The Use of Hosted Enterprise Applications by SMEs: A Dual Market and User Perspective

Abstract

This deliberately dual perspective paper seeks to deepen our understanding of the engagement of SMEs in hosted enterprise applications in the UK. The emergence and development of the ASP sector has attracted much interest and highly optimistic forecasts for revenues. The paper starts by considering ICT adoption by SMEs in general before reviewing the provision of hosted enterprise applications in the US and UK (market perspective). The study is extended by qualitative empirical data collected by semi-structured interviews with SME users of hosted enterprise applications (user perspective) and subsequent analysis in order to develop the key findings and conclusions. From an SME user perspective the key findings to emerge from the study include: i) confirmation that ICT infrastructure was no longer a barrier to adoption, ii) the pragmatic approach taken to security issues, iii) the use of both multiple information systems and multiple service providers, iv) the financial attractiveness of the rental model and v) the intention to continue or extend the use of hosted applications. It also highlights the opportunity for gaining competitive advantage by using hosted enterprise applications to reduce costs. There are very few empirical studies of hosted applications which take deliberately market and SME user perspectives -this paper makes an important contribution in this emerging field.

Who is out there?

“…Trust in the SaaS vendor community is important not only because of its direct, positive effect on intentions, but also because it should mitigate three major risks hindering an organization's intention to adopt SaaS: 1) high implementation costs due to the significant discontinuity in current IT governance (Harney, 2004;Kakabadse et al, 2004;Susarla et al, 2003), 2) concerns about risks resulting from transacting over the Internet (Kakabadse and Kakabadse, 2002;Lockett et al, 2006;Walsh, 2003), and 3) opportunism concerns due to longterm dependence on a third party (Gupta and Herath, 2005;Heart and Pliskin, 2002a;Sigala, 2004).…”

“…Software as a Service (SaaS) is a B2B transaction that facilitates the provision of centrally-located IT services by a vendor via either a rental or lease agreement (Lockett et al, 2006). Thus, SaaS customers are charged usage fees for remotely accessing applications and databases that reside on vendor-owned servers (Gupta and Herath, 2005;Susarla et al, 2003).…”

“…3 Furthermore, Oracle and IBM have lately established SaaS (preferring the "on demand" designation) as an important line of business, and SAP launched its new package Business ByDesign primarily as SaaS. 4 Evidently, although the full potential of SaaS has not been realized and its institutionalization has yet to be seen, the Web is now more strongly recognized as a valid IT delivery platform (Carr, 2005;Mustonen-Ollila and Lyytinen, 2004), albeit less so for delivering core, organization-wide applications (Gupta and Herath, 2005;Lockett et al, 2006). SaaS adoption requires major changes in organizational IT governance, especially when it involves replacing existing core applications.…”

SME Adoption of Enterprise Systems in the Northwest of England

“…To gain a holistic understanding of ES, the implementation process and the impact of ES adoption on firm performance should also be examined. With the recent popularity of hosted software applications (Lockett et al 2006), future studies could empirically examine ftirther the factors impacting the adoption of these technologies and how they differ from the findings presented in this study. Finally, because factors impacting adoption of ES are different from factors impacting SME adoption of previously studied IT innovations, future research could examine factors impacting the adoption of new IT innovations.…”

“…Lockett et al (2006) emphasize that the provision of hosted applications by ASPs (application service providers), on a rented basis is viewed as being of particular relevance to SMEs. None of the early adopters has a hosted ES, but they still seek IT support from the leasing vendors.…”