This document summarizes research on SME reluctance to adopt Software-as-a-Service (SaaS) ERP systems in South Africa. Interviews were conducted with key decision makers at 5 South African SMEs. The main inhibitors to SaaS ERP adoption found were concerns over system performance/availability risks due to infrastructure issues, sunk costs in existing systems, loss of control over systems and data security placed in vendors' hands. Improved IT reliability and potential cost savings were drivers. Functionality limitations and lack of customization were minor inhibitors. Overall, South African SMEs' reluctance is explained by strong preferences to maintain control over critical systems and data exacerbated by network infrastructure problems raising fears over cloud system

1. SaaS ERP adoption intent:
the South African SME perspective
Dr. Lisa Seymour
University of Cape Town
Prof. Dr. Joachim Schuler
Pforzheim University, Germany
Julian Faasen
University of Cape Town

3.  Importance
• Critical role of SMEs in developing countries in
national development [6]
• ERPs enable competitiveness but are high risk and
high cost [26]
• The SaaS model is seem as a critical enabler to
allow SMEs to access
 The purpose of this study
• Gain an understanding of the reluctance to adopt
SaaS ERP software within South African small and
medium enterprises (SMEs).
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4. SaaS Applications
SaaS ERP: "Last Bastion of Resistance to SaaS" (Aberdeen Research, 2007)
SaaS Application Small Medium Large
Enterprise Resource Planning 9% 1% 3%
Business Intelligence 14% 7% 3%
Talent Management 30% 16% 11%
CRM for Salesforce Automation 43% 23% 22%
Aberdeen Group, 2009; ERP Options
Panorama, 2012
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5. Model derived from the broad literature
Technological Factors Organizational Factors
• Perceived technological • Perceived business
benefits benefits
• Software functionality fit • Resource constraints
• ERP alternatives • Top management support
• Systems reliability • Reluctance to outsource
• Integration capabilities strategic assets
Intention
to adopt
SaaS ERP
Environmental Factors
• Competitive pressure
• Data security & privacy
• Uncertainty & Vendor
Trustworthiness
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6. Method
 South African SMEs
• between 50 and 200 employees
• within traditional ERP focused industries (e.g.
manufacturing, logistics, distribution, warehousing and
financial services, etc.)
 7 Semi-structured interviews with key decision makers
 General inductive analysis [26], member checking,
thick descriptions, code-recode and audit trail
strategies [27]
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7. Company and Participant Demographics
Company Participant Position Experience Industry No. of
code Code employees
A A1 Digital Director 10 years + Book publishing and 250
distribution
A A2 IT Operations Manager 17 Years Book publishing and 250
distribution
B B Head of IT 20 years + Financial Services 120
C C1 Chief Operating Officer 20 years + Specialized Health 50
Services
C C2 IT Consultant 7 years + Specialized Health 50
Services
D D Financial Director 20 years + Freight Logistics 200
Provider
E E Managing Director 20 years + Medical Distribution 137
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8. Software landscape for companies interviewed
Company code
Current Software Landscape A B C D E
Using industry-specific ERP software Yes No No No No
Using component-based ERP software No No Yes Yes Yes
Using off-the-shelf software Yes Yes Yes Yes Yes
Using Bespoke (customized) software Yes Yes Yes Yes No
Implementation of ERP software in progress No Yes No No No
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9. Results
The following 7 themes, in order from most significant to
least, emerged based on the participant perceptions,
personal experience and organizational context
• 1. Systems performance and availability risk (inhibitor)
• 2. Sunk cost and Satisfaction with existing system (inhibitor)
• 3. Loss of control and Vendor trust (inhibitor)
• 4. Data security risk (inhibitor)
• 5. Improved IT reliability (driver)
• 6. Perceived cost reduction (driver)
• 7. Functionality Fit and Customization Limitations (inhibitor)
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10. 1. System performance and availability risk
 Associated with the risk of losing access to
mission-critical systems and the resulting impact
on business operations. Predominantly bandwidth
cost, internet latency limitations and bandwidth
reliability
 “The cheapest, I suppose is the ADSL, with 4MB
lines, but they tend to fall over, cables get stolen”
(D).
 “They can’t guarantee you no downtime, but I
mean there are so many factors locally that
they’ve got no control of. You know, you have a
parastatal running the bulk of our bandwidth
system” (E)
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11. 2. Sunk cost & Satisfaction with existing systems
 Irrecoverable costs incurred during the acquisition
and evolution of existing IT systems
 “...if we were starting today with a clean slate, with not
having a server room full of hardware, then
definitely...SaaS would be a good idea” (D)
 The perception of participants that their existing
enterprise software was fit for purpose
 “...whenever you’ve got a system in place that ticks
90% of your boxes and it’s reliable...why change,
what are we going to gain, will the gain be worth the
pain and effort and the cost of changing” (A1).
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12. 3. Loss of Control and Lack of Vendor Trust
 A number of participants associated SaaS ERP
with a loss of control over their software and
hardware components. They also raised
concerns around trusting vendors with their
mission-critical software solutions.
 “...if they decide to do maintenance...there’s
nothing we can do about it...you don’t have a
choice” (C2).
 “...they sort of cut corners and then you end up
getting almost a specific-to-SLA type of service”
(A2).
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13. 4. Data Security Risk
 Related to concerns around the security and
confidentiality of business information hosted on
SaaS vendor infrastructure.
 “...somebody somewhere at some level has got to
have access to all of that information and it’s a
very off-putting factor for us” (E).
 “they’ve got a large number of other clients
accessing the same servers” (D)
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14. 5. Improved IT Reliability
 Due to sophisticated platform technology, regular
software updates, more effective backups and
better systems redundancy
 “I think it will be a safer option ...if they’ve got
more expensive infrastructure with redundancy
built in” (C1).
 “...it’s probably more often updated...because it’s
been shared across a range of customers; it has
to really be perfect all the time” (A1)
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15. 6. Perceived cost reduction
 Initial hardware and infrastructure;
 high cost of maintaining on-premise ERP and
potential long term operational cost savings with
SaaS ERP.
 “..it’s the ongoing running costs, support and
maintenance, that makes a difference”
(Participant B).
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16. 7. Functionality Fit and Customization Limitations
 Only three participants raised concerns around
lack of flexibility of SaaS ERP software due to
concerns around the ability to customize the
software.
 “They do have a certain amount of configurability
in the program...but when it comes down to the
actual software application, they (ERP vendor)
say this is what you get...and if you want to
change, that’s fine but then we’ll make the
change available to everybody...so you lose your
competitive advantage” (D)
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17. Explanation of SME reluctance to adopt SaaS ERP
Sunk cost &
Data security Satisfaction -
risk
- with existing
systems
Perceived
- cost
+ reduction
Loss of SME
control & - intention
Lack of to adopt
vendor trust SaaS ERP
+ Improved IT
- reliability
System Reduced
performance - functionality fit
& Availability & customization
risk limitations
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18. Going Forward
 Lack of control and vendor trust concerns
dominate in SA and this is exacerbated by high
risks of unavailability attributed to the poor
network infrastructure of the country.
 Due to the lack of SaaS ERP vendor presence in
South Africa, it is reasonable to assume that
South African organizations lack sufficient
awareness around SaaS ERP
 ERP SaaS Adoption issues
 ERP Retirement research
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19. Thank you!
Questions?
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