Cloud Computing

There are various definitions of Cloud Computing that see it as a new business model and computing paradigm, which enables on-demand provisioning of computational and storage resources (Xiao and Xiao, 2013).

The Cloud Computing service model consists of five essential characteristics and three service models. The Cloud Computing characteristics are: 1) on-demand self-service: users can provision services automatically without any human interaction, 2) broad network access: the services can be used through various client platforms such as mobile phones, laptops, tablets, etc., 3) resource pooling: the provider’s computing resources are pooled to serve multiple consumers, 4) rapid elasticity: capabilities can be elastically provisioned and released, and 5) measured service: cloud systems automatically control and optimize resource use (NIST, 2013). Meanwhile, the three services models are: 1) Software as a Service or SaaS such as web-based email (Gmail, Yahoo, Hotmail), Google docs, and other business applications (accounting, inventory); 2) Platform as a Service or PaaS such as web store, Google app engine, payment gateway, social networking websites (Facebook, LinkedIn, Twitter, and Instagram); and 3) Infrastructure as a Service or IaaS such as storage (Dropbox, Google Drive).

Researchers and service providers suggest that Cloud Computing services provide the most appropriate platform for SMEs to challenge large enterprises as Cloud Computing services can reduce the effect of the traditional challenges faced by SMEs in terms of capacity, ICT human resources and financial constraints. Furthermore, they can assist to exploit SME business opportunities across national borders (Ross and Blumenstein, 2014).

Cloud Computing services provide benefits and improved opportunities for SMEs to increase their entrepreneurial activity through four factors: 1) increasing global collaboration; 2) reducing opportunity costs; 3) scalability and accessing global markets; and 4) increasing access to international venture capital. Those factors link to the four Cloud Computing concepts. First is the increase in innovation. Cloud Computing services help SMEs to survive and engage in product and service development that might not have occurred previously, because of the traditional up-front ICT capital expenditure models that prevented SMEs from fully adopting ICT. Secondly, Cloud Computing services can help SMEs with their start-up operations. Here the on-demand payment model can reduce in-house ICT sunk costs by lowering the risks associated with developing new ICT-related or supported projects. Thirdly, the cloud can increase business agility as it allows firms to quickly increase the demand for products and services that prove successful in the marketplace. Increased access to global markets is the fourth advantage of Cloud Computing, as it is possible to have relatively low variable costs when ICT-related products and services can be provided over the Internet (Ross and Blumenstein, 2014). Figure 2-1 depicts the relationship between the factors and concepts.

Figure 2-1 Cloud Computing and Entrepreneurship

Source: (Ross and Blumenstein 2014)

Despite all the aforementioned benefits of Cloud Computing services, security and privacy are the major challenges in the adoption of Cloud Computing, which implements a shared service model that makes it possible to provide on demand and low cost services to a large consumer base. Security and privacy systems may contribute to a higher service cost. Another challenge is the integration of traditional ICT systems with Cloud Computing services, or even the migration from a manual business process to the new ICT service model. Vendor locking also discourages the SMEs from using Cloud Computing services, as SMEs generally do not have bargaining power with large service providers (Ross and Blumenstein, 2014).

According to a survey by Circle Research Global in 2015, out of 800 senior SME decision makers with up to 1,000 employees, 90% felt that cloud adoption was becoming increasingly important for their business success (ProQuest, 2016). In order to realize the true potential of Cloud Computing, SMEs need to consider several other products and technologies as well, which would form a complete a cloud eco-system. First, use thin clients instead of regular desktop PCs to access cloud-based apps. Second, the right mobile devices are required that

Increase global collaboration Access to international venture capital Access to global markets Scalability Reduced opportunity costs Increase innovation: • Ease failure

• Product and service development • R&D

Supports SME and start up firm activity

Increase business agility:

• Can ramp sales up or down as required

Increased potential global market: • Supports an international entrepreneurial orientation Increased Entrepreneurial activity Factors Concepts

enable access to the cloud from anywhere at any time, and from any device. Third, and most importantly, Internet bandwidth must be adequate and consistent, without which, it would be pointless to move to a cloud based environment.

Moreover, cloud-based technologies are supporting collaborative international new ventures by linking SMEs and start-up firms to potential partners and venture capital via Internet-based crowdfunding sites (Roos and Blumenstein, 2015).

According to The Asia Cloud Computing Association’s Cloud Readiness Index (CRI) 2016, Indonesia is ranked eleventh, climbing from its twelfth position in 2014. The improvements seen in cloud readiness and adoption have been led by private sector innovation, as a growing online population continues to demand more robust digital services (ACCA, 2016).

Asia Pacific outperforms the other markets on the basis of physical infrastructure, scoring well for international connectivity, broadband quality, green and sustainable policies, and data centre risk. This puts Asia in a strong position to lead the next wave of global innovation and leadership in technology (ACCA, 2016).

Four parameters are used to measure “hard infrastructure” capacity: international connectivity; broadband quality; power grid, green policy and sustainability; and data centre risk. Six other policy-related “soft infrastructure” parameters make up the other portion of the CRI: cybersecurity, privacy, government regulatory environment and usage, intellectual property (IP) protection, business sophistication, and freedom of information. There are other factors influencing the development of Cloud Computing in a country; these are the qualitative measures taken by governments to improve the regulatory aspects of the cloud, such as amendments to privacy laws, data control measures, etc. (ACCA, 2016).

Table 2-2 The Cloud Computing Readiness Index 2016 CRI Rank,

Country

#01 #02 #03 #04 #05 #06 #07 #08 #09 #10 TOT.

SCORE _Change Rank #1 Hong Kong 8.1 9.1 6.7 8.0 6.2 9.5 7.2 8.6 7.4 7.2 78.1 +4 #2 Singapore 6.4 9.4 6.5 7.8 6.8 9.0 8.6 8.9 7.3 6.0 76.7 +2 #3 New Zealand 4.6 8.2 7.6 6.8 7.4 9.0 8.1 8.7 6.9 7.2 74.4 -1 #4 Australia 4.3 8.0 6.6 6.3 7.6 9.5 7.4 8.3 6.7 8.3 73.2 -1 #5 Japan 3.9 8.9 6.7 5.9 7.1 8.0 7.8 8.7 8.3 7.8 73.0 -4 #6 Taiwan 4.1 8.8 6.7 6.4 7.0 9.5 6.7 7.4 7.1 7.2 71.1 +1 #7 South Korea 3.8 9.0 6.3 6.2 7.1 9.0 7.0 6.0 6.9 6.7 68.0 -1 #8 Malaysia 3.3 7.6 5.4 5.9 7.6 8.0 7.4 7.7 7.6 5.8 66.3 - #9 Philippines 3.3 5.5 6.0 3.5 3.5 7.5 5.5 5.6 6.1 7.3 53.8 +1 #10 Thailand 3.8 8.6 6.0 5.2 4.1 5.0 5.1 4.6 6.3 3.8 52.6 -1 #11 Indonesia 1.8 6.3 5.4 2.7 4.7 6.0 5.6 6.1 6.1 5.8 50.6 +1 #12 India 1.7 5.6 5.1 1.9 7.1 4.5 5.5 6.0 6.0 5.8 49.1 +1 #13 China 1.6 6.6 5.3 2.5 4.4 5.5 6.2 5.7 6.1 1.3 45.4 -2 #14 Vietnam 3.0 6.7 5.4 2.6 3.2 5.0 5.4 5.1 5.1 2.4 44.0 - Comparison (and hypothetical rank)

Brazil (#8) 3.8 6.8 7.0 4.4 7.1 5.0 5.2 4.7 6.1 7.0 57.1 Germany (#3) 5.0 8.4 7.1 6.9 7.1 8.0 7.3 8.1 8.1 8.3 74.3 South Africa (#8) 5.0 6.0 5.8 2.7 3.8 3.5 6.0 7.7 6.3 7.4 54.3 UAE (#8) 3.8 8.3 4.9 6.7 3.5 3.5 8.1 7.9 7.6 3.3 57.5 UK (#3) 6.1 8.5 7.2 6.6 7.1 8.5 7.8 8.6 7.9 7.6 75.7 USA (#5) 4.3 8.4 6.6 5.8 8.2 6.5 7.4 8.3 8.0 8.1 71.6 Note: All values to 1 decimal place. #01 International Connectivity, #02 Broadband Quality, #03 Power Grid, Green Policy, and sustainability, #04 Data Centre Risk, #05 Cybersecurity, #06 Privacy, #07 Government Regulatory Environment and Usage, #08 Intellectual Property Protection, #09 Business Sophistication, #10 Freedom of Information.

Source: ACCA (2016)