Transaction Cost Economics Of Cloud Computing Adoption

Abstract

Cloud computing is posited as a next major innovation in IT industry. But Cloud computing is in its infancy in terms of market adoption. Its adoption is impeded by issues of privacy, security, confidentiality, availability and performance. In this paper, we use the framework offered by transaction cost theory to explain the adoption of cloud technologies. We study the three phases of migration to cloud – information seeking, contract preparation and contract execution. For each of these phases we categorize the transaction costs resulting from uncertainty surrounding the transaction and asset specificity required to support the transaction. We propose a set of guidelines for adopting organizations and providers that can reduce the transaction costs of cloud adoption