The role of cloud computing in addressing small, medium enterprise challenges in South Africa

Abstract

This thesis was motivated by Roberts (2010) who found that 63% of SMEs in South Africa do not make it past second year of operation. To expand further on this problem, we reviewed literature to understand key business challenges experienced by SMEs in South Africa which contribute to this high failure rate. The challenges include red tape, labour legislation, lack of skills, lack of innovation, impact of crime, and lack of funds. The research project aimed to answer a key question: “How can information technology, in the form of Cloud Computing be used to address the challenges faced by small and medium businesses in South Africa?” To answer this question, data was collected from 265 SME companies and quantitatively analysed. It is important to note that the profile of SMEs targeted in this study are those that employed fewer than 200 employees, with a turnover of not less than 26 million rand per annum, and registered with South African Revenue Services (SARS) and also with the Companies and Intellectual Property Commission (CIPC) of South Africa. Over 60% of the firms that responded to the survey were in business for more than 10 years which means we are mainly dealing with data from businesses that have past the survivalist stage and are matured businesses. These are businesses that can share their experiences and challenges they faced throughout their journey. The profile of SMEs in this study should not be confused with that of Very Small Medium Enterprise Businesses. The questionnaire was designed to address four themes being the Demographic profile, SME Business Environment, Threat of Survival, and lastly Technology Adoption. Key finding in this research is that 60% of the panellists stated that red tape is the overriding challenge that small businesses contend with. 67% of the panellists confirmed that they have not invested in their businesses in the past year; and 53% stated that they have not applied for finance from the bank for fear of being rejected. Only 30% of the SME market were found to use enterprise resource planning (ERP) and 62% do not have their own IT department. Of great concern is that 65% of the panellists have experienced server down time at least once in the past year. Inability to predict the rising IT costs in a firm has been cited as the main concern when running IT on premise. The cost predictability finding was also discovered to be a benefit enjoyed by the SMEs who use Cloud Computing. The conclusion is that there is a relationship between Cloud Computing, Small and Medium Enterprise businesses and the challenges they face in their business environment. To address the identified business challenges, technology adoption studies by Gumbi & Mnkandla (2015), Carcary, Doherty & Conway (2014), Lacovou et al (1995), Mohlomeane & Ruxwana (2014), Kshetri (2010), BMI Research (2018), Conway & Curry (2012), Li, Zhao & Yu (2015), Wernefeldt (1985), Schindehuitte & Morris (2001), Tornatzy & Flesher (1991) were reviewed. From these publications, the Technology, Organisational and Environmental (TOE) was found to be relevant and of interest for use in answering the main research question. This study developed the Cloud Adoption Framework which is the anchor of all SME challenges. Key study contribution is that the TOE model, which is predominantly used to understand the determinants of technology adoption like various industry applications, infrastructure innovations etc., are now used to address specific challenges that have contributed in the high failure rate of SME business. This is the first-time TOE model has been used to align with key SME challenges that contribute to firms’ failure. Specific technology across Software, Infrastructure and Platform services models are recommended for use by SMEs to ensure challenges are mitigated and improve the chances of survival for SMEs operating in South Africa. By following the recommended Cloud Adoption Framework, SMEs should be able to navigate the complexities brought about by the tough operating environment and also the technologies available to address those challenges. All six challenges have solutions in Cloud Computing and SMEs are educated on these solutions and also how to access these on a pay as you use model of consumption.