Research pick: Cloudy economic outlook - "Does adoption of cloud computing matter? The economic worth of cloud computing implementation"

There has been a considerable amount of hyperbole expounded around the topic of cloud computing. However, it is a paradigm that offers many benefits to those with limited computing resources or simply a need to shift the processing and data storage to external systems and reap the benefits of distributed, networked tools and memory.

Now, Aurelia Nicholas-Donald of Virginia State University Petersburg and Mo Adam Mahmood and Laura Lunstrum of Trevino University of Texas at El Paso, USA, have asked the provocative question: “Does adoption of cloud computing matter?”. Writing in the International Journal of Information Systems and Management, they reveal their findings regarding the economic worth of the implementation of cloud computing and how that might affect the market value of a company.

The team used a resource-based view and the efficient market hypothesis to analyse a sample of 136 companies on the US stock exchanges that use cloud computing. Intriguingly, the team found that announcements regarding cloud computing aspirations or executions are actually associated with a drop in market returns, although scientifically speaking these returns are not statically significant. However, the trading volume and the risk of these companies did show a significant increase and both were found to be statistically significant in the face of cloud computing announcements.

The researchers suggest that the stock market reaction is mixed. “The key features affiliated with cloud computing, such as lower startup costs, less training requirement, ease of governance, and ease of maintenance appears to impact the financial outlook of the firm,” they explain. However, “The significant increase in volume reflects that investors see the adoption of cloud computing as a means for enhancing the abilities of a business,” the team reports.

“We believe the present research shows that cloud computing adoption does provide financial benefits to the adopting firms,” the team concludes.

Nicholas-Donald, A., Mahmood, M.A. and Trevino, L.L. (2018) ‘Does adoption of cloud computing matter? The economic worth of cloud computing implementation‘, Int. J. Information Systems and Management, Vol. 1, No. 4, pp.328-342.