Cloud Computing In Developing Countries

Published Date: 02 Nov 2017

The possible adoption of IT/IS community cloud computing services by SMEs in developing countries.

In today’s business environment the need for IS/IT has fully evolved to become an integral part of any successful organization that exists today. The strategies adopted by businesses around the globe revolve around IT in such a way that their internal business processes are mostly reliant if not totally reliant on IT (Laudon & Laudon, 2012). Henderson & Venkatraman (1989), state that the sole purpose of adopting these strategies is to choose new innovative ways of making more profit with no losses incurred and little or no waste. However this trend has been stalled by the high risks and cost associated with adopting and integrating these new technological trends which happen to surpass the financial capabilities of the organization in question (Lansing, 2012). As the current global economy struggles to get out of the depression of 2008/2009, businesses now invest more time analyzing new technological trends for the business environment, which profess to be cost saving measures, measuring them against long term implications. (Clemons & Wilkinson, 1996).

However, certain successful businesses that count these losses as insignificant continue to expand the canyon that divides them from SME’s struggling to grow and make profits (OECD, 1996). In the business environment the cost of purchasing IT hardware and software infrastructure / resources needed to efficiently run business processes can be the deciding factor between success and failure (Laudon & Laudon, 2012). This creates a problem for businesses that cannot afford the luxury of constantly updating their current infrastructure for the sake of keeping up with the changing environment. In developed countries, this digital/ economic divide can rarely be seen as the environment and the factors that influence the business environment make it easier SME’s trying to grow to gain access to these technologies and resources. However in developing countries the lack of infrastructure makes it harder for businesses to stretch beyond this vast canyon created to reach or gain access to these resources (Beck, et al., 2005).

Cloud computing, part of the recent bursts in technology, has created an avenue to bridge this divide between resources that can be accessed by the successful businesses in the developed countries and the SME’s in developing countries (Kshetri, 2010). This new technology which operates over the internet, affords businesses the opportunity of accessing IT services packages offered by Cloud Computing Providers (CSP) irrespective of region or business size quickly and efficiently (Wang, 2011). Each of these packages offer businesses not just access to but the right amount of infrastructure, software and platform services needed at the operational and strategic level of operation to efficiently run the business. Jadeja & Modi (2012), state that the three forms of service packages, public, private and hybrid, each offer certain levels of security and reliability from risks interms of service delivery and as such the prices for the packages differ. They further state that from public cloud computing services being the cheapest yet most vunerable, right through to hybrid which is said to be the most secure, businesses choose cloud services offered by CSPs based on their individual financial budget allocation and requirements. However this means that in the developing countries where cost is the major deciding factor in technology procurement, businesses that have decieded on opting for cloud computing services may likely choose the cheaper yet vunerable public cloud services rendered (Greengard , 2010).

This paper seeks to delve into the possible adoption of a collaborative rather than competitive approach in order to enhance the opportunities for SME’s in developing countries to gain access to cloud computing services. In this paper we shall weigh the benefits of joint collaboration between individual businesses in different economic sectors against individual business efforts being made to enhance productivity and growth. In addition, we intend to highlight the inherent risks associated with collaborative cloud computing in a bid to identify the threatning areas to be avoided if this idea is to work efficiently for SMEs in developing countries. Finally we intend to point out the structures to be put in place for the successful implementation of thwith the aim of pointing out the prefered benefits of of cluster collaborative cloud computing in these developing countries for the sole purpose of strenghtning businesses.

The recent global recession that caused the economic collapse of 2007/2008 stirred up the minds of business managers to think up better strategies of finding sustainable ways to growing their customer base thus expanding their profit margin. By adopting more efficient lean and cost saving IS systems, businesses are recording increased productivity and growth; collectively strengthen the economy of the country where they are established. There is a direct relation between the GDP growth of a country and the businesses that thrive within them. Business analysts over the years have stressed the role Information Technology and Systems play in recovery of the economy. By acting as a supporting framework on which business processes are based on, IT speeds the ROI causing rapid growth and development. It is recorded that the collective activities of small and medium scale enterprises makes the difference between developed countries and developing countries. However, most business enterprises around the world can be identified and collectively classified as successful based on their ability to transform the resources within their environment into long term or short term profitable achievements. This however is subject to the type and amount of readily available resources provided by their environments. In developing countries, a number of factors influence the availability of such resources for businesses. One major challenge of such businesses within developing countries is the absence of potential investors who most times are unwilling to invest and provide funding and support needed by these businesses due to the unstable nature of the developing environments. Such funding and support are needed by these businesses to procure both IT/IS tools that can drastically improve their businesses making it more efficient. This absence of support forces SMEs to turn to government institutions and banks for credit loans and grants.

This creates a comparable difference between the businesses that thrive in developed countries and those that struggle within developing countries. The environment around which businesses in the developed countries exist, has evolved to become suitable with the necessary infrastructure need by businesses to thrive are abundant. Although economies around the world have been hit by the recession, these infrastructures and support systems provided by the government through policies and investments for businesses is making it easier for businesses to recover and in turn add to the overall growth and productivity of these countries. It is important to note, that though support and infrastructure systems are also provided by governments of developing countries. However the rate at which these economic and infrastructural systems are established for business support is much slower and has over the years required support from International development aid agencies in order to aid in their maintenance and stability.

This stresses the need for lean and cost saving business strategies to be adopted by SMEs. Expert analysts have proffered solutions which SME’s can adopt to increase savings and investments to the projects they handle. These solutions can be summarized under two possible strategic directions which can be adopted for SME’s. One would be to increase the level of funding allotted to SME’s by both local and international financial bodies. Secondly, SME’s would have to adopt a common cost saving and lean efficient system in running their business processes in order to record some level of growth. However, due to the financial crises, these financial Institutions have tightened the grip on their lending policies, making it practically impossible for micro and small enterprises to acquire credit loans. With these high standards set by these institutions, such micro SME’S must seek alternatives to attain growth in order to cope with this challenge.

One way would be to efficiently speed up their internal business processes in order to rapidly convert strategies into profit through the use of IT hardware and software tools as well as IS systems. More so, with the percentage of businesses that have now adopted IT to enhance their business processes, IT integration has now evolved from being optional but a necessity if businesses intend to compete in the market. However, with the growing characteristic of IT pervasiveness over the years these IT tools have become increasingly harder to acquire and maintain as they demand a huge amount of amount of investment from businesses that integrate them as support systems. The major aim of integrating IT and IS as a support for business processes is to deliver services and products at a more efficient and cost effective manner in order to reap long term and short return benefits. These support systems which require constant upgrading and maintenance, usually hardware software, takes up a substantial amount of the businesses budget in order maintain the level of productivity that is expected. When this integration and maintenance cannot be handled by micro and small to medium scale enterprises, they tend to run into bankruptcy. The constraints of cost and time these IT/IS support systems require, unfortunately means that micro SMEs may lack the ability to integrate these systems. With only 20% of the top 5 banks financing SME’s in non OECD countries and the numbers dwindling to just 5% in Sub-Saharan Africa, strategic managers and decision makers are caught in the challenge of implementing a cost effective IT infrastructures and strategies for growth in SMEs.

Businesses have continued to battle this high cost demands from the competitive business environment by implementing different strategies unique to each business. One of these strategies, outsourcing, involves the transfer of sections of a business process to an external third party business that focuses on the outsourced sector as its core business. These outsourcing vendors work as strategic partners providing services and a wider range of scalable resources to businesses at a lower cost. According to CIO analysts, businesses are either fully or partially shifting their IT departments to third party vendors who have both the infrastructure and maintenance ability need to support such systems. Although this strategy is very effective aiding SME’s to cut back on cost spending while enabling them focus on core business processes, the risks associated with it are quite severe. One of the major challenges is that since the services of these outsourcing vendors are provided from different independent business in different countries, the potential for data security breaches are higher since the vendor is in complete control of managing the IT sector. More so, risks surrounding the service availability that may potentially stall business activities incurring losses.

Another modern strategy similar to the concept of outsourcing is the adoption of Cloud computing technology. However cloud computing returns control of the entire businesses process back to business through the provision of self-service IT capacities. Cloud computing being a new technology, provides businesses with virtual services over the internet by cloud service vendors. These IT services allows businesses to make use of them as and when is needed, promoting a very efficient lean process. Thus, these services which would normally require huge financial IT software and hardware investment if they were to be physically implemented are now provided virtually to businesses, cheap, fast and efficiently.

Defining Cloud Computing

Cloud computing is a new ICT based technology which has been portrayed as the latest innovation in ICT, with an exceptional 25 per cent growth rate, represented over $56 billion in 2009 . In 2010, cloud computing took the lead position in terms of investment, ahead of Green-IT and virtualization. In France, the consultancy firm Markess estimated, during the Eurocloud Congress in April 2010, that the French cloud computing market represented EUR 1.5 billion in 2009 and was expected to grow to EUR 2.3 billion by 2011. Its impact on the world economy is projected by at USD 150 billion in 2013 (some 10 per cent of worldwide investment in the IT sphere).

The question that arises at this point is what is cloud computing and how does it work? Simply, it refers to virtual services that aid businesses to conduct transactions offered over the Internet. It is a new solution that gives users and businesses the option of accessing software and IT resources with the desired flexibility and modularity and at a cost effective price. STOP However, for the purpose of this paper and its focus on SMEs in developing world, taking Africa as a case study, the definition of cloud computing produced by the National Institute of Standards and Technology (NIST) and the ITU Focus Group. The definition by the National Institute of Standards and Technology (NIST 2013) adequately captures its application as "a framework that offers enabling network users and businesses on-demand access to a shared pool of configurable computing resources that can be rapidly provisioned and released to the client without the need for a direct service provider interaction". The diagram below, thus illustrates the computing resources both hardware and software, which are delivered as a service over a network (i.e. the Internet.)

Characteristics of cloud computing

Cloud computing services can be characterized by a number of factors which distinguish it from other technologies. Of these factors, one important point to note is the fact that cloud computing users do not own the IT resources they use, they access servers hosted in external data centres (ii) Services are provided via the pay-per-use model or subscription model (iii) The resources and services provided to the client are often virtual and shared among several users and (v) the services are provided via the Internet. Therefore, the process implies the use of a cloud shaped symbol from which the process derives its name, (Wikipedia encyclopedia January 2013) as an abstraction for the complex infrastructure it contains in system diagrams. In essence, Cloud computing entrusts remote services with a user's data, software and computation.

C:\Users\ANTHONIA A EKPA PhD\Pictures\Cloud_computing_svg.png

1.1 Cloud computing logical diagram

Components of Cloud Computing

According to the ITU (2012), Cloud computing comprises of five types of service:

Infrastructure as a Service (IaaS): virtualized on-demand server, virtualized data centre, flexible on-demand storage space, flexible local networks (LANs), firewalls, security services, etc.

Platform as a Service (PaaS): platform for cloud computing service provision (customer service management, billing, etc.)

Software as a Service (SaaS): business applications, customer relations and support (CRM), HR, finance (ERP), online payments, electronic marketplace (for very small and small and medium sized enterprises), etc.

Communication as a Service (CaaS): audio/video communication services, collaborative services, unified communications, e-mail, instant messaging, data sharing (web conference) and

Network as a Service (NaaS): managed Internet (guaranteed speed, availability, etc.), virtualized networks (VPNs) coupled with cloud computing services, flexible and on-demand bandwidth.

The functionality of the above five components offer some services as follows : On‐demand self‐service which involves customers using a web site or similar control panel interface to provision computing resources such as additional computers, network bandwidth or user email accounts, without requiring human interaction between customers and the vendor, b. Broad network access enables customers to access computing resources over networks such as the Internet from a broad range of computing devices such as laptops and Smartphones . Resource pooling involves vendors using shared computing resources to provide cloud services to multiple customers. Virtualization and multi‐tenancy mechanisms are typically used to both segregate and protect each customer and their data from other customers, and to make it appear to customers that they are the only user of a shared computer or software application and d. Rapid elasticity which enables the fast and automatic increase and decrease to the amount of available computer processing, storage and network bandwidth as required by customer and demand and Pay‐per‐use measured service that involves customers only paying for the computing resources that they actually use, and being able to monitor their usage. This is analogous to household use of utilities such as electricity.

Globalization and the ICT revolution in Africa

Like other developing regions of the world, Africa is experiencing the impact of globalization which has affected not only the way people live, but also how they communicate and carry out businesses. One area in which globalization has impacted severely on the Africa is in opening up the continent to international trade in several of the continent's mineral resources especially oil and gas and solid minerals - gold , diamond etc as well as cash crops including cocoa and coffee among others . In addition, globalization ensured that Africa is not immune to the influence of modern technology especially ICT and telecommunications.

These two technological advancements have revolutionalised the way global business is transacted in and with Africans. Whereas in the past Africans were contented with merchandizing with each other and international business partners through personal contact and occasional third party engagements through agents (legal and otherwise) and required physical exchange of goods with lots of paper work and signing of contracts , today , technology has made the business environment challenging , competitive and paperless .

The role of Information technology in global business systems has been acknowledged as monumental. Several ICT innovations are gradually being introduced in the workplace and the business environment with significant changes occurring daily. The emergence of information and communication technologies (ICT) and telecommunications has not only simplified business; it has reduced its cost, improved outputs for business persons and enhanced competition and collaboration in diverse areas. The proof of this is in developing countries including Africa is documented in a 2012 survey carried out by the International Telecommunication Union (ITU), the United Nations specialized agency for– ICTs, where it is stated that "the ICT sector in Africa is characterized by the very rapid development of mobile networks". This is expected considering, the fact that in early 2012, ICT development and cellular mobile penetration in Africa grew concurrently at a rate of 52 per cent, with 12.8 per cent of the population having Internet access.

Alongside the growth of ICT and mobile telephony is that of Cloud computing, which has been described in a World Bank publication as "one of the most hyped ICT concepts of the last 12 months". This acknowledgement arises from the obvious impact this technology is having in accelerating growth and Small and medium enterprises (business in developing countries including those in Africa according) in developing countries. More importantly , the report notes that although cloud computing 'a new way of using IT resources' (P.viii) , "the experience of African countries to date points to cloud computing technology being used at different levels according to the institutions concerned. Indeed, while a given administration may only now be preparing to introduce this new technology, it may well be the case that 50 per cent of the country’s ICT operators have begun to implement or are already using it."

Two sectors in Africa that are first to avail themselves the most use of this technology in the continent according to the ITU(2012) report are the banking and education sectors. In Tanzania and Rwanda, for example, specific data center projects are already operational or in the process of being set up. In Benin and Burundi, strategies are emerging for the introduction of cloud computing.

The role of Cloud computing in collaborative marketing strategies by African SMEs

African countries in particular are gradually embracing technological advancements especially information and technology to improve their businesses. The reasons for this expansion in IT led business are many. Principal among them being the fact that operating small businesses in Africa can be challenging. It has been noted (Osalor 2013) for example, that Nigerian entrepreneurs are increasingly opening up to IT business environments. The advantage that cloud computing holds for developing countries especially Africa is that it can, as has occurred in the developed world, enhance economic growth through cost reduction in hardware and software that SMEs need to spend to run their information systems technology. The "cloud", the abbreviation for this linking of terminals, can allow users to improve services, and keep overhead costs like security and server space at lower levels.

It can also provide powerful computing systems at a fraction of the cost of traditional infrastructure. A valuable option suggested by Alex Laverty (2011) is that of collaboration. According to him, the value of cloud computing lies in the fact that "all parties, large and small companies as well as governments, can benefit from the cloud". That is, while large companies can save the costs of housing and maintaining their entire IT systems by moving it offsite to the remote servers that power the cloud. Small firms can save on start up costs by accessing the ready-made applications provided by service providers.

According to him, "the collaboration and communication that can be achieved through the cloud allow African developers and entrepreneurs to be part of global development and conversations in ways that traditional communication systems have limited their involvement."

An example is a current example is the development of mobile apps. Laverty (p.2) illustrates how a developer in Rwanda can use web based applications to create and test an app for the iPhone and then publish their completed work to Apple’s App Store where any iPhone user in the world can purchase the app and download it. This according to him, "creates economic links that were unimaginable before cloud computing".

Considering the cost implications of sustaining businesses by small and medium scale entrepreneurs, cloud computing offers a useful alternative through any or all of its five components identified by n NIST to include:

Benefits of Cloud Computing to SMEs

The extraordinary growth of cloud computing in recent years is increasingly engaging interested Internet and IT users seeking to use services and applications available on the internet through the web. The benefits of Cloud computing are numerous and go beyond application in businesses. Governments too have deployed this technology. The Australian Government's Department for Defense Intelligence and Security (2013) for example, confirms that "Cloud computing offers potential benefits including cost saving and improved business outcomes for Australian government agencies." The essential value of this technology is in the fact that IT services, from the storage and processing of data to software applications, is now available and accessible to everyone. (MAAREF, 2012: 7).

Due to its relevance, Cloud computing has been adopted by many companies, particularly small and medium-sized firms and very small firms .In addition to offering a new economic model for ICTs – that ensures new modes of investment in, and operation of IT resources, the availability of online services frees users from the need to acquire hardware by paying instead for the resources used. Cloud computing also offers IT resource (hardware and software) modularity, with availability in terms of volume and time according to the customer's requirements and at its request. To summarize the benefits of Cloud computing, ITU (2012) states categorically that in an economic context where companies are seeking to make the most from their investments and minimize operating costs, cloud computing is seen as the solution for tomorrow"

...with cloud computing, organizations, institutions and

companies no longer need to invest heavily in resources,

which are of necessity limited and require burdensome

and costly internal management .

The benefits of Cloud computing in developing countries where resources are scarce, and setting up of businesses are difficult especially for small business owners. Not only does it offers the needed platform for operating businesses with minimal cost , it allows business owners to set a virtual office which affords them the flexibility of connecting to each other anywhere and at any time. With the growing number of web-enabled devices used in today's business environment (e.g. smart phones, tablets), access to data are therefore easier.

Challenge of SMES in Developing countries

The need for greater participation of the private sector in building the economic base of nations has been systematically emphasized over time. Businesses, whether big or small are the fulcrum of economic revival of nations especially today, when recession has led to the collapse of big firms including banks in the developed world. However, the economic meltdown recorded in many countries including developed ones, has significant implications for businesses around the world, many of which have encountered difficulties in developing coping strategies that would enable them compete adequately with other businesses. Of note is the effect on businesses in developing countries, majority of whose citizens live below a dollar a day and are struggling with such issues as poverty and literacy among several impediments to development. The UNIDO 2011 annual report confirms that developing countries are currently facing challenges development and that raising funds to acquire or maintain businesses which ultimately will improve the economies of the countries has been difficult. Despite these challenges , the report attributes to Small and medium scale enterprises the huge successes recorded in the sustainability of some sectors including banking and notes that heir challenges notwithstanding , SME’s are the main measure of productivity hence the effort by many nations to channel resources towards aiding SMEs effort to increase their output .

The businesses environments in which SMEs in developing countries operate differ from one country to another. Similarly , the successes or failure of such businesses depend on several factors including the nature of the business and investment environment , fiscal policies in operation and the prevailing economic and social policies operated by governments and more importantly the access to technology and its deployment in business transactions .

In Africa, the challenges are numerous and include those that are externally and internally generated. While the former has been summarized as "the increasingly intense and often unbalanced competition between African businesses and those in the so-called developed world", which constitutes "the effects of successive global crises'', the internally generated challenge for SMEs in Africa typified by Nigeria as observed by Peter Osalor (2013) include:

Inadequate and inefficient infrastructural facilities, which tend to escalate costs of operation as SMEs

lack of adequate credit for SMEs traceable to the reluctance of banks to extend credit to them owing among others to poor documentation of project

weak demand for products arising from low and dwindling consumer purchasing power and lack of patronage of locally produced goods by those in authority

incidence of multiplicity of regulatory agencies and taxes which has always resulted in high cost of doing business

poor management practices and

low entrepreneurial skill arising from inadequate educational and technical background of many SME promoters.

Osalor explains further that in Nigeria, with Africa's largest population and several SMEs, funding is a major challenge. A UNIDO report (2011) similarly reveals that SMEs face challenges of not only limited funding but also technological barriers , which has given rise to the global business environment constantly seeking new innovative ways of providing sustainable solutions for SMEs in to thrive . In Nigeria for example, in addition to support from government, there is collaboration among the private sector operatives to build the capacity of indigenous small business to improve their services through ICT in order to compete effectively with international / multinational businesses. In order to create such a level playing ground, the bankers committee intervened in 2001 with a scheme themed "Small and medium industries Equity Investment Scheme" (SMIEIS) which has metamorphosed today to an ITC based business platform whereby several small entrepreneurs can utilize the internet to collaborate, exhibit and market their goods and make more profit than was hitherto the case when the internet was not applied in businesses.

Also, developmental policies usually tend to favour of large firms and sometimes foreign –owned firms leaving SMEs in a distressed and vulnerable position. Until recently in Nigeria for example, regulatory compliance ordinarily reduced the cost of doing business for the private sector and incurs costs- time and money, adverse effects on small firms.

Under capitalisation, difficulty in gaining access to bank credits & other financial markets, coupled with corruption, lack of transparency, very high bureaucratic costs and seeming lack of government interest in support for the roles of SMEs in national economic development and competitiveness, adversely impacts on Small businesses making it therefore imperative for them to look for alternatives that are cheaper and more reliable such as ICT based business applications.

Peter Osalor (cited) observes for example that the the urge to survive and make profits is creating room for collaboration among SMES in Africa and " forcing all businesses to redouble their efforts to reduce operating costs, rationalize investments, boost productivity and foster innovation" , the internally driven challenges are more" .

The Flip side of Cloud computing for Africa's SMEs

Despite its enormous benefits, there are some challenges faced by African SMEs in the use of Cloud computing which is reflective of what obtains in the ICT arena as a whole, which is captured aptly by ITU in its 2009 report. These borders mostly on the policy within the business environment. For example, the report reveals that "African countries are facing a number of challenges in increasing ICT levels. These include the lack of full liberalization of markets and the limited availability of infrastructure, such as shortage of international Internet bandwidth. In addition, prices for ICT services remain very high compared to income levels and broadband Internet services are out of the reach of most Africans." According to the ITU (2012) the penetration rates for fixed and mobile broadband in Africa is barely surpassing 0.2 and 3.79 per cent, respectively. The implication of this is obvious. There is the need for continued effort on the part of service providers with the enabling environment created by Governments. Laverty (2011) particularly observes that obstacles in Africa center primarily on infrastructure and government policy.

Conclusion

Despite the advantages to be gained through access to the cloud, this paper will not be complete without mentioning the likely risks to what we term the 3Es (Economy , Efficiency and Effectiveness ) required for cloud computing in developing countries especially Africa . To bring this about, it is imperative as practitioners have noted (ITU 2012, NIST 2013 ) have noted and summarized by (Laverty 2011) that "developing countries need to pursue policies that increase ICT infrastructure and increase availability of cloud computing tools".

Also, the increasing competence of system hackers makes it necessary for legislation to be put in place to protect SMEs. As rightly noted Australian Government's Department of Defence Intelligent and Security, cloud computing is not without some risks hence the development of strategies captured in the publication "Cloud Computing Security Considerations (2012)"