See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/258514078

Enabling SMEs to Use Cloud Computing Services - An Exploratory Study on

Enterprises Strategy Alterations

Chapter · January 2012

CITATION READS

1 5,963

2 authors:

Dulani Meedeniya Indika Perera

University of Moratuwa University of Moratuwa
124 PUBLICATIONS 962 CITATIONS 209 PUBLICATIONS 1,620 CITATIONS

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Eco-Sustainable Informatics View project

Generic Phylogenetic Inference Framework View project

All content following this page was uploaded by Dulani Meedeniya on 29 May 2014.

The user has requested enhancement of the downloaded file.

 Enabling SMEs to Use Cloud Computing
Services – An Exploratory Study on
Enterprises Strategy Alterations
Indika Perera and Dulani Meedeniya
School of Computer Science, University of St Andrews,
United Kingdom
giusp@st-andrews.ac.uk, dam58@st-andrews.ac.uk

Abstract
Modern commercial enterprises, irrespective of their relative size and the scale of
operations, have been enormously benefited from the ever increasing services related with
the Information and Communication Technologies (ICT). While the theories and models
associated with developments and expansions of modern enterprises and their activities are
in multi-disciplinary nature, the technology facilitations for such activities are converging
into the domain of ICT infrastructure. In effect, virtual enterprises, operating globally
without a physical presence, often supersede most of the hurdles that govern traditional
businesses, while challenging our present understanding of business strategies. The recent
development towards the provision of scalable utility computing services, known as cloud
computing, has introduced a further paradigm to the norms of virtual enterprise operations
by successfully eliminating the computing infrastructure barriers that many business
enterprises have been experiencing to date. In this work, we have investigated the benefits
of cloud computing to business enterprises, with a particular interest on small and medium
scale enterprises (SMEs). While presenting the specific benefits and challenges for SMEs
from cloud computing, this exploratory study proposes a new paradigm to fit cloud
technology into the present enterprise practices at the strategic level. The findings from a
recently published global survey on cloud computing usage in enterprises by Computer
Science Corporation (CSC) support our arguments with empirical evidence and rationalise
our approach of value chain modification to overcome this challenge.

Introduction
Business management with ICT has never been more usable and convenient with a myriad
of solutions that have been developed and used, yet the industry case studies and related
research show a significant number of failed and underutilised information system usages
in today’s business world. Beyond the trivial reasons such as flaw practices throughout the
information system lifecycle, there are number of reasons ranging from organizational,
human, operational and financial factors that can widen the gap between the business
operations and the ICT solution that intend to facilitate the business (Perera & Fernando,
Information Technology in Management V. Tewari (Ed.)

2007). These mismatches can be costly and often become threats to the sustainability of the
SMEs’ future. Service oriented business processes and technological support for business
automation have been major research motives during the last two decades to overcome this
challenge. With the extensive development and research of computing as a service, the latest
concept of cloud computing has emerged with many promising features for becoming a
mainstream computing practice in the future.

There are many benefits from cloud technology to businesses. In brief, utility model of
resource usage, on-demand scalability, lowering costs for IT maintenance and flexibility are
major benefits that an enterprise can enjoy. Unexpected scaling down such as disposing of
temporarily underutilized equipment, due to a business slowdown, or ironically due to
improved software efficiency, normally comes with a financial penalty (Armbrust, et al.,
2009); cloud computing eliminate this as the resources can be scaled up and down within
minutes of enterprise business processes change. Cloud computing is likely to be an
attractive option for many SMEs, particularly in the current global economic crisis, due to its
flexible cost structure and scalability (Sultan, 2011). In fact, cloud computing can be used as
an enriching platform for the struggling SMEs in the present turbulent and demanding
market conditions. However, research studies on cloud adaptation, such as (CSC, 2011),
indicate mixed results of cloud usage and SME views on cloud benefits. The positive
contribution of cloud computing provides incentives to create new businesses, in particular
SMEs (Etro, 2009). We take this as one of our major considerations for this exploratory
study, in which we try to propose a modified view on SME value chain with a supportive
framework of factors to consider when employ cloud services for SME operations.

The structure of this chapter is arranged as follows: A brief overview on cloud computing
and related technologies will be discussed in the section two to facilitate the later
discussions in the chapter. Benefits of using cloud computing and related services are
discussed in the third section with a specific focus on small and medium scale enterprises.
The fourth section introduces a novel set of strategic views that would reshape the present
business strategy norms to suite the cloud computing requirements for achieving
operational excellence. Finally, the section five discusses the pertaining challenges on using
cloud computing and its practices for effective outcomes for SMEs and possible alterations
in their current practices. The conclusion will elaborate on the key views presented in the
chapter with possible policy implications for future research.

Cloud Computing – An Overview

Because of the novelty of the concept, we see a number of different interpretations for cloud
computing and its service models. Similar to the transformation from historical special
purpose computing machines to general purpose computers that we use today, cloud
computing also expands its application boundaries and introduces a general purpose
service to its stakeholders. The heterogeneous technologies that associate with the cloud
computing make it a complex phenomenon, which can complicate the user views (Hwang,
2008). At the same time, due to the limited experience and poor awareness, some tend to
explain and interpret the concept of cloud computing using their metaphors from traditional
and predecessor technologies such as grid, cluster and high performance computing (HPC).
Although, we can see a number of similarities, obviously because of cloud computing came

72
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

as the successor to such technologies, we would miss the unique characteristics of cloud
concept if we limit our views to the previous models of computing. Many researchers,
including (Mateescu et al., 2011), (Jha et al., 2009), (Mc Evoy & Schulze, 2008), have examined
cloud computing against grid and other technologies. Their work has shown that the cloud
computing can be considered as the transformation of HPC and grid computing into a more
general purpose technology for everyday needs of the masses. Although, HPC and grid
computing can still be used for various unique use cases, the ever increasing capabilities of
cloud computing expand their operational territories across the other similar technologies.

It is essential that we keep a clear and accurate view about the uniqueness of cloud
computing for transforming our business strategies successfully. Privately owned, locally
deployed HPC systems for specific domain requirements were a significant factor for
enterprise success, which was challenged with the distributed computing techniques such as
Grids. Even today we see a number of HPC deployments with added features such as
portability (Mateescu et al., 2011), for mission critical and unique business needs, although
such can be comparatively expensive and rigid. As an extension, grid computing allow
several organizations to pool their computing resources (mainly computing hardware) with
mutual understanding to form a larger computing grid. Although the grid computing could
address some of the problems that we had with isolated HPC arrangements, it was not a
significant shift of the way we use computers for business needs; increased capabilities such
as distributed processing came with a price of expensive and challenging coordination
between the deployments. Further, reasonable amount of computational power has to be
spent on process synchronization, which is an overhead. The interfaces present in the grid
infrastructure are too low level; they expose too many details that increase the complexity
and time of development (Jha et al., 2009). Moreover, the grid configurations did not
effectively address the scalability issues for the end users nor has it given a considerable
saving for the upfront costs on hardware resources as a result of poor scalability. Existing
grid computing users can benefit by clouds through the availability of resources and
scalability while using the already invested grid infrastructure for performing costly data
operations (Palankar et al., 2008). Some of the popular examples for grid solutions include
TeraGrid (XSEDE, 2011) and Globus Toolkit (2003).

Cloud computing, in contrast, offers a higher level of scalability at a finer granular level,
which can be managed without significant overheads. Cloud computing solutions show a
combination of clusters and grids properties, while having unique parameters and
capabilities for virtualization, dynamically configurable services with Web Service
interfaces, and strong support for creating 3rd party, value added services by building on
cloud compute, storage, and applications (Buyya, et al., 2009). Moreover, the usability and
higher flexibility have allowed millions of end users to manage their resource needs as they
wish without worrying about the underlying complexities. The way cloud services are
designed, users can be benefited in multiple ways ranging from simple virtual storage
capacities to high end scalable processing needs on demand. Most importantly, the
flexibility and scalability of cloud computing, often known as elasticity, has given the
service providers and end users a trouble free service composition depending on the variant
demands while managing and utilizing the services through the integrated Web services.
The cloud computing solutions can integrate easily with the existing information system
infrastructure making the migration to cloud services a convenient process. Before
discussing further details and unique benefits that users get from cloud computing, let us
have a brief look on the key information about this new technology.
73
Information Technology in Management V. Tewari (Ed.)

Definition of Cloud Computing

Relying on a widely accepted and accurate definition of cloud computing can help the
business enterprises to design and implement suitable strategies to get the maximum
benefits. Since the industry and technology is still growing, relying on a standard definition
would enable the cloud user to experience a better insight.

Different definitions for cloud computing have been proposed in the recent past. One such
definition by McFedries (2008) was based on the concept of massive data scalability (Hand,
2007) as cloud computing is a collection of data centre based huge clusters with enormous
computing power and storage through spare resources. A landmark event for initiating the
cloud computing standardization was the forum of CTOs from seven leading industries,
which has provided a good ground for understating clouds and the usages (Creeger, 2009a).
The proposed definition by Vaquero (et al., 2008) shows a rich conceptualization with an
analysis on the whole spectrum of cloud computing. According to their interpretation, cloud
computing can be defined as: “Clouds are a large pool of easily usable and accessible virtualized
resources (such as hardware, development platforms and/or services). These resources can be
dynamically reconfigured to adjust to a variable load (scale), allowing also for an optimum resource
utilization. This pool of resources is typically exploited by a pay-per-use model in which guarantees
are offered by the Infrastructure Provider by means of customized Service Level Agreements”
(Vaquero et al., 2008). This explanation is quite intuitive for a high level view on cloud
computing; however, it lacks the extensive technical architecture of cloud operations for an
in-depth view.

The National Institute of Standards and Technology (NIST) of USA has developed a
definition, including most of the general aspects of cloud computing. The NIST definition
also includes a comprehensive categorisation of the key attributes, the service architecture
and the deployment models for cloud computing. It is widely accepted that the NIST
definition gives the most accurate and authentic definition for this technology; NIST
definition has over 400 citations in leading journals and conference, as at present.

“Cloud computing 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. This cloud model is composed of five essential characteristics, three service
models, and four deployment models” (Mell and Grance, 2011).

The five essential characteristics mentioned in the NIST definition include: on-demand self-
service, broad network access, resource pooling, rapid elasticity and measured service (Mell
and Grance, 2011). The descriptions given in NIST definition can be summarised as the
following figure (Fig. 1). The five essential characteristics and the descriptions give the
overview of the cloud computing behaviour. Importantly, the unique characteristic of
measured service captured a wide attention and resulted in the term utility computing
(Armbrust et al., 2010) to describe the cloud service, often. A perspective on cloud
computing as a utility service similar to the modern day electricity usage can be partially
accurate as the both approaches share common features, to a certain extent. The question is,
however, how far can we rely on that analogy for the enterprise scale usages? We will be
looking into this challenge further, later.

74
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

Figure 1: Five essential characteristics of cloud computing (designed upon Mell & Grance,
2011)

Service and Deployment Models of Cloud Computing

The four deployment models and the 3 service models described in NIST definition can
provide the initial layout for the cloud industry to explore possible expansions as the
technology grows. In the standard model of cloud deployment, NIST has classified four
unique categories of cloud deployments (Mell & Grance, 2011); this classification has been
the standard practice in the industry from the early stages of cloud computing usages. The
Figure 2, indicate the four deployment options in an abstract notion.

Public Clouds – These are the global leading cloud computing services that anyone can
register and obtain the service with a utility model of pay-as-you use. Amazon AWS (2011),
Google AppEngine (2011) and Microsoft Azure (2011) are notable global cloud computing
service providers at present. Customer configuration and maintenance are low at this
deployment option where the services are managed at the provider end, although the end
users decide the scale of resources, they utilize for a given instance considering the cost
factors associated. Notably, the Elastic Computing Cloud or known as EC2 for on demand
computing needs and simple storage services or known as S3 for data storage needs in the
clouds offered from Amazon are well positioned in the public cloud market as a reasonable
choice for varying needs of a business enterprise.

Private Clouds – These are the privately owned cloud service infrastructures deployed and
managed by individual organizations for their needs. These services are isolated from other
cloud infrastructures and often, but not necessarily, located in the enterprise premises to
ensure the maximum security and privacy of the data. Resource pooling for on demand
needs of the sub units/divisions of the organization is practiced, although the utility model
of computing may not be meaningful as everything managed within the enterprise. Because

75
Information Technology in Management V. Tewari (Ed.)

of the capital requirement for cloud infrastructure and extensive need of expertise for
managing, this option might not always be cost effective suitable for SMEs.

Figure 2: Deployment modes of cloud computing

Community Clouds – These are the cloud services dedicated for a collection of organizations
for their usage. This can be considered as a combination of private and public cloud options,
however, the nature of specific requirements that being addressed by this arrangement
make it a unique deployment mode. The cloud services with the universities and research
institutional collaborations come under this category. For business organizations that thrive
in a dedicated eco-system through their value chain can consider this option should they
experience common requirements.

Hybrid Clouds – This deployment model incorporates the above three modes, mainly public
and private cloud options. One of the advantages of this configuration is the enormous
scalability which can support the less frequent, but very high demands of resources,
acquiring from the connected public cloud, although the individual private clouds are
managed in isolation. This type of sudden resource acquisition is often known as bursting
and the private clouds allow its data and applications to be shared with others in the hybrid
configuration.

Service Models

Service models of cloud computing represent the most visible difference between the cloud
offers. Effectively, this segregation of services depending on their operational capabilities
has been the prime factor to differentiate cloud computing from its predecessor technologies
at technical aspects. According to the definition, and in standard industry offers, we see 3
major service layers, namely: Infrastructure as a Service (IaaS), Platform as a Service (PaaS)
and Software as a Service (SaaS); the standard service stack can be shown as in Fig.3.

Infrastructure as a Service (IaaS) – This layer provides the computing hardware

infrastructure as a service. Hardware resources include, processing power (CPU hours, and
capacity), memory, disk storage, and communication means. IaaS layer is similar to having
virtualized computing environment with exceptional capability to scale up through elastic
resource allocation. IaaS layer is arguably the most accessible to enterprise as they can move
their systems to the cloud without altering their applications (Khajeh-Hosseini et al., 2010).
According to the service level agreements, virtual nodes will be allocated to meet the
demand, and the user is charged based on the service consumption. Amazon EC2 and S3
services are popular and have a range of options to select depending on the required
infrastructure capabilities.

76
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

Figure 3: Service levels of cloud computing

Platform as a Service (PaaS) – This layer adds a higher level of virtualization for the
infrastructure service and let users to experience the power of flexible infrastructure. Users
can develop their applications without worrying about the complexities at the lower layer as
the PaaS provides the required abstraction (Lawton, 2008). PaaS lets enterprises to test their
programs and applications with cloud infrastructure with a more control as they can explore
the scalability and elastic resources according to the needs. Microsoft Azure and Google
AppEngine are popular PaaS at present.

Software as a Service (SaaS) – This is the top layer in the cloud services (core services) and
users can access it through a web interface. The idea behind this high level service is to
isolate general purpose users from the underlying complexities at PaaS and IaaS levels. SaaS
is the main contributor for the unique nature of cloud services as everything is a software
service at the end (Erdogmus, 2009). General purpose service such as word processors,
spread-sheets, personal assistance tools, etc. are popular among the public cloud users.
Services can be offered in single or multi tenancy modes.

Beyond these three basic services, some researchers have indicated another service layer to
represent the business processing as a main candidate for separate consideration. Kaufman
(2009) has named this as “…the business cloud (for instance, business processes as a
service)”. Cloud services enable the delivery and consumption of the business processes as
cloud services [often referred as Business Processes as a Service (BPaaS)], which are
predefined business processes that are executed in part or all by the provider (Isom et al.,
2010). One of the popular BPaaS solutions is Hewlett-Packard Enterprise Services (formally
EDS), which is used in a range of different business domains. More significantly, BPaaS can
let enterprises to practice new business strategies, ignoring the infrastructure constraints
and explore new opportunities rapidly. For our study on cloud usages for SMEs, BPaaS play
a major role as it transforms the enterprise anatomy.

Benefits for Small and Medium Enterprises

Cloud computing introduces a wide range of benefits for any computing requirement
ranging from education, scientific research, business enterprise, governance and many
more. Even a personal user can benefit from cloud services for daily ICT requirements; in
best use case scenarios, end users can access the clouds using mobile and ubiquitous
computing devices, making high end computing a portable asset for anyone. Erdogmus
(2009) has indicated that the simplification of software usage, maintenance, and delivery
and the economies of the computing service as the major reasons for the success of cloud

77
Information Technology in Management V. Tewari (Ed.)

computing services. In that view, cloud computing can mainly address two major challenges
for any business enterprise, namely, operational economies and management of supportive
infrastructure (ICT mainly). When it comes to business enterprises, large scale enterprises
show a keen interest in adapting cloud technologies, mainly as a factor for operational
excellence and positioning their business with the bleeding edge technologies. Although, the
large scale enterprises could gain significant benefits by investing in clouds for replacing
their existing (in-house or outsourced) server infrastructure, it seems that these large scale
enterprises delay the decision for a significant migration until they get the ROI from the
already invested hardware and ICT units. In contrast, SMEs tend to show more cases of
relatively significant changes in their ICT infrastructure; cloud computing offer the potential
of reducing the cost of IT and freeing them from the expense and hassle of having to install
and maintain information solutions locally (Leavitt, 2009) (Perera, 2009). Specially, SMEs
tend to benefit from the elastic nature the on demand cloud service, in which they can
obtain the necessary computing and storage capacities as they arise, without investing for
idling server hardware upfront for unforeseen requirements. As an additional benefit,
clouds shift the responsibility to install and maintain hardware and basic computational
services away from the customer (Rosenthal, et al., 2010). There are number of related
literature that discusses the generic advantages of clouds; in this discussion, we mainly
focus on the unique advantages for SMEs because of cloud computing, however.

Lowering the entry barriers for SMEs

The requirement of capital is a challenging factor that governs most of the SMEs, specially,
at the early stages of their business lifecycle. As a result, many SMEs are subject to an
artificial entry barrier compared to large scale enterprises. Not only does the need for capital
affect SMEs entry to the business, but also can adversely influence on crucial business
partnerships that shape the future of the SMEs with competitiveness. While the large scale
enterprises are more concerned about the benefits of clouds for their operational cost
efficiencies, SMEs can be further benefited from cloud services to overcome the initial
capital requirements govern in the traditional market norms. Start-up companies are relying
on public cloud infrastructures to deploy their applications, which help in reducing their
initial costs (Vecchiola et al., 2012). This indicates one of the main advantages of using public
clouds for the business needs of SMEs.

Apart from the capital needs, SMEs are also subjected to technology related entry barriers.
In certain instances, agreements for proprietary technologies can cost substantially, and in
worst case scenario can result in embargos for certain uses. Through cloud based
infrastructure (IaaS, PaaS, SaaS) and BPaaS can let the technology owners to reach the SMEs
resulting in scale of economies for them and low cost availability of such technology as a
service, lowering the entry barriers for SMEs. For example, few emerging publication
organizations following open access model uses cloud infrastructure (Google docs, Amazon
S3, etc.) for online publication, use Amazon market place for on demand printing and sales
of printed books, and collaborate with globally accepted indexing and archival systems
through service integration. Because of the substantially reduced cost of operations, authors
get a nominal price for their article processing and publication, while readers access free
content with no restrictions. Because of the successful competition and market drive, global
leading publishers such as Springer has recently initiated its open access model (Springer-
Open) to position their business in this growing market.

78
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

Opportunities for Vertical Integration

Vertical integration lets an enterprise to experience more control over its value creation
process. In brief, the expansion of business processes reaching end customers (downstream
of the supply chain) known as forward integration while the expansion towards suppliers
(upstream) known as backward integration. The most important factors to consider when an
enterprise decides to integrate vertically its business are the costs and control of the options.
Obviously, by vertically integrating SMEs can capture the upstream and downstream profit
margins on top of the cost benefits of reduced transaction costs. Also it allows for business
expansion to further territories that present suppliers and distributors do not operate, giving
an opportunity for diversification and market penetration. However, for small enterprises,
the main challenge is its capability to manage the expanded value chain, which in turn can
introduce higher costs due to poor coordination of tasks and low productivity. At the same
time, due to the nature of business and bargaining powers of suppliers and distribution
channels vertical integration can be essential, yet not achievable due to the SMEs logistical,
legal, or financial constraints.

Cloud computing through its service model can help SMEs for this challenge. Mainly, with
the cloud supported business process services, an enterprise can easily integrate services
from outside to achieve vertical integration; additionally, this kind of cloud mediated
vertical integration would not introduce further inefficiencies or process coordination
problems, as the autonomous cloud services take care of the seamless integration for
heterogeneous services. Further, BPaaS allows enterprises to customize existing services and
obtain dynamic services to meet the demands when vertical integration is practiced. This
enables a smoother transition and the restructure of the processes with higher coordination
at low prices. We will be discussing more on this when we present the modified value chain
model for the cloud based SMEs.

Potential for Diversification

One of the challenging strategies for SMEs is the business diversification. For obvious
reasons, an enterprise may not seriously consider for diversification at the introductory or
early growing stages of the business, unless there is a valid reason; frequent diversification
can confuse the customers on the business offer, specially, during the early stages of the
product life cycle. SMEs often experience financial and operational challenges during the
business diversification. Without adequate competencies for operational transformation and
business process reengineering, SMEs can introduce more overheads and inefficient
business practices. Because of these reasons, even if an enterprise wishes to diversify, it
hardly selects unrelated diversification options at the first instance. Related diversification
provides smoother transformation but can take longer time to reach the unrelated
diversification objectives of the enterprise. Also, this delay can be exploited by competitive
rival enterprises by transforming their businesses sooner to the end domain.

SMEs can be benefited from cloud computing in many ways for their expected
diversifications. As we have discussed in the vertical integration options, a firm can
similarly explore the potential business sectors other than its main business value chain. The
ability of interoperable service integration through clouds at different scales (IaaS, PaaS,
SaaS) and relating those with the business processes (BPaaS) can let an enterprise to

79
Information Technology in Management V. Tewari (Ed.)

diversify virtually to almost any unrelated business sector. For example, a small scale
enterprise that performs client-end IT solutions can expand its services to data processing
mediation or enterprise scale Management Information System (MIS) service provision by
simply integrating few services from outside. Similarly, a small enterprise that performs
local travel arrangements (vehicle rent or transportation service) in a popular tourist
destination can integrate service from flight reservation, hotel reservation, travel insurance,
etc. and position their business as a leading travel and tourism service provider.

However, because of this perfect competitive nature of cloud service based diversifications,
SMEs are subjected to pierce competition within the rivalry forces, as any enterprise can
diversify following the others. To avoid this becoming a threat, an enterprise has to explore
potential cloud services frequently for value addition and make strategic service level
agreements (SLA) with cloud services that give a more competitive advantage to face the
future threats.

Shared Cost for Enterprise Software

Having a widely accepted enterprise solution that can integrate business processes and
automate most of the routine information processing tasks is undoubtedly a competitive
advantage for SMEs. Such solution can let the SMEs to offer their services to customers at a
competitive price, due to the operational excellence gained. The costs for enterprise software
application purchase or licencing can be a significant concern for SMEs. Specially, for small
enterprises, affording several large scale enterprise solutions may not be affordable in
present market prices. Although, reduced-cost arrangements of the software purchase or
licence can be seen for academic and charity organizations, SMEs do not often benefit from
these arrangements. At the same time, relying on open source alternatives may require
additional expertise, and the enterprise may be at stake as there is no customer care or after
sale service from freely available open source solutions.

Cloud computing can satisfactorily solve this problem by letting the SMEs to use expensive
applications at an affordable rate. Following the same notion of on demand service, at PaaS,
and SaaS in particular, cloud services offer a number of commercially available software for
its users. It can be proprietary operating systems, office applications, or domain specific
software solutions that address the business needs of the enterprise. This gives another
advantage for SMEs as the breadth of the affordable application software range increase
tremendously; most of these applications are not essential but can add value when a need
arises. Since the pay-as-you-use model is in place, the cost of use will be a fraction of the cost
that the enterprise would have spent, otherwise. Moreover, this reduces the potential for
software piracy, since applications are available for reasonable prices. Further options are
available for enterprise needs as single-tenancy and multi-tenancy modes; in single tenancy,
a dedicated instance of the application software is allocated for the enterprise use whereas in
multi-tenancy a shared software instance is given. Cost of usage can differ depending on the
mode of tenancy, but a more security and privacy concerned enterprise still can enjoy a
dedicated enterprise solution at a reasonable cost.

80
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

A Paradigm Shift for Business Strategies

In this analysis, we take a unique stance on associating the cloud computing into the
enterprise business strategies. Despite there are growing evidence of using cloud services to
benefit the businesses and associated research, in many cases the view taken by the
enterprises is to treat clouds as just another technology boost that is capable of replacing the
in-house or traditional data centre computing infrastructure. This misconception has a
strong support for its wide spread, from the current research trends; most of the cloud
computing researchers expect to develop and improve the computing infrastructure and far
less on studying its impact at enterprise scale. In this work, we have followed a novel
perspective to analyse the cloud computing impact for a business enterprise from the view
of established business analysis theory, the value chain analysis. First, we explain how cloud
computing become a unique paradigm for the future enterprise success and then we present
our modified model on the value chain. Finally, a brief analysis is included based on a
recently published data on cloud usage to support our arguments.

Cloud Computing as a Unique Paradigm

Rosenthal (et al., 2010) indicated that “for consumers, cloud computing is primarily a new
business paradigm, as opposed to a new technical paradigm; a cloud vendor (a commercial
company) provides hardware, a software infrastructure (platform), or an application as a
service to its customers”. This summarizes the required view for enterprise managers and
business owners to explore the benefits of cloud computing to the fullest. A technological
paradigm change can provide operational excellence and cost advantages for a given
business contrast to its previous technological methods. For example, using email or video
conferencing techniques can reduce the cost of communication substantially while making
the business efficient. However, just by using email or video conferencing, although they
have become essential techniques for modern enterprise to survive, not necessarily help to
transform one’s business from its current operations. For example, a book publishing
organization can benefit the communication channel efficiencies, but it still has to rely on all
other value creating activities in the publication process. Further, it may not be able to
diversify the business positioning in the market by just using the technological excellence. In
contrast, a business paradigm change lets the enterprises to reposition their businesses while
reviving their business portfolio. For example, with the Internet, many retailers and small
enterprises started to gain a fair competition with the market leaders, through their web
fronts. Not only does the Internet enable these enterprises to promote their offers, but also
allowed a seamless integration of their value chain with e-Commerce and third-party
distribution channels to expand their businesses. In that regard, the Internet has been not
just a technology paradigm but a business paradigm as well.

So, how does cloud computing allow enterprises to change their businesses? Primarily, it
comes from the provisioning of services. Cloud computing has the ability of service
provisioning by abstracting the infrastructure locations. Cloud computing is not just about a
technological improvement in data centres; it represents a fundamental change in how IT is
provisioned and used (Creeger, 2009b). In that sense, the same services that an enterprise is
relied upon can be provisioned through cloud services. We have already discussed the cost
efficiencies that one could take from cloud through on demand operations. Beyond that,
cloud technology lets the scalability of the business to expand without any technological

81
Information Technology in Management V. Tewari (Ed.)

barriers. It can be hardware, human resources, physical space, or capital barrier, cloud
services can be arranged with appropriate service level agreements. When such flexibility is
at the strategic planning level, an enterprise can easily take drastic changes with lesser
inertia and risk. When the cloud services based firm infrastructure becomes dynamic and
flexible, there will be lesser costs associated for strategic changes for new business models.
And the transparency between cloud service consumptions and service integrations will
clearly indicate the overhead processes and waste (soft and hard) created at each process
stage. This transformation comes on top of the benefits we have discussed in the previous
section. Therefore, an enterprise, especially a SME, can comfortably reposition its business
and expand without a significant investment or experiencing turbulent market barriers,
while harnessing all the benefits that clouds offer as a technological mean.

Obviously, when an enterprise starts to use cloud services, and transforming its business,
there can be staff downsizing, elimination of overhead units or operational procedures, and
changes to the power structures. For small enterprises, the changes can be very significant in
order to have a reasonable improvement. Some SMEs have completely eliminated their in-
house IT services and restructured the organization according to the new practice, gaining
significant profit margins. At the same time, there are many example cases that SMEs did
not make any benefit out of their decision to use cloud. This is the main point we highlight
in this work; as every enterprise is unique on their way of operations and nature, the
benefits and the degree of cloud service utilization are also unique factors for a given
enterprise. In the next section, we propose a modified value chain model to support these
crucial decisions on changing business practices.

Value Chain Transformation

A well-known theory for studying enterprise behaviour is the value chain analysis
introduced and developed by Michel Porter (1998). Porter’s value chain model incorporates
5 primary activities and 4 supportive activities that any enterprise is subjected to, which in
turn generate the margins for the business.

Figure 4: Value chain of an enterprise (Porter, 1998)

82
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

Since its introduction, the value chain analysis has been extended and used by many
researchers for various business context and theoretical domains. In order to develop an
accurate and generic model for the cloud supported enterprise, we thought to consider the
original thoughts of Porter’s value analysis as the basis for our model. The individual value
activities are the atomic units that generate value in this analysis. According to Porter (1998,
p38): “…Every value activity employs purchased inputs human resources (labour and
management), and some form of technology to perform its function. Each value activity also
uses and creates information, such as buyer data performance parameters (testing), and product
failure statistics. Value activities may also create financial assets such as inventory and
accounts receivable, or liabilities such as accounts payable.”

In this fundamental view of value activities, we observe a transformable set of properties

associate with a given value activity, with respect to cloud service offers. In this regard,
within the cloud service context, a purchased input represents the acquired cloud service for
that value activity, and the technology indicates the finer granular technical aspects of the
service acquired (storage, computing, data analysis etc.). Utility measures of cloud service
consumption represent the performance parameters while the information at each activity
plays the centre role in coordinating the other services (which is known as service
orchestration or services choreography in general). In financial terms, i.e. assets and
liabilities, each of the value activities represents the service charges and processed services
according to the SLAs.

This view is very important to see the advantage of cloud computing to the enterprise value
creation processes. Essentially, one might think that how a technology norm, which used to
be part of the supportive nature in the traditional setup, can become the central norm of the
operations. This, indeed is the paradigm shift that we highlight here; to depict our
arguments convincingly, we propose the following modified value chain to suite an
enterprise that enjoys the advantages of cloud computing.

Figure 5: Proposed value chain model of an enterprise with cloud computing service

According to the proposed model, a radical transformation can be expected in the present
enterprise norms. Considering the definition of a value activity given by Porter (1998), a
collection of value activities represent the major areas of activities (primary and supportive);
here we eliminate the concept of supportive activities and represent those with cloud
services. In that view, the four major areas: Infrastructure, Technology and Development,

83
Information Technology in Management V. Tewari (Ed.)

HR and Procurement will be replaced by the associating services offered through cloud
services. These cloud services often can be taken from outside, as many enterprises practice
through business process outsourcing (BPO) at present. The degree of replacement can be
the determinant factor for level of cloud service utilization for the enterprise. Virtual
enterprises thrive in the service sector may be fortunate enough for a complete replacement
of their supportive activities, whereas more traditional enterprise setups can formulate a
hybrid supportive infrastructure by combining the cloud services with the existing, yet
appropriately selected and modified, supportive services. This nature of practice has been
indicated in the model through dotted lines for the previous major areas.

Not only does the modified value chain affect the supportive activities, but also it changes
the way primary activities are handled. As indicated in the model, depending on the nature
of the business and the preferences of the enterprise, cloud computing services can
penetrate into the primary activities of the business at different levels. In certain instances,
an enterprise can use cloud services extensively for marketing and customer care services
but less for logistics. The level of cloud service usage should be decided by considering the
cost effectiveness, enterprise’s ability to transform and the expected productivity. Selecting
the correct level of cloud computing usage can be a significant challenge for SMEs; we have
presented few guidelines backed with recent literature to facilitate.

Here we have presented the potential paradigm shift of enterprise activities due to the cloud
computing. The next big question is what happens to the existing models of operations. Our
discussion on the paradigm shift helps to see through the possible transformations and
identify best modes for each major category of operations. When combined together, this
model and the analysis of the paradigm shift give a comprehensive support for the decision
takers in SMEs to get the best out from cloud computing.

Analysis on CSC Cloud Usage Survey Findings

A recent survey conducted by Computer Science Corporation (CSC, 2011) on cloud usage
shows interesting findings that portray the present context of cloud computing usage in the
global enterprises. The survey included 3645 IT decision makers from 8 industrialized
countries and provides a valuable insight to present cloud practices, enterprise beliefs, and
actual benefits against the theoretical norms. Further it is interesting to see how the business
sector is valuing certain aspects and motives to engage in cloud technology. Although, we
do not wish to repeat the survey findings, following facts validate our views and explained
benefits and challenges of cloud for SMEs. Also, it shows the certain misconceptions and
lack of awareness on correct approaches to utilize cloud technology for the best results.

The survey has revealed that the main reason for cloud adoption is information portability
(33%) while the cost advantages were considered by only 17% as the main driving force to
use cloud services. This raises an interesting dilemma; researches and literature stress the
fact that cloud computing offers significant cost benefits but the enterprises seem not
considering such a benefit as a mainstream reason. This indicates that either SMEs have to
revise their practices or there is no effective cost advantage of clouds; we suggest further
research on this issue. While, 82% claimed that they could save money through clouds, the
amounts of saving are low; In USA 23% of the business could not save any while 35% could
only save less than 20,000$.

84
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

Small business faced less resistance (74% with no employee resistance) indicates that SMEs
have a strong supportive factor for changing their businesses. At the same time, significantly
high percentage (range of 80% to 97%, US and Brazil, respectively) of employee training in
advance was reported. This also indicates the importance of facilitating the change process.
Relating to this change, 64% enterprises have said that they could reduce the waste and
energy consumption due to clouds.

While 52% said increased efficiency, 47% said lower operating cost for data centre
management. More importantly, 93% said that through cloud adaptation they could see at
least one improvement of their IT services, which indicate the change of value creating
operations with a new approach. However, this indicates the improvement of the IT services
only; as we propose, the improvements can be identified in every value creation activity, if
the enterprises adopt a correct combination of cloud services.

Challenges to Overcome
Similar to any other technology, cloud computing also introduces a set of challenges to its
users and service providers. Most of the technical challenges at cloud service provision and
related to the standardising and completing the stack of technologies are being completed
resulting in a number of different cloud service platforms at present.

Security, Privacy and Trust of Data and Processing

Security of an information system and associated data is one of the major concerns for any
enterprise. In fact, this challenge of achieving security and privacy of data and the
trustworthiness of the operations is not a new challenge because of the cloud technology.
However, the nature of cloud services and their offer introduces few challenging aspects for
any concerned enterprise. As the cloud computing technology changes the way we compute
and process data, it also questions our preferences and expectations of data security.
Nevertheless, this challenge has been the major deterring factor for wide acceptance and
growth of the cloud technology. Moreover, the failure to address some of the security and
privacy concerns of cloud data and processing has resulted in escalating the fear of IT
managers at SMEs on adapting cloud strategies. In fact, the majority of enterprises in
various scales of operations and business value welcome the cloud computing as a new
potential while stressing the fact that security and privacy have to be improved for wider
adoption and to comply with regulatory requirements (CSA, 2011). Knowing this crucial
challenge for cloud users, many related researches have been performed by (Subashini and
Kavitha, 2010), (Pearson and Benameur, 2010), (Paquette et al., 2010), (Vaquero et al., 2011),
(Takabi et al., 2010) etc. and introduced a wide range of remedial practices for enterprises.

The geographical location of the data and service is one of the major concerns for cloud
users to date. In fact, according to the definition, we are unable to pinpoint the exact
location(s) of data. Usually, users will not be able to know the exact location of their data or
other sources of data that coexist in that cloud location (Kaufman, 2009). This introduces the
fundamental challenge for security concerned enterprises. Further, for SMEs the assurance
on data confidentiality of their customers can be a significant factor for their business trust.
In traditional setups, we often see confidentiality, integrity and availability aspects are

85
Information Technology in Management V. Tewari (Ed.)

entered into contractual agreements. Although, the availability can be a less concern due to
cloud service SLA, assurance of confidentiality and integrity of data can be a major
challenge for SMEs. In particular, without knowing the data location how can SMEs give an
assurance for their customers? Also, if a security exploitation occurs on customer data,
which jurisdiction is applicable as the data are scattered on different countries? These are
the major concerns that delay many SMEs getting into the cloud services. To address this
location based security concern the service provider has to offer a certain level of assurance
(Kandukuri et al., 2009). Often, such assurance can be incorporated into the service level
agreements by default or on request by the user enterprises.

From the technological point of view, security, privacy and trust challenges of cloud
computing differ at each service level. IaaS challenges mainly incorporate up to the
virtualization layer of the hardware and any physical security challenge. Although, the
users can address security challenges as they get more opportunities to develop their
applications on IaaS with security in mind, the IaaS provider often not responsible for any
threat on top of its service. When it comes to the PaaS the provider offers certain degree of
customisation of user applications, which include security solutions, but the vulnerabilities
and threats from infrastructure and network, up to the service platform can be a significant
concern for the users. SaaS gives the maximum reliance on the service provider for required
security, privacy and trust, as the end users do not have much flexibility for customisation.
Moreover, security and privacy issues with single-tenancy and multi-tenancy modes of
software and application uses can introduce further concerns for an enterprise on its cloud
service usages. Subashini and Kavitha (2010) have presented a thorough survey on security
privacy and trust challenges at each delivery mode of cloud computing. In their work, they
have summarised most of the potential vulnerabilities and threats to modern enterprise
information systems and investigated those at different levels: IaaS, PaaS and SaaS with
literature support. Although their work does not provide a comprehensive solution
framework, the insight given in the article can be helpful for any enterprise expecting to
utilize clouds, to understand this challenge.

As with most technological advancements, regulators are typically in a "catch-up" mode to

identify policy, governance, and law; therefore, the industry itself should establish coherent
and effective policy and governance to identify and implement proper security methods
(Kaufman, 2009). This shows that most of the security, privacy and trust challenges with
cloud computing services can be solved through standard practices and appropriate service
level agreements. Importantly, when the users demand for the required security
implementations and assurance, cloud service providers have to provide those through their
service offer with technological solutions.

Seeing Accurately – Beyond the Utility Expectations

One of the major misconceptions on cloud technology and its offers is the view that cloud
computing is simply a utility mode of computing. The concept of utility computing is
partially correct for cloud architecture, especially when it comes to the higher level of
services i.e., SaaS and BPaaS. This is because of the enterprises have a long history of service
sharing through SOA solutions and BPO arrangements. In that respect, an enterprise can
easily adapt to cloud based utility models obtaining higher levels of scalability and cost
effectiveness. Specially, it comes to IaaS and PaaS (low level) services, as well as some

86
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

higher level instances the utility model fails to address certain specific cloud limitations.
Many publications and industrial reports highlight the utility nature of cloud computing
and often compare it with the generic utility services such as electricity. “Definitions of
cloud computing imply or explicitly use the “utility” model that embeds the logic of water
supply, electrical grids, or sewage systems. This model is ubiquitous. While it has important
strengths, it also has major weaknesses” (Brynjolfsson et al., 2010). As Brynjolfsson
indicated, strengths of the utility model come from the elastic nature of on demand
provision and the scalability of resources. However, there are many challenges with cloud
computing, which cannot be simply solved by taking it as just a utility service. “…If the
utility model was adequate, the challenges to cloud computing could be solved with
electricity-like solutions—but they cannot…” (Brynjolfsson et al., 2010); this highlights the
inappropriateness of treating the cloud concept as just a utility service.

Beyond the trivial misunderstanding, the utility only view on cloud computing can lead to
sever failures on cloud computing solutions for business enterprises. The most significant
failure would be at the strategic level of the enterprise, SMEs in particular, where the
decision makers fail to implement cohesive business strategies to complement the cloud
shortcomings. As an enterprise, often, would not be interested in deploying own electricity
generators, but simply connects to the national power grid for obvious cost and operational
efficiencies, a narrowly sighted and poorly aware management can expect the same
behaviour of service ignoring the logistical, resources personnel, infrastructure and
communication challenges that come along with clouds. More harmfully, this sort of
expectation can substantially reduce the potential explorations for business paradigm
change. Brynjolfsson (et al., 2010) stated that, an overly simplistic reliance on the utility
model risks blinding us to the real opportunities and challenges of cloud computing.

The advantage that SMEs can still enjoy is that the limitations of the utility model affect the
business only if wrong decisions are taken based on the false utility assumptions. That
means, even an enterprise can overcome the challenges of latency, communication, lock into
a single service provider and certain scalability mismatches through adaptation of correct
cloud deployment modes. If the latency, communication and interoperability are major
concerns, an enterprise can try a private cloud as the first step. In this arrangement, it won’t
benefit from the utility mode but achieve the same within less infrastructure cost with
trusted own management. Then, if there is a challenge of scalability, the private cloud can be
extended to a hybrid cloud combining the existing private cloud with a public service. In
this level, we can get the utility benefits for appropriate operations while using the private
infrastructure for weak or expensive factors of the public mode. It is the strategic view of
accurate system arrangement and optimum option selection that matters for the success of
using cloud computing; the hype on the utility model based view of cloud computing can
do more harm for a SME than its positive offer.

A new dimension for training and development

We saw early that cloud computing can change the nature of enterprise activities,
supportive activities, in particular, transforming the business norms. Because of this
transformation, SMEs have to reconsider their employee training and development. First of
all, cloud computing relies on remote communication through web services to get the tasks
done. If the employees are not aware of using such remote computational methods, they can
find the cloud based operational procedures less intuitive and challenging to adapt. This is a
87
Information Technology in Management V. Tewari (Ed.)

very important fact to consider as the firm IT infrastructure getting changed, so do the
training needs of employees; if the staff is not competent beyond basic desktop computing,
designing a skill development plan before the cloud migration can be quite useful.

Learning curve of cloud computing and the related technologies can be steep for employees.
Without adequate support and training facilities, employees tend to feel the negative effects
of the cloud services than appreciating the new changes. At the same time, if the employees
are not properly informed about the future potentials and business expansions, they can fear
of losing their jobs in the future when clouds start to offer more services for the enterprise
operations. Sometimes, due to the lack of awareness on potential benefits for their work and
the enterprise success, some employees can be doubtful on the changes, which in turn can
affect their acceptance of new methods by comparing those against the previous practices.
All these fears, misconceptions and doubts can be cleared easily if the enterprise human
resource training and development activities are suitably designed and appropriately
practiced.

The final challenge on employee training is the transformation of the employee minds to fit
their needs with cloud offers. To explain, let us assume that an enterprise is trying to
transform its supportive services with cloud computing, as shown in the value chain model.
To get the maximum benefit out of this decision to use clouds, the employees have to
change their practices to treat this new infrastructure as services from clouds, but not as the
same old infrastructure that they had used. Without this attitude change the employees
would simply try to practice most of their old overhead routines without knowing the
productive alterations in cloud services. For example, a financial record system can be used
to generate reports at each stage of processing to inform other divisions in the enterprise,
mainly to synchronise the operations. In cloud context this sort explicit communication is
not required as the cloud service can talk to each other and offer the most efficient process
flow depending on the demand. If an employee tries to generate these unnecessary records
even in clouds that would create additional processing steps and incur more costs than
planned. Therefore, the required training must be given in line with the restructured
business processes.

Making the Correct Choices

As we have discussed, cloud computing can present challenges to SMEs depending on their
take of the technology and the nature of their business operations. After deciding to use
cloud computing services, the next big challenge for a SME is to select the correct cloud
solution from a range of possibilities that we have discussed early. As the cloud industry is
growing, we can expect more supportive and standard guidance for SMEs in the future. At
present, most of the industry case studies are based on large scale enterprises and the gains
they have had from migrating to the clouds. However, the norms and practices of SMEs are
often, differ sufficiently from the large enterprises and the best practices may not be
applicable as they are.

While many public cloud providers offer pay-as-you-go computing, their varying
approaches to infrastructure, virtualization, and software services lead to a problem of
plenty (Li et al., 2010). This indicates the problem SMEs can experience for their cloud based
decisions. To investigate this issue further, Li (et al., 2010) examined four cloud providers

88
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

that together account for most of the cloud customers today. The findings show that the
offered services vary widely in performance and costs, underscoring the need for thoughtful
provider selection. For further analysis on the same issue, they have developed a tool,
CloudCmp, which can guide customers in selecting the best-performing provider for their
applications (Li et al., 2010). In another study, which focused on performance cost analysis of
using cloud computing, Walker (2009) has investigated the cost per CPU hour and
compared the computational cost against the upfront purchase of server hardware. This
initial investigation is a good support for decision makers in SMEs to choose either purchase
or lease the required resources. Although, there are few free cloud services available, a
recent study on two selected free cloud services has shown that beyond the basic use of file
sharing and remote storage, virtual desktops and cloud processing can substantially
consume the local machine resources (Perera, 2010). We suggest considering suitable
benchmarks if an enterprise wishes to rely on a free cloud service for its commercial needs.

Storage requirements for a business organization at present can vary from several Gigabytes
to hundreds of Petabytes depending on the nature and scale of operations. Data intensive
business processes can be a significant factor of an enterprise budget, hence can
substantially determine the profit margins based on the cost per storage unit. As we have
discussed previously, the data storage facilities offered as a part of the cloud infrastructure,
a business enterprise can face a critical decisive moment on selecting whether to purchase
physical storage capabilities or to go for a cloud storage service. Lack of research literature
and benchmarks on storage options and profit models can make these a challenging
decision for a SME. Walker (et al., 2010) investigated this and presented a model to support
the decision making of storage requirements. In their extensive analysis and decision model,
they have considered the asset depreciation, net present value of investment, operational
costs and hard disk price trends for several years. Most importantly, the common flawed
assumption of having zero latency for cloud based storage services was highlighted
considering the average conditions of Internet connectivity, which often, is a major problem
for SMEs. We suggest considering the recommendation given by Walker (et al., 2010) for a
productive decision on storage acquisition.

A model for high level strategic decision making on investments for computing
requirements was presented by Klems (et al., 2009). Their work includes a supportive
framework based on opportunity costs and then estimates the value in terms of the
opportunity costs; because of this approach, even small scale enterprises can benchmark
their available options and follow the optimum strategy over the best alternative. Although
the proposed framework can be extended for an advanced analysis, they have shown
several cases studies and quantitative analysis to support the validity and significance of
their approach. We suggest, since the opportunity cost of investment is a very significant
factor a SME, to consider the recommended approach of Klems (et al., 2009) if there are more
than one best options that gives head-to-head benefits.

Although we have seen many advantages, decision to use cloud computing can introduce
more costs to the business model, especially if the business has already ventured into a large
in-house server infrastructure, recently. At the same time, picking the correct cloud service
provider can be important if the enterprise is expecting to invest largely on cloud based
solution development. One of the major concerns is the lock-in nature of the cloud services;
interoperability issues between service providers can make an enterprise stuck into its first
service provider although there are better alternatives at a later time. Selecting a service
89
Information Technology in Management V. Tewari (Ed.)

provider that follows industry standards such as SOAP (Simple Object Access Protocol) and
REST (Representational State Transfer) based communication standards can help to achieve
interoperability and openness for change. Amazon S3 and Windows Azure ensure these
standards at present. Sometimes, if the business does not rely on the ICT too much, a small
enterprise can try a free cloud service or the basic service options given in a public cloud
(e.g. Amazon AWS EC2 or S3) for a limited virtual storage and running the web front end of
the business with basic computing needs. Of course with that kind of utilisation, we will
never be able to explore the full potential of this technology, but definitely, it can be a safer
and stable start for a concerned SME.

Change is Inevitable

Although the concept of cloud computing is still in its growing stage, current industry
trends show that the technology has been penetrating into the whole spectrum of businesses
ranging from Fortune 500 enterprises to single owner self-employed businesses. Similar to
the Internet and web technologies changed the way businesses had operated, cloud
computing show all the promising reasons to change the way we manage our enterprises at
present. A business may delay the decision to adapt this new technology into the regular
operations of the enterprise; the more you delay the utilization, there is a likelihood of
increasing the cost of benefits that you forego, however. As we have shown, this cannot
merely be taken as a new technology, but a complete new competence for the business that
gives a significant competitive advantage over the others. In that perspective, for anyone to
explore the benefits of this new technology appear to be as the sooner the better.

Not only does cloud computing change the modes that we use ICT for the business, it
changes the way most of the present industries operate. We have discussed more details on
this under the paradigm shift; as a summary, the changes are essential even at the
individual employee level. For a business shifting the operations to cloud can be the first
step, which more likely to open many potential avenues to position their business in high
demanding business sectors within the context of clouds, by becoming a market driver. For
individual employees, developing their competencies to meet the demands in a cloud
computing supported environment can give them more opportunities while securing their
employments in the future. If any entity (an enterprise or an employee) delays the
adaptations will later have to either exit the market or become a market follower competing
to survive in the remaining narrowed market segments. It is just a matter of time! Sooner or
later, depending on the nature of your actions, cloud computing tend to affect your life. It is
the businesses’ take of this new transformation will be the determining factor of the future
success.

Conclusion
In this work we have identified the unique problem of facilitating the Small and Medium
Enterprises to shape their business strategies to use and explore the cloud computing
benefits. In our research, we identified that although there are many researches being done
for improving and completing the cloud technologies at the system level, there is a very
limited amount of studies being done to investigate the cloud computing impact on business
enterprises, SMEs in particular. While acknowledging the generic benefits and norms of
cloud computing for any requirement, here we have followed a unique approach relating

90
Enabling SMEs to Use Cloud Computing – An Exploratory Study on Enterprises Strategy Alterations

this exploratory study with the established theoretical models of analysing an enterprise;
i.e., value chain analysis for competitive advantage. The identified challenges and the
presented paradigm changing aspects can be validated through the recent survey data;
which we have presented briefly through secondary data. We welcome further research on
this particular research area of using cloud computing for SME operations. Such research
motive would undoubtedly facilitate the SMEs to accurately harness this new technology
into to their businesses and enjoy the maximum benefits.

References
Armbrust M., Fox A., Griffith R., Joseph A., Katz R., Konwinski A., Lee G., Patterson D., Rabkin A.,
Stoica I., and Zaharia M., (2009), Above the Clouds: A Berkeley View of Cloud computing,
Technical Report No. UCB/EECS-2009-28, University of California at Berkley, USA,
Armbrust M., Fox A., Griffith R., Joseph A., Katz R., Konwinski A., Lee G., Patterson D., Rabkin A.,
Stoica I., and Zaharia M., (2010), A view of cloud computing, Communications of the ACM,
53(4):50-58
Buyya R., Yeo C. S., Venugopal S., Broberga J. and Brandic I. (2009), Cloud computing and emerging IT
platforms: Vision, hype, and reality for delivering computing as the 5th utility, Future Generation
Computer Systems, 25(6): 599-616
Brynjolfsson E., Hofmann P. and Jordan J., (2010), Cloud Computing and Electricity: Beyond the Utility
Model, Communications of the ACM, 53(5):32-34
Creeger M., (2009a), CTO Roundtable: Cloud Computing: An Overview, ACM Queue, 7(5):1-2
Creeger M., (2009b), CTO roundtable: cloud computing, Communications of the ACM, 52(8): 50-56
CSA – Cloud Security Alliance, (2011), Security Guidance for Critical Areas of Focus in Cloud
Computing V3.0, [available at] https://cloudsecurityalliance.org/guidance/csaguide.v3.0.pdf
[accessed on December 2011]
CSC – Computer Science Corporation, (2011), CSC-Cloud Usage Index, [available at]
www.csc.com/cloud, [accessed on December 2011]
Erdogmus H.,(2009), Cloud computing: Does Nirvana Hide behind the Nebula? IEEE Software, 26(2):4–6
Etro, F. (2009), The economic impact of cloud computing on business creation, employment and output
in the EU, Review of Business and Economics, 54(2):179–208.
Globus Alliance (2003), Globus Toolkit, [available at] www.globus.org [accessed on June 2011]
Hand E., (2007), Head in the clouds, Nature, 449: 963, Oct 2007.
Hwang K., (2008), “Massively distributed systems: From grids and p2p to clouds”, Keynote: the 3rd
International Conference on Grid and Pervasive Computing - gpc-workshop, China, pp. xxii,
Isom P.K., Miller-Sylvia S.L., Vaidya, S., (2010), Intelligent Enterprise Architecture, IBM Journal of
Research and Development, 54(4):1-2
Kandukuri, B.P., Paturi V.R., and Rakshit A., (2009), Cloud Security Issues, In Proc. of International
Conference on Services Computing- SCC’09, IEEE, Bangalore, 517-520
Kaufman, L.M. (2009), Data Security in the World of Cloud Computing, Security and Privacy, IEEE,
7(4):61-64
Khajeh-Hosseini, A., Greenwood, D., Sommerville, I., (2010), Cloud Migration: A Case Study of
Migrating an Enterprise IT System to IaaS, 3rd International Conference on Cloud Computing
(CLOUD 2010), IEEE, pp. 450-457
Klems M., Nimis J., and Tai S., (2009), Do Clouds Compute? A Framework for Estimating the Value of
Cloud Computing, Lecture Notes in Business Information Processing LNBIP, Springer, 22: 110–123
Lawton G., (2008), Developing Software Online With Platform as a Service Technology, Computer,
41(6):13-15
Leavitt N., (2009), Is cloud computing really ready for prime time? Computer, 42(1):15–20
Li A., Yang X., Kandula S., and Zhang M., (2010), CloudCmp: comparing public cloud providers, In
Proc. of the 10th annual conference on Internet measurement (IMC '10), ACM, NY, pp. 1-14.

91
 Information Technology in Management V. Tewari (Ed.)

Jha S., Merzky A., Fox G., (2009), Using clouds to provide grids with higher levels of abstraction and
explicit support for usage modes”, Concurrency and Computation: Practice & Experience,
21(8):1087-1108
Mc Evoy G. V., Schulze B., (2008), Using clouds to address grid limitations, In Proc. of the 6th
international Workshop on Middleware for Grid Computing MGC '08 ACM, NY, pp. 1-6,
McFedries P., (2008), The cloud is the computer, IEEE Spectrum Online, August 2008, [available at]
http://www.spectrum.ieee.org/computing/hardware/the-cloud-is-the-computer [accessed
June 2011]
Mateescu G., Gentzsch W. and Ribbens C. J. (2011), Hybrid Computing—Where HPC meets grid and
Cloud Computing, Future Generation Computer Systems, 27(5): 440-453
Mell P. and Grance T. (2011), The NIST Definition of Cloud Computing: Recommendations of the
National Institute of Standards and Technology, National Institute of Standards and Technology
USA, 1-7
Palankar M.R., Iamnitchi A., Ripeanu M., and Garfinkel S. (2008), Amazon S3 for science grids: a viable
solution?, In Proc. of the 2008 international Workshop on Data-Aware Distributed Computing, DADC
'08. ACM, NY, pp. 55-64
Paquette S, Jaeger P T, Wilson S C. (2010), Identifying the security risks associated with governmental
use of cloud computing, Government Information Quarterly, 27(3):245–253
Pearson S, and Benameur A. (2010), Privacy, security and trust issues arising from cloud computing. In
Proc. of the 2nd IEEE International Conference on Cloud Computing Technology and Science,
CloudCom 2010; IEEE Press, pp. 693-702
Perera, G.I.U.S. and Fernando M.S.D. (2007), Bridging the Gap – Business and Information Systems: A
Roadmap, In Proc. of 4th International Conference on Business Management, ICBM2007, Sri Lanka,
pp. 334-343
Perera I., (2009), Reshaping the Computation with clouds: An Analysis on Opportunities and Issues of
Cloud Computing, Advances in Computational Sciences and Technology, 2(3):305-324
Perera I., (2010), Are Free Cloud Services Productive? A Performance Study on End User Computing,
Journal of Applied Computer Science and Mathematics, 4(8):34-40
Porter M., (1998), Competitive Advantage: Creating and Sustaining Superior Performance – with new
Introduction, The Free Press, New York, pp.37-38
Rosenthal A., Mork P., Li M. H., Stanford J., Koester D., and Reynolds P. (2010), Cloud computing: A
new business paradigm for biomedical information sharing, Journal of Biomedical Informatics,
43(2): 342-353
Subashini S. and Kavitha V, (2010), A survey on security issues in service delivery models of cloud
computing, Journal of Network and Computer Applications, 34(1):1-11
Takabi H, Joshi J B D, Ahn G. (2010), Security and privacy challenges in cloud computing environments.
IEEE Security & Privacy, 8(6):24–31
Sultan N. A., (2011), Reaching for the “cloud”: How SMEs can manage, International Journal of
Information Management, 31(3):272-278
Vaquero L. M., Rodero-Merino L., Caceres J., and Lindner M., (2008), A break in the clouds: towards a
cloud definition, SIGCOMM Computer Communication Review, 39(1): 50-55
Vaquero L M, Rodero-Merino L, Morán D. (2011), Locking the sky: A survey on IaaS cloud security,
Computing, 91(1):93–118
C. Vecchiola, R. N. Calheiros, D. Karunamoorthy, R. Buyya, (2012), Deadline-driven provisioning of
resources for scientific applications in hybrid clouds with Aneka, Future Generation Computer
Systems, 28(1): 58-65
Walker E., (2009), The Real Cost of a CPU Hour, Computer, 42(4):35-41.
Walker E., Brisken W. and Romney J., (2010), To Lease or Not to Lease from Storage Clouds, Computer,
43(4):44-50
XSEDE - Extreme Science and Engineering Discovery Environment (2011), TeraGrid Archives,
[available at] https://www.xsede.org/tg-archives [accessed on November 2011]

92

View publication stats