Adoption of SaaS-based ERP by SMEs in an emerging market economy : giving up control over mission critical business software

De Wet, Philippus Bernardus (2018-12)

Thesis (MA)--Stellenbosch University, 2018.

Thesis

ENGLISH SUMMARY : Small and Medium Enterprises (SMEs) are playing a key contribution to a healthy economic environment. Traditional Enterprise Resource Planning (ERP) systems are generally too expensive for SMEs. Fortunately for technological enhancements, cloud computing makes it possible for companies to rent ERP on a subscription or a pay-per-use model. Due to cash flow, capital and human resource constraints, the public cloud is an ideal solution for SMEs. The business application as well as the server infrastructure is owned and maintained by cloud service providers. Previous studies have found that by losing direct control over systems is one of the main disadvantages of Software-as-a-Service (SaaS-based) ERP. By adopting SaaS-based ERP, organisations fear that they will lose control over the security and privacy of their data making their systems vulnerable to data breaches. In addition, loss of control over system performance and uptime might also cause rejection of SaaS. The purpose of this qualitative research study is to explore the adoption of SaaS-based ERP by SMEs in an emerging economy like South Africa, when not only control, but also trust is placed in the hands of third-party providers to manage, protect and support the heart of a business, i.e. its mission critical business system. An analysis is required of the adopter categorisation where local SMEs currently find themselves in and an understanding of SMEs willingness to outsource their IT, data and business software. This study has found that on the basis of Roger’s diffusion of innovations (DOI) theory, if any of the SME participants would want to adopt a SaaS application, they would fall in the “late majority” adoption category. With 53% of the business applications used in this research study is of a SaaS type, it can be said that the peak of the innovativeness curve has been reached for SMEs partaking in this study. Overall, it has been found that SaaS-based ERP performed better than conventional ERP by achieving a 32% higher ranking in functionality and a 27% higher ranking in provider support. While planned downtime outside business hours has no effect on the adoption of SaaS-based ERP by SMEs in this study, planned downtime within office hours, unplanned downtime and severe cloud outages does have an effect. Most SMEs wouldn’t reject SaaS-based ERP; they would rather prefer to switch cloud providers. It turns out that most SMEs in this study are risk averse and will reject a system previously hacked. It has been found that a major security breach would have an impact on SaaS-based ERP adoption. Such an event would cause most participants to switch to an alternative provider; half of which would migrate back to an on-premise ERP application. Vendor lock-in Small and Medium Enterprises (SMEs) are playing a key contribution to a healthy economic environment. Traditional Enterprise Resource Planning (ERP) systems are generally too expensive for SMEs. Fortunately for technological enhancements, cloud computing makes it possible for companies to rent ERP on a subscription or a pay-per-use model. Due to cash flow, capital and human resource constraints, the public cloud is an ideal solution for SMEs. The business application as well as the server infrastructure is owned and maintained by cloud service providers. Previous studies have found that by losing direct control over systems is one of the main disadvantages of Software-as-a-Service (SaaS-based) ERP. By adopting SaaS-based ERP, organisations fear that they will lose control over the security and privacy of their data making their systems vulnerable to data breaches. In addition, loss of control over system performance and uptime might also cause rejection of SaaS. The purpose of this qualitative research study is to explore the adoption of SaaS-based ERP by SMEs in an emerging economy like South Africa, when not only control, but also trust is placed in the hands of third-party providers to manage, protect and support the heart of a business, i.e. its mission critical business system. An analysis is required of the adopter categorisation where local SMEs currently find themselves in and an understanding of SMEs willingness to outsource their IT, data and business software. This study has found that on the basis of Roger’s diffusion of innovations (DOI) theory, if any of the SME participants would want to adopt a SaaS application, they would fall in the “late majority” adoption category. With 53% of the business applications used in this research study is of a SaaS type, it can be said that the peak of the innovativeness curve has been reached for SMEs partaking in this study. Overall, it has been found that SaaS-based ERP performed better than conventional ERP by achieving a 32% higher ranking in functionality and a 27% higher ranking in provider support. While planned downtime outside business hours has no effect on the adoption of SaaS-based ERP by SMEs in this study, planned downtime within office hours, unplanned downtime and severe cloud outages does have an effect. Most SMEs wouldn’t reject SaaS-based ERP; they would rather prefer to switch cloud providers. It turns out that most SMEs in this study are risk averse and will reject a system previously hacked. It has been found that a major security breach would have an impact on SaaS-based ERP adoption. Such an event would cause most participants to switch to an alternative provider; half of which would migrate back to an on-premise ERP application. Vendor lock-in will complicate such a transition process. It has also been found that the local SMEs don’t take full responsibility for protecting their systems against security breaches. Trust is considered to be the third most important cloud adoption factor and that the majority of these SMEs are comfortable with handing control over to cloud providers. Brand, reputation and a comprehensive Service Level Agreement (SLA) impacts trusting relationships and provides peace of mind to SaaS tenants. It appears that changes and challenges related to control cause a shift in trust, from personal relationships in the traditional sense to a system that’s secure and stable with little downtime. All the SaaS-based ERP tenants are located in or close to main cities. By focusing on SME operating in remote towns with a poor technological infrastructure, further research will add more value by focussing on last mile connectivity, broadband technology and connection latency challenges.

AFRIKAANSE OPSOMMING : Klein en medium ondernemings (KMO’s) speel 'n belangrike rol tot 'n gesonde ekonomiese omgewing. Meeste van hierdie organisasies kan nie tradisionele ondernemingshulpbronbeplanning (OHB) stelsels bekostig nie. Gelukkig maak tegnologiese verbeterings in wolkverwerking dit moontlik om OHB en ander soortgelyke besigheidstelsels te huur op ‘n subskripsie of ‘n betaal-soos-jy-gebruik basis. Die stelsel, sowel as die bediener infrastruktuur, is die eiendom van wolkdiensverskaffers en word deur hulle onderhou. Weens beperkte kontantvloei, kapitaal en menslike hulpbronne is wolkververking ‘n ideale opsie vir KMO’s. Vorige studies het bevind dat een van die vernaamste nadele van Sagteware-as-'n-Diens (SanD-gebaseerde) OHB-stelsel is om direkte beheer oor stelsels te verloor. Deur die aanneming van SanD-gebaseerde OHB-stelsel, vrees organisasies dat hulle beheer oor die sekuriteit en privaatheid van hul data sal verloor, wat sodoende hul stelsels kwesbaar maak vir data-oortredings. Daarbenewens kan die verlies van beheer oor stelselprestasie en beskikbaarheid ook beteken dat SanD-gebaseerde OHB-stelsels moontlik verwerp mag word. Die doel van hierdie kwalitatiewe navorsingstudie is om ondersoek in te stel oor die aanneming van SanD-gebaseerde OHB-stelsels deur KMO’s in 'n opkomende ekonomiese mark soos Suid-Afrika. Spesifiek wanneer beide beheer en vertroue in die hande van derdeparty-diensverskaffers geplaas word om die hart van 'n besigheid te bestuur, beskerm en te ondersteun. Deur te bepaal waar plaaslike KMO’s hulself tans bevind, moet ‘n ontleding gedoen word in terme van die aannemingskategorie. Dit is ook noodsaaklik om begrip te hê van KMO’s se bereidwilligheid om hul IT-, data- en besigheids-sagteware uit te kontrakteer. Indien enige van die KMO-deelnemers 'n SanD-toepassing wil aanneem, het hierdie studie bevind dat op grond van Roger se diffusie van innovasies teorie, hulle in die "laat meerderheid" aannemingskategorie sal val. Aangesien 53% van die sagteware wat vir besigheidsdoeleindes in hierdie navorsingsstudie gebruik word van 'n SanD-tiepe is, kan daar afgelei word dat die KMO's wat aan hierdie studie deelgeneem het, die piek van die innoveringskurwe bereik het. Oor die algemeen is gevind dat SanD-gebaseerde OHB-stelsels beter presteer as konvensionele OHB-stelsels aangesien KMO’s in hierdie studie hul 32% hoër gegradeer het in terme van funksionaliteit en 27% hoër vir verskafferondersteuning. Terwyl beplande stelsel aftyd buite besigheidsure geen invloed op die aanneming van SanD-gebaseerde OHB-stelsels deur KMO's in hierdie studie het nie, het beplande aftyd binne kantoorure, onbeplande aftyd en ernstige wolkonderbrekings, wel 'n effek. Die meeste KMO's sal nie ‘n SanD-gebaseerde OHB-stelsel verwerp nie; hulle sal wel eerder verkies om van wolkverskaffers te verander. Dit blyk dat die meerderheid van die KMO's in hierdie studie riskant is en 'n stelsel waarop inbraak gemaak is, sal verwerp. Daar is bevind dat 'n groot sekuriteitsoortreding 'n negatiewe impak sal hê op die aanneming van SanD-gebaseerde OHB-stelsels. Indien so ‘n gebeurtenis wel sou plaasvind, sal die meeste van die deelnemers oorskakel na 'n alternatiewe verskaffer; waarvan die helfte sal terugval na 'n tradisionele OHB-stelsel. Verskaffer afhanklikheid sal wel so 'n oorgangsproses bemoeilik. Daar is ook bevind dat die plaaslike KMO's nie volle verantwoordelikheid neem deur hul stelsels te beskerm teen sekuriteitsoortredings nie. Vertroue word beskou as die derde belangrikste wolk-aannemingsfaktor en dit was bevind dat die meerderheid van die KMO's gemaklik is om beheer van hul OHB-stelsels oor te gee aan wolkverskaffers. Handelsmerke, reputasie en 'n omvattende diensvlakooreenkoms het 'n impak op vertrouensverhoudings en bied gemoedsrus aan SanD-huurders. Dit blyk dat veranderinge en uitdagings met betrekking tot die oorgee van beheer 'n verskuiwing in vertroue veroorsaak, van persoonlike verhoudings in die tradisionele sin na 'n besigheidstelsel wat veilig en stabiel is met baie min aftyd. Al die SanD-gebaseerde OHB-huurders is geleë in of naby hoofstede. Deur te fokus op KMO's wat in afgeleë dorpe wat oor 'n swak tegnologiese infrastruktuur beskik, sal verdere navorsing meer waarde toevoeg deur te fokus op die laaste myl-konneksie, breëbandtegnologie en latensie uitdagings.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/105029
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