses are going to implement cloud services (Oliveira, Thomas, & Espadanal,
2014) and many SMEs are hesitant to move to this trend, fearing to lose control if they migrate their
infrastructure to cloud and may encounter undesirable outcomes.
Several studies relating to cloud computing adoption have been conducted (Yang & Tate, 2012);
however, little work is available on developing economies, more specifically, cloud computing
perspective by organizations in the Philippines. First, a handful of studies exploring cloud adoption
directly on micro, small and medium enterprises (MSMEs) in developing countries have been published.
In 2016, the Philippines was ranked number 9th on cloud readiness index from a report released by the
Asia Cloud Computing Association (ACCA, 2016) with a total score of 53.8. Though, the report indicates
that the gap in cloud readiness between the top performers is vast as the number 8th ranked Malaysia has
a total score of 66.3 compared to the Philippines which is 53.8 only. To determine the potential and
challenges of cloud adoption, ACCA began studying and reporting an annual cloud readiness index of
14 countries in Asia. The finding helps to identify solutions to the problems related to cloud adoption
with the aid of the major cloud vendors, government cloud stakeholders, decision makers and cloud
consumers (Abolfazli & Sanaei, 2015). However, the reports gathered lacks sufficient understanding
and information on the degree of cloud adoption by MSMEs in the Philippines. This situation
creates a gap in cloud computing adoption by MSMEs in the Philippines, an example of a developing
country.
Second, no study has been conducted to investigate the cloud computing intentions in MSMEs in the
Philippines. The Philippine MSMEs are progressively growing and contributing to the economic
performance. Additionally, the MSMEs accounts for 8 per cent in all types of business organizations in
the Philippines. To date, the Philippine government has been prescribing cloud-first policy as a key
sustainable approach for IT deployment needs in various business sectors. It is a priority of the government
to improve the business operations of organizations as a whole. Hence, understanding the factors, issues
and challenges, and practices of MSMEs in cloud computing adoption is beneficial not only for
professionals but also for developing economies aiming to enhance their business operations by
implementing cloud-based solutions.
Third, cloud computing is gradually being adopted by MSMEs in the Philippines to reach and expand
market opportunities, and allow speedy and cost-effective deployment of services. However, more
research is needed to address and analyse business-related issues about the implementation of could
computing in the Philippines. The MSMEs still require research and references to further successful
cloud computing adoption. More importantly, there is a need to investigate cloud computing adoption as
a competitive approach to levelling between developed and developing countries. Hence, this study is
the first attempt at investigating this significant phenomenon and is not only significant in MSMEs in the
Philippines but also for other emerging economies in the Asia-Pacific region.
The succeeding sections of this article include a review of cloud computing, technology adoption
models and the current state of MSMEs in the Philippines, followed by hypothesis, methodology and
presentation of the results, discussion, implications and conclusion.
Matias and Hernandez 3

Literature Review

Cloud Computing
Cloud computing emerged from the continuous advancement of IT products and services delivered over
the Internet (Oliveira et al., 2014). Firms can lease IT resources in the cloud and deploy applications,
manage data and perform analyses via the Internet (Hsu, Ray, & Li-Hsieh, 2014) and will only access
services they had paid for (Alkhater, Wills, & Walters, 2014).
The public, the private and the hybrid cloud are the three common cloud computing delivery models.
The concept of public cloud involves customers given access to a shared-service environment from a
cloud provider (Garrison et al., 2015), which is very cost effective for the small-medium firm to deploy
applications (Gupta et al., 2013). Organization in the private cloud is much secured compared to the
public cloud since private cloud has exclusive access and use of its resources (Low, Chen, & Wu, 2011).
The use of both service-delivery models creates a hybrid cloud environment with the automated
arrangement and coordination of two platforms (Garrison et al., 2015). Additionally, cloud computing is
categorized into the following service models (Garrison et al., 2015; Gupta et al., 2013; Low et al.,
2011). (a) Software-as-a-Service (SaaS) category: the business software is provided by the application
service provider over the Internet for client consumption; (b) the Platform-as-a-Service (PaaS): this
category enables firms to access resources like operating systems, databases and middleware within a
virtualized platform provided over the internet; (c) Infrastructure-as-a-Service (IaaS): this category is the
delivery of actual physical devices as a service available over the internet.

Cloud Computing Adoption

According to Oliveira et al. (2014), there are numerous studies that have been conducted to address
cloud computing technical and operational issues. Topics on costs and risks, secure storage audit protocol,
security, privacy and information loss are covered in those studies to aid the firm in selecting appropriate
cloud computing services. Repschlaeger, Zarnekow, Wind, and Klaus (2012) had presented an overall
requirement of the cloud computing framework that covers six target dimensions. These studies help
firms by providing a better assessment foundation to adopt cloud services.
Phaphoom et al. (2015) suggest that companies are quite hesitant to move their resources into the
cloud because of some technical barriers and security-related risks. There are six major obstacles when
deciding on cloud adoption namely, availability, data privacy, integration, portability, security and
migration. Based on their research findings, the three factors availability, integration, and migration
complexity will encourage firm in adopting cloud computing. Moreover, Gupta et al. (2013) recommend
that the least important factors for SMEs to adopt cloud are cost savings and cost reduction and the most
top two priority factors are ‘ease of use and convenience’ and ‘security and privacy’. Moreover, the study
indicates that SMEs in Singapore, Malaysia and India are pleased to migrate to the cloud due to its easy
use, convenience and better security and privacy. Also, it is indicated that reliability factor needs attention
by providers and firms.
In Taiwan, Lin and Chen (2012) interviewed 19 IT professionals to determine its perceptions towards
cloud computing and to identify their concerns associated with cloud adoption. Even with supports made
by the providers, the study suggests that many IT professionals do not have an in-depth understanding of
cloud computing and are unfamiliar with its advantages. Their concerns are mostly in cloud business
applications and not on the complexity and effort spends. Lastly, Alshamaila et al. (2013) found that firm
4 Global Business Review

potential to recognize the advantage of cloud implementation to its competitor depends on their high
relational IT capability. Cloud adoption intention is not directly affected by firm size. Instead, it helps to
recognize cloud benefits and its importance (Hsu et al., 2014). Organizations now are slowly integrating
cloud computing into their business strategies and operations to attain competitiveness. SMEs will not
be reluctant anymore to implement these types of innovations into their businesses despite the few issues
identified by the experts (Gupta et al., 2013).
However, cloud computing adoption in developing economies remains a research gap as limited
empirical evidence published is available (Sharma, Al-Badi, Govindaluri, & Al-Kharusi, 2016). Thus, an
extensive investigation of cloud computing in developing countries, more particularly, the MSMEs must be
conducted to understand the critical factors on success and or failure of organizations in cloud computing
adoption. Lastly, numerous studies that are also examined in this work are included in Appendix A.

Technology Adoption Models

There are two widely adopted theories for IT adoption studies in organizations: the technology–
organization–environment (TOE) framework and diffusion of innovation (DOI) (Phaphoom et al., 2015).
To create a more holistic approach, Oliveira et al. (2014) had to combine these two theoretical perspectives
to determine the factors of adoption based on the attribute of innovation and the technology development,
organization and industry environment of organizations.
In the past decades, researchers have investigated the factors that influence the diffusion processes of
various technologies, through the different models and theories proposed. There are eight theories in this
area, such as Theory of Reasoned Action (TRA) (Fishbein & Ajzen, 2011), the technology acceptance
model (TAM) (Venkatesh & Davis, 2000), the Motivation Model (Davis, Bagozzi, & Warshaw, 1992),
the theory of planned behaviour (TPB) (Ajzen, 1991), the diffusion of innovation (DOI) (Rogers, 2010),
and technology environment organization framework (TOE) (Tornatzky, Fleischer, & Chakrabarti,
1990), among others.
Among these models and theories, DOI is one of the commonly used theories that attempts to explain
and predict the adoption of innovations, developed by Rogers (2010). Most of these theories explain the
adoption decision through the technology-related factors; however, technology-related factors are not
the only factors that influence innovation adoption of individuals and by organizations. Furthermore,
there are environmental and organizational factors which affect the decision to adopt technologies. These
factors, more specifically, environmental factors, are not taken into account in DOI (Rogers, 2010).
Thus, the TOE is introduced that overcomes this shortcoming. TOE framework not only employs
technological aspects of the diffusion process, but also presents non-technological aspects including
organizational and environmental factors (Tornatzky et al., 1990). Hsu et al. (2014) state that TOE
enhances DOI’s capability to explain the intra-firm innovation diffusion.

Diffusion of Innovation
The DOI has been used to explain IT adoption. The model aims to explain the way that technological
innovation progresses from creation to utilization. It describes the adoption patterns, and mechanisms for
diffusion, and further assists in predicting how and whether the innovation will be successful. The DOI
model comprises three main categories of factors that influence innovation adoption decisions including
innovation characteristics, organizational characteristics and individual characteristics (Rogers, 2010). The
Matias and Hernandez 5

innovation characteristics consist of the perceived attributes of innovation that hinder or facilitate. Rogers
(2010) explained the five attributes of innovation such as relative advantage, compatibility, complexity,
trialability and observability. Relative advantage refers to the perceived extent of advantage of the new
technological innovation. Compatibility refers to the degree to which the innovation is perceived consistent
with the existing values, experiences and needs of the possible adopters in organizations. Complexity
relates to the perceived difficulty of understanding and using the innovation, while trialability refers to the
degree to which the innovation can be easily tried and tested over time. Finally, observability refers to the
level to which the results of an innovation are visible to the technology adopter (Rogers, 2003).

The Technology Organization Environment Framework

The TOE is argued to be integrative framework providing a holistic approach and guidance (Oliveira &
Martins, 2011). The TOE framework contains three dimensions, including technology, organization and
environment that influence the diffusion process by which innovation is adopted. It serves as taxonomy
for factors that facilitate or inhibit the adoption of innovative technologies. The technology dimension
refers to the internal and external technology relevant to the organization, and relevant available
technologies for potential adoption. The organization dimension explains the structure and the processes
in an organization that facilitates or constraint the adoption of innovation. The environment dimension
consists of market elements or competitors, industry, regulations and government.
The integrative model shown in Figure 1 was tested based on 369 sample firms from Portugal to study
the cloud adoption by manufacturing and services sectors.
Hsu et al. (2014) developed a model based on TOE factors and examined 200 Taiwanese firms and
found out three significant determinants, and had found out that competitors pressure as a not significant
determinant. It also noted that businesses having high IT capability will like to select the pay-as-you-go
pricing mechanism. Also, the deployment model is determined by concerns, and firms with larger
business concerns are likely to choose private over public cloud. Yang et al. (2015) examined SaaS
adoption factors in China, and the study had assessed how to prepare organizational users to implement
the cloud service. The study used a tripod model of SaaS Readiness, and the study findings suggest that
not all organizational users are willing to adopt SaaS and despite the considerable cost the firm may save
they are still hesitant. Alshamaila et al. (2013) studied the SME adoption process in the north east of

Figure 1. The Integrative DOI–TOE Research Model

Source: Oliveira et al. (2014).
6 Global Business Review

England. Using the TOE framework, a semi-structured interview was conducted to gather data in 15
different firms. The study found out 12 main factors that have a significant role in the adoption of cloud
computing by SMEs. Though, an element identified as a not important determinant of cloud computing
adoption is competitive pressure.
Sharma et al. (2017) adopted a mixed methodology to identify and rank critical factors for cloud
computing adoption in the Indian context. Results revealed that ‘IT service cost’ and ‘time to market’ are
the most critical factors, while ‘organization size’ is reported to be the least critical for cloud computing
adoption.
Consequently, Gangwar, Date, and Ramaswamy (2015a) integrated TAM and TOE and tested at the
organizational level. The study collected data using a questionnaire from 280 companies in three different
sectors in India, namely IT, manufacturing and finance. Their result shows various important determinants
of cloud computing adoption in organizations. Thus, they also noted that factors directly influencing
intention to adopt cloud services, in contrast to Alshamaila et al. (2013), are competitive pressure and
trading partner support. Also in Gangwar et al. (2015a), the authors extended the TAM–TOE framework
and incorporated cloud-specific variables security and third-party control. The framework was
qualitatively analysed using an interview method which resulted in 12 of the variables relevant to cloud-
computing adoption.

MSMEs in the Philippines

According to the Senate of the Philippines (2012), MSMEs are a vital factor in economic development
in countries like the Philippines. These MSMEs improved the lives of many Filipinos by creating jobs
and stimulating economic growth in rural and far-flung areas.
In 2014, according to a report provided by the Philippine Statistics Authority (PSA), 99.6 per cent of the
establishments in the Philippines was MSMEs and with the remaining 0.4 per cent are large companies
(DTI, 2014). MSMEs have contributed 62.8 per cent of jobs in 2014 compared to 37.1 per cent from large
enterprises. It also contributes to exports accounting for 25 per cent revenue and estimated that 60 per cent
of all exporters belong to this sector. Table 1 presented a thriving and growing economy by MSMEs and
served as a framework and a model for new entrepreneurs and large firms. Even with the policies supporting
and promoting an empowering atmosphere for MSME development, full growth and potential are hardly
achieved, because of some non-financial and financial barriers (Senate of the Philippines, 2012).
Survival and continuity of this sector are a must and essential for the country; hence, adopting ICT
innovations such as cloud computing can help to reduce barriers as they can explore new business
opportunities, maximize their profit and investments by integrating new strategies and cutting cost on IT
infrastructures. Adopting ICT enables business organizations to compete on a global scale with improved
operation, productivity and services to customer and communication with its suppliers (Tarutė &

Table 1. MSME Classification in the Philippines

Enterprise By Asset Size Firm Size

Micro Up to P3,000,000 1–9
Small P3,000,001–P15,000,000 10–99
Medium P15,000,001–P100,000,000 100–199
Source: Senate of the Philippines (2012).
Matias and Hernandez 7

Gatautis, 2014). The ACCA (2016) reported the improvement of the Philippines Cloud Readiness
ranking it to be the ninth most cloud-ready nation in the Asia Pacific, overtaking Thailand. Accordingly,
the Philippines have improved on addressing freedom of information and privacy. Inadequate connectivity
and exposure to natural disasters pose a risk, reported as the reasons why the country performs poorly in
this metrics. On the other hand, the Philippines have established Government Cloud (GovCloud), a
government core objective of creating infrastructure and services that consolidate IT resources, streamline
the organization cost in IT implementation and improve overall operational efficiency (Government
Cloud, 2017). Accordingly, most Philippine agencies are having real potential and capabilities to
implement cloud-based solutions and must benefit from these technologies.

Objectives
The objective of this study is to advance the growing body of research on cloud computing, through
understanding the factors affecting cloud adoption intention by MSMEs in the Philippines using TOE
framework. TOE is a multi-perspective framework organization-level theory (Depietro, Wiarda, &
Fleischer, 1990). A quantitative survey will be carried out by individuals having an important position into
MSMEs and familiarity with the organization direction in information technology implementation. The
study results may help the sector that contributes almost 62.8 per cent of jobs generated in the Philippines
for the year 2014 (DTI, 2014) to adopt new strategies, explore new business opportunities and gain business
operational advantages (Tarutė & Gatautis, 2014). The findings of the study could have important
implications and significant value to computing society, government and service providers, in understanding
on why MSMEs choose to adopt cloud computing services (Alshamaila et al., 2013).

Theoretical Framework and Hypotheses

Adopting the TOE framework, we propose a research model shown in Figure 2 by replicating some of
the experience from Gangwar et al. (2015b), Hsu et al. (2014) and Oliveira et al. (2014) to gain further
insights on cloud adoption intention by MSMEs in the Philippines on an exploratory perspective.

Figure 2. Research Framework

Source: Gangwar, Date, and Ramaswamy (2015b), Hsu et al. (2014) and Oliveira et al. (2014).
8 Global Business Review

Hypotheses of the TOE Context

Technology context
Two features were adopted from the literature for technology context: the perception on cloud benefits
and the concerns of the businesses; these factors are seen to be critical in cloud adoption process from
the work of Hsu et al. (2014). Accordingly, perception on cloud benefits indicates the firm’s operative
and execution advantages acquired from cloud computing. Thus, we also observe the hypothesis:

H1: An MSME that recognizes a higher levels cloud advantages is more likely to adopt cloud services.

Business concerns are that the potential risk may be encountered by firms in using the cloud. Several
issues that are associated with cloud computing have been widely argued by researchers. Adopting cloud
means that a firm will entrust its resources to cloud service provider, and these may include operations,
equipment and critical data and information. Having this kind of setup, firm may encounter different
problems like bandwidth and infrastructure related issues since cloud-computing services depend mainly
on the Internet. Hence, we also adopted the study hypothesis:

H2: An MSME that recognizes higher levels of business concern is less likely to adopt cloud services.

Organizational context
The organization context is the existing business resources to support and manage the adoption and
implementation of innovation. These resources include technology readiness or ability that involves an
annual budget and number of IT personnel to support daily operations. Alshamaila et al. (2013) suggest
that a firm with strong IT capacity is more likely to recognize the benefits of cloud computing. Thus, we
hypothesize in line with the TOE framework and with the previous studies:

H3: An MSME with higher levels of technological readiness is more likely to adopt cloud services.

Environment context
Environmental context is the physical space and location where businesses operate. It is influenced by
environmental elements that might affect a company’s intention to adopt cloud technology. As shown in
the model, competitive pressure and regulatory support are included in the environmental context.
Competitive pressure is the degree of pressure by the firm from its competitors. To keep up with their
competitor’s, businesses are forced to adopt innovation to improve their business strategies. Hence, the
following hypothesis:

H4: Pressure from competitors positively affects MSMEs intention to adopt cloud computing.

Regulatory supports encourage the integration of cloud computing by businesses. The lack of policy
and standards can affect firm positively or negatively from adopting cloud. Accordingly, if a government
mandates organization to confirm through technology policies, firms will be agreeable to accept new
technology. Thus, the hypothesis:

H5: A government regulation positively affects MSMEs intention to adopt cloud computing.
Matias and Hernandez 9

Methodology

Research Methodology
There are three commonly accepted research approaches applied to information systems, namely,
quantitative, qualitative and mixed-method (Terrell, 2012). This study used a mixed-method, as several
studies shown in the literature have effectively used this approach to study technology adoption (Hsu
et al., 2014; Low et al., 2011; Oliveira et al., 2014). As a result, several concepts are reviewed and have
developed a model to examine the adoption intention of new technologies. In the previous sections, the
study followed TOE framework for developing the research model and formulating the hypotheses,
grounding on the study of Hsu et al. (2014) and Oliveira et al. (2014).
The survey questionnaire was created with the objective of answering the hypotheses formed from the
proposed research framework. A quantitative methodology was adequately used for this work. Hence,
the results are in the form of numeric data that can be analysed statistically.
To complement the survey, interviews were considered. Interviews are widely accepted approach in
qualitative studies on technology adoption to obtain in-depth understanding of the phenomenon and
context involved (Marshall & Rossman, 2014).

Survey Questionnaire
Each item in the survey instrument is taken from well-established and validated works (Hsu et al., 2014;
Oliveira et al., 2014) to measure the factors affecting firms intention to adopt cloud computing. The
summary of the measurement items used for each factor and their related key literature sources are
shown in Table 2.

Sample Selection
For surveys, there are two types of sampling techniques that can be used: probability or non-probability
sampling (Burmeister & Aitken, 2012). Hence, the study is using a sampling strategy, and MSMEs are
chosen based on the subjective judgment of the researchers, rather than random selection; a non-
probability sampling technique will be adopted to select participants. The target survey respondents for
this quantitative study are decision makers or individuals having an important position to the MSMEs

Table 2. Summary of the Questionnaire Instrument

Factor Items Reference

Perceived benefits of cloud (PB) 6 Hsu et al. (2014)
Business concerns of using cloud (BC) 7
IT capability (ITC) 2
Competitive pressure (CP) 3 Oliveira et al. (2014)
Regulatory support (RS) 2
Cloud-computing adoption (A) 1
Source: Authors’ own.
10 Global Business Review

Table 3. Sample Characteristics

Position # % IT Personnel # %
Asst Vice Pres 1 3% 0–2 19 63%
General Manager 21 70% 3–5 7 23%
IT Manager 2 7% 6–10 3 10%
Owner 6 20% 11–50 1 3%
IT Budget # Firm Size # %
Below 500 thousand 24 80% Micro 18 60%
Between 1 & 5 million 1 3% Small 8 27%
Between 5 & 10 million 1 3% Medium 2 7%
Between 500 thousand 3 10% Large 2 7%
& 1 million
Over 10 million 1 3%
Source: Authors’ own.

such as owner, directors and senior IT managers which are the most familiar with the firm direction in
technology acquisition and implementation (Oliveira et al., 2014).

Data Gathering
An online survey was carried out in this study, as this method has numerous strengths compared to other
survey methods (Senarathna, 2016). By using the Internet, the survey questionnaire was distributed in
different forms, such as by email with a link to a survey URL, or by email with an embedded survey. It
guarantees the prospective respondents that their answers will be anonymous and the gathered data will be
evaluated in an aggregate manner, and individual feedback will be not be associated with the respondents
(Aboelmaged, 2014). Consequently, there are 30 MSMEs that participated in this study. The data gathering
was conducted on 3 February 2017, until 15 March 2017 and sample summary is shown in Table 3.
Face-to-face interviews were conducted to gain a broad understanding of the participants’ perspectives
on cloud-computing adoption. Interviews ranged from one to two hours and were recorded for each
participant. The recorded interview responses were transcribed for analysis. This study ensures that the
participants understood and informed of the purpose of the study, taken an informed consent form before
the data collection started. Interview schedules for each participant were prepared and succeeding follow-up
interview sessions as well. All interview sessions were conducted conveniently for each participant.

Data Analysis
Several processes and analyses were adopted from Senarathna (2016) to test the proposed research
model; the data were collected using Google forms and spreadsheets; it was then downloaded to a
statistical application, that is, SPSS to be analysed. Each variable was coded with a numeric value, and
that was measured based on a five-point Likert’s scale where 1 is the lowest level, and 5 is the highest,
except for the IT capability, where responses are not based on perceptions; rather, it reflects the actual
status of the businesses in terms of the number of employees and their current IT division budget. Then
responses were categorized as (a) 0–2 employees, (b) 3–5 employees, (c) 6–10 employees, (d) 11–50
Matias and Hernandez 11

Table 4. Reliability Indicators

Factor Items Alpha

Perceived benefits of cloud (PB) 6 0.902
Business concerns of using cloud (BC) 7 0.885
Competitive pressure (CP) 3 0.758
Regulatory support (RS) 2 0.869
IT capability (ITC) 2 0.201
Source: Authors’ own.

employees, and (e) over 50 employees for the number of IT employees. Similarly, the responses for the
current budget for the IT division were categorized as (a) below 500 thousand, (b) between 500 thousand
and 1 million, (c) between 1 and 5 million, (d) between 5 and 10 million, and (e) over 10 million. To
ensure accuracy, the data were screened to check missing values, outliers and normality. The measure of
central tendency and the frequency distribution of each item were examined, and the mean value and the
standard deviation for all elements in each factor were also calculated. The data validity and reliability
are evaluated to guarantee the data quality for the modelling to undertake. Also, the study used cut-off
points that are identified (Senarathna, 2016) for reliability. Accordingly, the 0.70 or higher coefficients
are considered acceptable. Content validity of the research instrument was established as it was lifted
from well-established and validated works in the pieces of literature and carefully selected and refined
items to develop the questionnaire. Table 4 shows the reliability statistics with Cronbach’s alpha where
every factor has greater than 0.7 value, indicating good quality of data.

Confirmatory Factor Analysis

To test the hypothesized research model, we conducted a confirmatory factor analysis (CFA) using structural
equation modelling (SEM). The measurement model was developed using the AMOS tool and analysis was
method maximum likelihood estimation (MLE) for estimation procedure. MLE does not require a large
sample size, and it is the widely used method because it produces reliable results (Alkhalil, Sahandi, &

Figure 3. Structural Equation Modelling Using AMOS Tool

Source: Authors’ own.
12 Global Business Review

John, 2017). Furthermore, the results suggest that there was adequate fit for the five factors measurements
(c2 = 4.116, df = 5, GFI = 0.942, RMR = 0.045, RMSEA = 0.000, CFI = 1.00). Figure 3 shows the
standardized results for the structural model and the extent of the mutual influence among variables.

Data Analysis and Results

Descriptive Statistics
The descriptive statistics of the variables used in the research model is presented in Table 5. As
enumerated, the top three perceived benefits of cloud services to a firm indicated by the respondents are
‘ubiquitous access’, ‘customizability’ and ‘easily analyse data on the Internet’. As for the concerns
reported by MSME, with some observations being the same as by Hsu et al. (2014), they are as following:
‘confidentiality’, ‘service outages’, ‘insufficient service quality guarantee’ and ‘vendor lock-in.’ As for
the organizational context, a respondent indicates that their firm has a lesser number of IT employees and
lower annual budget for ICT.
Table 5 also indicates that cloud computing influenced the business competition and the respondents
indicate higher awareness about cloud providing legal protection, and laws and regulations. The
correlation and descriptive statistics of all factors are shown in Table 6, where a significant positive
relationship between BC and CP, BC and RS, PB and RS, CP and A, and RS and A is shown.

Table 5. Averages of Indicators

Factors Assessment Indicators Average Percentage

Perceived benefits of Customization 4.133 82.67
cloud (PB) Easily analyse data on Internet 4.033 80.6%
Reduce deployment time 3.833 76.6%
Reduce IT cost 3.967 79.3%
Reduce IT employees cost 3.867 77.3%
Ubiquitous access 4.167 83.33
Business concerns of Confidentiality 3.500 70.00
using cloud (BC) Incompatibility 2.900 58.00
Insufficient service quality guarantee 2.933 58.67
Internet bottleneck 2.767 55.33
Service outages 2.967 59.33
Underperformance 2.900 58.00
Vendor lock-in 2.933 58.67
Competitive pressure (CP) Influence on competition 3.400 68.00
Pressure from competitors 2.500 50.00
Competitors adoption to cloud 2.833 56.67
Computing
Regulatory support (RS) Legal protection 3.833 76.67
Laws and regulations 3.400 68.00
IT capability (ITC) IT employee 1.533 30.67
Annual budget 1.400 28.00
Cloud computing adoption (A) Intention to adopt 2.933 58.66
Source: Authors’ own.
Matias and Hernandez 13

Table 6. Correlation Matrix and Descriptive Statistics

Factors PB BC ITC CP RS A Mean SD

PB 1 4.033 08309
BC 0.320 1 2.900 0.8448
ITC –0.003 0.126 1 1.466 0.6686
CP 0.232 0.456* 0.206 1 2.911 0.8114
RS 0.555** 0.429* 0.088 0.307 1 3.616 0.9439
A 0.244 0.234 0.256 0.481** 0.541** 1 2.933 0.6914
Source: Authors’ own.
Notes: **: Correlation is significant at the 0.01 level (2-tailed).
*: Correlation is significant at the 0.05 level (2-tailed).

Multiple Linear Regression Analysis

The proposed framework was tested using the multiple linear regression (MLR) model to understand the
relationship between independent variables that influence the adoption of cloud computing. MLR
attempts to model the relationship between independent variables and a response variable by fitting a
linear equation to observed data.
The standard method was used, where all predictors are inputted concurrently into the model.
Predictors or the independent variables are evaluated by what they add to the prediction of the dependent
variable. F-test was used to assess whether any of the predictors in an MLR model are significant. After
the F-value is computed, R-squared or the coefficient of determination is determined, and it will be used
to examine how close the data are to the fitted regression line. The t-test will be used to check the
significance of individual regression coefficients and beta coefficients will be used to determine the
degree of the effect of each predictor to the dependent variable (Statistics Solutions, 2013). MLR results
shown in Table 7 indicate that among the five indicators presented in the proposed model, competitive
pressure and regulatory support significantly influence cloud computing adoption, while IT capability,
perceived benefits and business concern, in contrary to Hsu et al. (2014), are not the significant factors,
and it is possible that MSMEs are seeing or favouring other issues. It is also observed that PB and BC
have negative coefficients. This means that MSMEs have believed to have higher comprehensive
benefits, and expected some potential challenges and concerns in using the cloud; however, this does not
affect its intention to adopt cloud computing or its acceptance remains low.

Table 7. Summary of Hypotheses Test

No. Hypothesis Beta Coefficients T-value Significance Supported?

H1 Perceived benefits –0.085 –0.462 p > .05 No
of cloud (PB)
H2 Business concerns –0.156 –0.858 p > .05 No
of using cloud (BC)
H3 IT capability (ITC) 0.151 0.969 p > .05 No
H4 Competitive pressure (CP) 0.380 2.172 p < .05 Yes
H5 Regulatory support (RS) 0.525 2.711 p < .05 Yes
Source: Authors’ own.
14 Global Business Review

As for competitive pressure, contrary to the results of Hsu et al. (2014) and Oliveira et al. (2014), the
results show a significant p < 0.05 and positive coefficient (0.323) when firms consider cloud adoption.
Thus, findings support H4, ‘pressure from competitors encourages MSMEs and positively affect its
intention to adopt cloud computing.’ According to Gangwar et al. (2015b), when a firm devices new
business strategy by taking new ICT innovation such as cloud computing, other businesses face stiff
competition and thus are influenced and pressurised to adopt same technology to keep up with the
market demands and respond more quickly in the competitive environment (Low et al., 2011).
Contrary to the previous research (Hsu et al., 2014; Oliveira et al., 2014), regulatory support also has
a significant (p < 0.05) and positive coefficient (0.385) and supports H5: governmental regulations
motivate MSMEs and positively affect its intention to adopt cloud-computing.’ Firms have the desire to
control its data and resources. If these processes are outsourced to the cloud, businesses need to ensure
that the provider respects and is in compliance with laws and regulations (Phaphoom et al., 2015).
Thus, based on the results, we can reasonably assume that even though the MSMEs believed that they
could acquire favourable features and advantages by using the cloud, they also anticipated some concerns
in the technology, as well as believed that cloud computing requires a readily available financial budget.
Nevertheless, with the absence of competitive pressure and regulatory support, MSMEs will not have the
intention to adopt cloud computing. As suggested in the study of Lin and Chen (2012), IT personnel in
every MSMEs do not have an in-depth understanding of the cloud and businesses will have to wait until
some cases of firms that have successfully adopted and implemented the cloud before they make their
decision. Accordingly, the absence of guiding policy and standards can prevent MSMEs from adopting the
cloud and they tend to wait for generally accepted and implemented standards before they decide to adopt.
Lastly, it was discussed in Hsu et al. (2014) that the higher value of R-square will result in the
research model having a greater explanatory power. In this study, the adjusted R-square of the multiple
linear regression model is 0.333, which means that the model provided a 33.3 per cent of the explanatory
power with a significance value of the regression model of 0.010 suggesting that the independent
variables that comprise the model significantly correlated with the dependent variable.

Qualitative Interviews
This study also considered the views of the participants, through interviews on the technological,
organizational and environmental aspects of cloud computing in MSMEs. It is to ensure that the
perceptions of MSMEs in the Philippines have been captured.
All participants recognized the benefits of cloud computing adoption in organizations. A participant
(IP7) explained that: ‘cloud computing enables our organization to customize, scale and efficiently
deploy new services to our customers’. Another participant (IP9) confirmed that: ‘Our SaaS reduces
costs while offering flexibility and quick access to resources as it provides better cloud work options.’
Similarly, an interview participant (IP 2) points out that: ‘we have 24/7 access to cloud based services,
we have lesser time in deploying our softwares, maintaining, and still have control over the resources
needed and used’. Generally, all participants firmly believed that cloud computing adoption introduces
widespread benefits; however, it is not a significant factor in the decision to adopt it among MSMEs.
The business concerns about using cloud computing do not strongly matter to the interview participants.
All participants have concerns on confidentiality; however, it is confirmed that cloud computing adoption
is also governed by the existing data privacy laws, which aims to strengthen confidentiality in handling
data on business operations such as cloud-based systems. It reduces potential adverse risks in deploying
Matias and Hernandez 15

cloud-based services while encouraging uptake among MSMEs. On the other hand, most of the
participants do not see any potential challenges on incompatibility, service quality, technical bottleneck,
service outage, underperformance and lock-in with service providers as a range of private cloud
computing service providers offer competitive strategies and options to start its adoption among MSMEs.
Moreover, the participants fully understand the implications of cloud computing adoption to business
operations as well as its sustainability.
Concerns on IT capability among the participants were explained by the participants. Currently, a
limited number of professionals in the country have cloud computing skills. An interview participant
(IP1) confirmed: ‘We are having difficulty in employing IT professionals with relevant cloud computing
competency’. Another participant explained the need for training (IP5): ‘We have been sending some of
our IT professionals to training to ensure we fully understand the technical perspectives, benefits, and
risks on cloud computing’. On the other hand, the participants noted that the financial budget needed
does not affect the decision-makers to adopt cloud computing. All participants confirmed that cloud
computing requires readily available financial budget within the MSMEs.
Another factor in the environmental context is competitive pressure, which affects the decisions to
adopt cloud computing in MSMEs. An interview participant (IP8) explained that cloud computing
adoption is influenced by competition:

Our goal is not only to provide value to our customers, however, I firmly believe that decreasing costs, enhancing
efficiency and introducing an innovative way of doing business helps in expanding our market share It is a
common direction to all SMEs in the Philippines to remain relevant with customers and competitors.

Similarly, a participant (IP3) confirmed that MSMEs progressed in cloud computing adoption: ‘Our
competitors have a welcoming mindset on cloud computing and deployed different cloud based solutions.
They see it important to positively impact businesses, become competitive and bring new opportunities
for stronger market and value-chain’.
This study also considered the factor regulatory support in the adoption of cloud computing in MSMEs.
All participants confirmed the relevance of newly implemented policies and guidelines of the government
on clouding computing adoption. A participant explained (IP4): ‘I think that the government campaign
toward cloud computing positively affects our business delivery and operations. We have a guiding
framework not only from private service providers but also from the government’. Another participant (IP6)
further explained that the ‘new policies on cloud computing are suitable for MSMEs to strengthen end-to-
end customer service operations and conducive for new market developments in the country’.

Discussion
The significant finding of this research is that the perceived benefits of cloud, business concerns of using
a cloud and IT capability are not the main influencers for MSMEs in the Philippines to adopt cloud
computing, whereas, regulatory support is considered as the most important factor to adopt cloud, and
followed by competitive pressure.
The study hypothesized that MSMEs having recognized higher benefits would be more likely to
adopt cloud computing. Results suggest that it does not influence firm’s intention, though they understand
that they could gain relative advantages or benefits by implementing the technology. The study also
hypothesized that an MSME that recognizes higher levels of business concern has slighter chance to
adopt cloud computing. Similarly, findings indicate that it does not affect firm’s intention though the
results observe higher averages.
16 Global Business Review

Concerning organizational context, the study hypothesizes that an MSME with higher levels of
technological readiness is more likely to adopt cloud services. MSMEs recognize the benefits and
advantages of having these technological advancements. Still, the majority of the MSMEs have lesser
number of IT employees and lower annual budget for ICT. However, results suggest that it does not
influence a firm’s intention to adopt cloud computing. The study finds that technological advancement
is recognized by the firm’s management to be beneficial and advantageous to the businesses. Management
should acquire or develop a competent team of IT personnel to successfully implement new technologies.
Management should also evaluate the impact of implementing cloud computing and other innovations to
its annual ICT budget, as they perceive that these technologies provide advantages against the cost of
equipment and other expenditure. However, these perceptions of cloud benefits and IT capabilities do
not influence them, or they are still hesitant (Yang & Tate, 2012), unlike large business investing rapidly
in cloud services.
Additionally, with a guiding policy and standards in place in the country, it can positively influence
MSMEs from adopting the cloud. Since cloud computing poses a variety of issues, it needs appropriate
legal protection, and proper laws and regulations (Senarathna, 2016).
Regarding the environmental context, as businesses feel competitive pressure and once they perceive
that competitors are adopting to these technologies, they are usually forced to take as they want to keep
up with the competitive environment (Gangwar et al., 2015b).

Theoretical Implications
Using TOE framework (Hsu et al., 2014; Oliveira et al., 2014), this study is an initial attempt to explore,
assess and understand factors affecting cloud adoption intention by MSMEs in the Philippines. Based on
the samples (n = 30), we determined the factors of cloud adoption and used multiple linear regression to
statically analyse the data obtained. The findings are vital for MSMEs to make a comprehensive decision
on cloud adoptions.
Thus, the study provides theoretical contributions to the technology adoption literature by applying
an established TOE framework to conduct an initial attempt to investigate the status of adoption of recent
technology in the Philippines. Results also provided additional perspectives on cloud computing adoption
since numbers of studies in this area are limited.

Managerial Implications
This study suggests some implications for practice in organizations. First, this study identifies the factors
affecting the MSMEs decision to adopt cloud computing as IT deployment solution. MSMEs can use the
findings of this study to make a better decision and further the uptake of cloud computing in organizations.
Second, the results of the study could be used to further explore the role of IT capability in MSMEs in
the Philippines considering that cloud computing requires technical competency not only for the cloud
computing service providers but also for internal stakeholders in MSMEs organizations such as IT
personnel and project managers, among others. Thus, this situation could be further explained, more
importantly, the skills readiness among IT professionals involved in cloud computing implementations.
Third, this study indicates the importance of regulatory support that influences cloud computing adoption
in MSMEs. The findings could be used by policymakers and industry associations to develop better
policies and guidelines that incentivize MSMEs in strategically integrating cloud computing solutions
with a strong position on collaboration on successful adopters and early adopters in organizations.
Matias and Hernandez 17

Hence, MSMEs could better exploit other opportunities of cloud computing to achieve business
performance and sustainability.

Limitations and Future Research

Despite the contribution of this study, it is not free from limitations. First, the data collection was
conducted in insufficient time; many firms are still in the stage of understanding what cloud computing
is rather than studying how to implement the services. Thus, bias could happen; hence, the study method
of data collection was subjective. Due to limited time, the study data are quite small and limited to the
southern part of the Philippines. Hence, it is suggested in future work to gather larger data and increase
coverage. Second, the study is limited to five indicators. Future work could consider other indicators
such as pricing and types of deployment in future works to further explain the significant factors in cloud
computing adoption in MSMEs. Furthermore, investigating the relationships and influences of these
factors in cloud computing adoptions are required. Third, this study could not be used to generalize cloud
computing adoption in the Asia-Pacific region. Future studies may consider cross-country analysis of
cloud computing adoption in MSMEs and determine their similarities, differences, and challenges. Also,
future studies may help in identifying the opportunities for the adoption of best practices in leading
MSMEs with successful cloud computing implementation.

Conclusion
The study aims to evaluate the factors that affect MSMEs intention to adopt cloud computing. The
findings suggest that competitive pressure and regulatory support influence businesses to adopt cloud
computing. Conversely, perceived benefits, IT capability and business concerns of using cloud computing
do not influence cloud computing adoption in organizations. Therefore, this study contributes to
technology adoption literature by providing a different perspective of cloud computing adoption in a
developing country perspective with relatively growing MSME markets.

Acknowledgement
The authors are grateful to the anonymous referees of the journal for their extremely useful suggestions to improve
the quality of the article. Usual disclaimers apply.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of
this article.

Funding
The authors received no financial support for the research, authorship, and/or publication of this article.
18 Global Business Review

Appendix A.

Technology Organizational Environmental

Author Model Context Context Context
Alshamaila et al. (2013) DOI-TOE •  elative advantage
R • S ize •  ompetitive pressure
C
• Uncertainty • Top management • Industry
• Compatibility support • Market scope
• Complexity • Innovativeness • Supplier computing
• Trialability • Prior technology support
experience
Gupta, Seetharaman, DOI • C ost reduction
and Raj (2013) • Ease of use and
convenience
• Security and privacy
• Sharing and
collaboration
• Service provider
Reliability
Makena (2013) TOE • Relative advantage • T op management
• Competitiveness support
• Complexity • Size
• Compatibility
• Technology readiness
Abubakar et al. (2014) DOI • Cost Benefits • T
 op management
• Security and privacy support
• Data loss
Abdullah and Hassan DOI • Fitness of cloud • T op management
(2015) vendors support
• Compatibility • Resistance towards
• Presence of IT adopting a new
Infrastructure technology
Boateng and Essandoh TOE • Triability • Learning Capability • F irst Adopters in
(2014) • IT Infrastructure • Non-performance Our Industry
and Resources of Cloud Services to • User and Technical
Compatibility support Operations Support from
Security • Top Management Provider
Support and • Choice of Skilled
Involvement and Expert Cloud
• Resistance towards Vendors
New Technologies • Influence of Market
Conformity with Scope
Work Culture and • The Nature of
Style Industry Relationship
• Organizational with Providers
Structure and Size • Government and
Competitors
(continued)
Matias and Hernandez 19

Appendix A. (continued)

Technology Organizational Environmental

Author Model Context Context Context
Prasad and Green TOE • Strategic and • External factors
(2015) incremental intent
• Organizational
structure and culture
• Human resource
capacity
Al-Ismaili, Li, Shen, DOI-TOE • S ecurity Concerns • Top Management • E xternal Support
He (2016) • Cost Savings Support Market Scope
• Relative Advantage • Innovativeness of the
• Privacy Risk Firm
• Compatibility • IS knowledge
• Trialability • Firm Size
Senarathna (2016) DOI-TOE • Cloud relative • Awareness of Cloud
advantages
• Cloud flexibility
• Quality of service
(QoS)
• Cloud security (CS)
• Cloud privacy
Amini and Bakri (2015) DOI-TOE • Relative Advantage • T
 op Manager • C ompetitive Pressure
• Compatibility Support • Regulatory Support
• Security Concerns
• Cost Savings
Technology
Readiness
Karkonasasi (2016) TOE • Cost Savings • T
 op Management • C ompetitive Pressure
• Security and Privacy Support • Trading Partner
Reliability Pressure
Nuskiya (2017) TOE • Security Concern • T op Management
• Technology Support
Readiness • Firm Size
Chemjor and Lagat TOE • Relative Advantage • Top Management • C
 ompetitive Pressure
(2017) • Compatibility Support Trading Partners
• Technology • Firm Size Pressure
Readiness
Complexity
Sandu and Gide (2018) TOE • Technology • T
 op Management • Regulatory Support
Readiness Support
20 Global Business Review

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