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Abstract

Although a substantial portion of IT spending has shifted to the cloud, empirical evidence on economic value of cloud computing is lacking. This study examines the effect of cloud computing on productivity and scrutinizes how its effect differs depending on environmental uncertainty. Using publicly available data on the product sales and the inter-industry purchase flows, we measure purchased cloud services in U.S. industries during 1997-2018 and distinguish between software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS). Employing a production function approach, our findings suggest that cloud computing investments do not always lead to productivity gains, but its effect varies by the level of environmental uncertainty. Specifically, while cloud computing contributes to productivity under high environmental uncertainty, it may have an adverse effect under stable environments. Further, this positive impact under uncertain environments is found to be driven mainly by IaaS, rather than SaaS. This study provides important implications on cloud computing investment strategies.

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Aug 10th, 12:00 AM

Returns to Cloud Computing Investments: The Role of Environmental Uncertainty

Although a substantial portion of IT spending has shifted to the cloud, empirical evidence on economic value of cloud computing is lacking. This study examines the effect of cloud computing on productivity and scrutinizes how its effect differs depending on environmental uncertainty. Using publicly available data on the product sales and the inter-industry purchase flows, we measure purchased cloud services in U.S. industries during 1997-2018 and distinguish between software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS). Employing a production function approach, our findings suggest that cloud computing investments do not always lead to productivity gains, but its effect varies by the level of environmental uncertainty. Specifically, while cloud computing contributes to productivity under high environmental uncertainty, it may have an adverse effect under stable environments. Further, this positive impact under uncertain environments is found to be driven mainly by IaaS, rather than SaaS. This study provides important implications on cloud computing investment strategies.

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