UNIVERSITY OF KWAZULU-NATAL A STUDY OF CLOUD COMPUTING TECHNOLOGY ADOPTION BY SMALL AND MEDIUM ENTERPRISES (SMEs) IN GAUTENG PROVINCE BY LUFUNGULA OSEMBE (Student Number: 207517802) A Thesis / Dissertation submitted in fulfilment of the academic requirements for the degree of Master of Commerce in Information Systems and Technology School of Management, IT & Governance College of Law and Management Studies Supervisor: Dr. Indira Padayachee 2015 DECLARATION I, Lufungula Osembe, declare that The research reported in this dissertation, except where otherwise indicated, is my original research. This dissertation has not been submitted for any degree or examination at any other university. This dissertation does not contain other persons’ text, data, pictures, graphics or other information, unless specifically acknowledged as being sourced from relevant sources. This dissertation does not contain other persons’ writing, unless specifically acknowledged as being sourced from other sources. Where other written sources have been quoted, then: a. their words have been re-written but the general information attributed to authors has been sourced. b. where their exact words have been used, their writing has been placed inside quotation marks and clearly referenced. Where I have reproduced a publication of which I am author, co-author or editor, I have indicated in detail which part of the publication was actually written by myself alone and have fully referenced such publications. This dissertation does not contain data, text, graphics or tables copied and pasted from Internet, unless acknowledged, and the source being detailed in the dissertation and in the references sections. ----------------------------------------------------- Date: L. Osembe (207517802) i ACKNOWLEDGMENTS I wish to make special mention of some people who have significantly contributed in many ways in me achieving this Masters project. It would not have been possible without their guidance and words of encouragement. Mighty God, for His protection and blessing. My supervisor, Dr. Indira Padayachee for her support, guidance and words of encouragement throughout the project. Gill Hendry, for her work on statistical analysis and usage of the SPSS tool. Mr. Junior Mabiza –ma-Mabiza, for his time and dedication in editing the final project. My family, especially my dad Dr. K. Mubenga and mum for their words of encouragement. My teaching and learning team at the IIE Rosebank namely, Givemore Munyanyi, Brian Sibanda, Ransom Quao, Eric Ledwaba, Liesel Van Der Walt and Yolandi Collins for their dedicated support. All the participants who took time from their comfort zone to participate into this project. ii ABSTRACT This study investigates small and medium enterprises in the IT sector located within the province of Gauteng, to ascertain their perceptions on the benefits and risks associated with cloud computing, and to assess the extent of usage of cloud computing services. Fifty-two IT SMEs took part into this research and the findings revealed that respondents were IT consultants, IT managers, executive managers, middle managers, company owners, employees with IT expertise or knowledge, as well as IT specialists from each selected IT SME. IT SMEs that took part into the research had between 1-200 employees with primary users of computing devices being employees followed by clients. The findings revealed that IT SMEs operated in the following three sectors: computer/IT, mobile business, as well as digital solution. These organisations were in existence between one month and twenty years. The research findings indicated that 71.4% of respondents used cloud computing and 28.6% of respondents did not use cloud computing. The findings also indicated that 75% of non-users were planning to use cloud computing as compared to 25% of non-users, who were not planning to use cloud computing. The findings revealed that non-users were likely to use SaaS as compared to other cloud services. Among the challenges faced by non-users in the usage of cloud computing, the following were identified as very important ones: awareness, implementation, complexities, as well as risks. The findings revealed that the following services were highly likely to be used by users: SaaS, IaaS, as well as PaaS. The following factors were identified by users as highly influential in their decision to adopt cloud computing: improved service level management, cost-efficiency, standard-based security, as well as risks. The following factors were identified as important benefits in cloud computing by users: cost-efficiency, lower-implementation, scalability, saving time and cost, sustainability, customisation, as well as virtualisation. The findings revealed the following factors as important concerns and limitations in cloud computing: risks, availability, security issues, regulatory requirements, awareness, performance, impact of security, impact of challenges, impact of availability, trust and transparency, shared technology issues, disaster recovery, service level agreement, virtualisation, as well as policy integration. The findings also revealed that service level agreement should be the foundation for cloud computing adoption. iii TABLE OF CONTENTS DECLARATION....................................................................................................................... i ACKNOWLEDGMENTS ....................................................................................................... ii ABSTRACT ............................................................................................................................. iii TABLE OF CONTENTS ....................................................................................................... iv LIST OF TABLES ................................................................................................................. xv LIST OF FIGURES ............................................................................................................. xvii LIST OF ACRONYMS AND ABBREVIATIONS .......................................................... xviii Chapter 1- Introduction……………………………………………………….1 1.1. Introduction……………………………………………………...………………………..1 1.2. Background of the study……………………………………………………..…………...2 1.3. Purpose of the study…………………………………………………………………..…..3 1.4. Research problem/Statement of the problem……………………………………………...3 1.5. Research questions………………………………………………………………………...4 1.6. Research objectives………………………………………………………………………..5 1.7. Preliminary literature review……………………………………………………..………5 1.7.1. Cloud computing technology model…………………………………………………....5 1.7.2. SMEs and their contribution to the national economy…………………………………..6 1.7.3. Perceived benefits and usefulness of cloud computing as a technology model…………7 1.7.4. Challenges and limitations to cloud computing adoption………………………………7 1.7.4.1. Risk issues…………………………………………………………………………….7 1.7.4.2. Security issues………..…………………………………………………………….....8 1.7.4.3. Availability issues…………..…………………………………………………………8 1.7.4.4. Performance issues………………………………………..…………………………..8 1.7.4.5. Regulatory requirements in cloud computing……………………………..……….....9 1.7.4.6. Service level management in cloud computing………………………………………9 1.8. Conceptual framework……………………………………………………..……………..9 iv 1.8.1. Defining the Technology-Organisational-Environment conceptual framework……….10 1.8.2. Expanding the TOE conceptual framework………..………………………………….11 1.8.2.1. Technological aspects of IT SMEs…………………………………………………...11 1.8.2.2. Organisational aspects of IT SMEs…………………………………………………..12 1.8.2.3. Environmental aspects of IT SMEs…………………………………………………..12 1.8.3. Reasons for using the TOE conceptual framework………………………………….....13 1.9. Importance and significance of the study………………………………………………...14 1.10. Justification/Rational………………………………………………………….………..15 1.11. Research design and methodology……………………………………………………...16 1.12. Limitations of the study…………………………………………………………………17 1.13. Conclusion………………………………………………………...……………………19 1.14. Thesis layout……………………………………………………………………………19 Chapter 2- Literature review…………………………………………………20 2.1. Introduction………………………………………………..…………………………….20 2.2. The cloud computing technology model…………………………………………............20 2.2.1. Definitions of cloud computing………………………………………………………...20 2.2.2. Characteristics of cloud computing…………………………………………………….22 2.2.3. Services in cloud computing…………………………...………………………………23 2.2.4. Deployment models in cloud computing……………………………………………….26 2.3. Cloud Computing adoption and usage……………………………………………………27 2.3.1. Extent of use of cloud computing in emerging economies……………………………..27 2.3.2. Extent of use of cloud computing in South Africa……………………………………..28 2.4. SMEs and their contribution to the South African economy…………………………….29 2.4.1. SMEs in South Africa………………………………………………………………….29 2.4.2. Financial contributions of cloud computing by SMEs in developing economies……...32 2.4.3. Perceived barriers to growth and competition for SMEs in Gauteng…………………..33 2.5. Perceived benefits and usefulness of cloud computing as a technology model………….34 v 2.6. Challenges and limitations to cloud computing adoption………………………………...37 2.6.1. Risk issues associated with cloud computing…………………………………………..39 2.6.1.1. Awareness and global impact in the adoption of cloud computing…………………..39 2.6.1.2. Long-term sticker-shocker in cloud computing………………………………………40 2.6.2. Security issues associated with cloud computing………………………………………41 2.6.2.1. Cloud security………………………………...……………………………………...41 2.6.2.2. The