Implementing Managed Services in Nigeria
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Many companies exists today offering 'managed services'. In Nigeria reference surveys for determining the appropriate business models and criteria are few and far between. This presentation is the result of survey/ project to address such need. It makes use of decision making techniques, employs the business model canvass developed by Osterwalder et al and arrives at a submission: for Nigeria the most likely successful model for managed services is the subscription model. It also shows that customer related issues in general, and value proposition in particular, are the most important critical success factors in selecting a managed services provider.
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Implementing Managed Services in Nigeria
- 1. MTM / MEM / MPM SYMPOSIUM: Implementing Managed Information and Communication Technology Services BOGLO AP Tel: +234 802 320 2221 E-mail: ayodeleboglo@hotmail.com 2010 Symposium: GSTM
- 2. Agenda Introduction & Problem Statement Relevant Theory Project Model Results Conclusion 2010 Symposium: GSTM
- 3. Introduction & Problem Statement Views About ICT Business •IS/IT department Management Function •Regulation •Associations Business •Practitioners Ecosystem •users service •Outsourcing •Communications •Managed •Transportation System/ sub-system services •Utilities 2010 Symposium: GSTM
- 4. Introduction & Problem Statement Identified Challenges Challenges for Managed Services; mostly focused outside Africa Country-Level Individual-Level •Infrastructure • Culture and language •Law •Outsourcing experience •Security •Technical expertise and work •Time zone methods •performance metrics •quality of service •financial capabilities and Service Provider viability 2010 Symposium: GSTM
- 5. Introduction & Problem Statement Are the factors earlier mentioned tenable if Africa was to embrace the managed services phenomenon? Are there business models whose application will bode well for the implementation of managed services in Africa with internet services in particular? 2010 Symposium: GSTM
- 6. Relevant Theory Applicable Management Information System Theories •Principal-Agent •‘Make or buy’ conflicts decision •Information Agency assymetry •Production costs Cost Transaction Resource Cost Dependency •resources scarcity (RDT) •Resource Control (TCT) Managed and power Internet Services •Competitive advantage via resource: •Low Imitability •Social behaviour •Low mobility Social Resource •Dependency and Exchange Based •Rarity power •High Value (SET) (RBT) •Low substitution 2010 Symposium: GSTM
- 7. Relevant Theory Dependent and Independent Variables/Constructs Agency RBT RDT SET TCT Search, Information Resource bargaining, Assets Social exchange Assymetry, importance, enforcement, relationship, independent Moral hazard, Capabilities presence of dependency, asset specificity, Resources resource transacting trust, contract power alternatives frequency, uncertainty/risk Governance Efficiency, structure, degree interest of outsourcing, dependent alignment, risk Competitive Power /control Value, utility outsourcing sharing, advantage success, co- successful ordination & contracting collaboration 2010 Symposium: GSTM
- 8. Project Model Business Model Construct Source: Osterwalder et al 2010 Business Model Canvas Product Financial Management 2010 Symposium: GSTM
- 9. Project Model Decision Model Construct The Analytical Hierarchical Process provided a means for determining how important the various factors were for managed internet services • Made allowance for subjectivity and preferences • Made users and providers of the service joint deciders on what is important Managed Services (internet) Customer Infrastructure Financial Product Environment Interfaces Management Management 2010 Symposium: GSTM
- 10. Project Model Exploratory Survey Construct 2010 Symposium: GSTM
- 11. Project Model Survey Respondents Survey Characteristic Value Type of survey Exploratory Sampling Technique Stratified random Stratification criteria Geo-political region, Economic Activity, Educational disadvantage, logistical challenge, representation Selected respondents location (number) Lagos(400), Port-Harcourt (150), Kano (50) Respondent Classification Residential, Corporate 2010 Symposium: GSTM
- 12. Results Consistency Index (CI) = 77.85% Inconsistency Sources Priorities/Success Factors 2010 Symposium: GSTM
- 13. Results Preferred Business Model Alternative Total Score Normal Ideal Rank Subscription 0.1480 0.5622 1.0000 1 Model Utility Model 0.0666 0.2528 0.4497 2 Both (combination of 0.0346 0.1315 0.2338 3 both models) Other 0.0141 0.0534 0.0950 4 2010 Symposium: GSTM
- 14. Results Critical Success Factors Customer Interfaces: Managed internet services (i.e. ISPs) are to have the mass market as their priority customers. More priority should be given in creating awareness about the services they provide. Customers prefer personalised relationships with ISPs. Financial Aspects: ISPs should address issues of agency costs as their priority cost center; their priorities should be to locate in areas with higher population density; pricing models that generate revenue on a subscription basis offer better value and are of higher priority Infrastructure: ISPs should consider partnerships that deliver network optimisation and economies of scale; they should be configured in such a way that contract management and network promotion are top on the list of priorities; a critical success factor is to ensure the right configuration management/planning capabilities are in place Environment: legal environment must be such that they make the delivery of managed internet services less challenging. 2010 Symposium: GSTM
- 15. Conclusions Apparently, for Sub-Saharan Africa, the subscription-based business model is the most suited In decreasing order of priorities, to successfully implementing managed services one must consider customer interfaces, infrastructure, environment, product and then financial aspects Further investigation will be required to unlock the reasons for the inconsistencies between what the customer wants (customer interfaces) and the financial aspects of risk and reward of an investor 2010 Symposium: GSTM
- 16. Implementing Managed Information and Communication Technology Services Closure and questions 2010 Symposium: GSTM
Editor's Notes
- Agency TheoryAgency theory is directed at the ubiquitous agency relationship, in which one party (the principal) delegates work to another (the agent), who performs that work. Agency theory is concerned with resolving two problems that can occur in agency relationships. The first is the agency problem that arises when (a) the desires or goals of the principal and agent conflict and (b) it is difficult or expensive for the principle to verify what the agent is actually doing. The problem here is that the principal cannot verify that the agent has behaved appropriately. The second is the problem of risk sharing that arises when the principal and agent have different attitudes towards risk. The problem here is that the principle and the agent may prefer different actions because of the different risk preferences. Social Exchange TheoryToday, social exchange theory exists in many forms, but all of them are driven by the same central concept of actors exchanging resources via a social exchange relationship. Where social exchange (e.g., Ax; By ) is the voluntary transfer of resources (x,y,…) between multiple actors (A,B,…) (Cook,1977). The theory has evolved from a dyadic model to a network model (Cook, 1977) with market properties (Emerson, 1987). The crux of the theory is still best captured in Homans’s own words (1958, P.606) “Social behavior is an exchange of goods, material goods but also non-material ones, such as the symbols of approval or prestige. Persons that give much to others try to get much from them, and persons that get much from others are under pressure to give much to them. This process of influence tends to work out at equilibrium to a balance in the exchanges. For a person in an exchange, what he gives may be a cost to him, just as what he gets may be a reward, and his behavior changes less as the difference of the two, profit, tends to a maximum.” This interaction between two actors (people, firms etc.) results in various contingencies, where the actors modify their resources to each others expectations. Power is the mechanics that can explain the relation of the actors (Emerson, 1962 and Blau, 1964). According to Emerson (1962), power is the property of a relation and not of an actor, because it “resides implicitly in the other’s dependency.” (P.32). Where “dependence of A upon Bj (DABJ) is a joint function, (1) varying directly with the value to A of the resources received from B and (2) varying inversely with comparison level for alternative exchange relations.” (Emerson and Cook, 1972b: 64). Power results from resource dependency (Emerson, 1962) in a dyadic relation but in a network exchange model, it is also derived from the structure (Cook,1977) - structural power. Here, power of A over B (PAB) in any relation Ax; By is the ability of A to decrease the exchange ratio, x/y (Emerson and Cook,1974, P. 25). Transaction CostTransaction costs consist of costs incurred in searching for the best supplier/partner/customer, the cost of establishing a supposedly "tamper-proof" contract, and the costs of monitoring and enforcing the implementation of the contract. Transaction cost theorists assert that the total cost incurred by a firm can be grouped largely into two components—transaction costs and production costs. Transaction costs, often known as coordination costs, are well defined as the costs of "all the information processing necessary to coordinate the work of people and machines that perform the primary processes," whereas production costs include the costs incurred from "the physical or other primary processes necessary to create and distribute the goods or services being produced" Resource Based TheoryThe resource-based view (RBV) argues that firms possess resources, a subset of which enable them to achieve competitive advantage, and a subset of those that lead to superior long-term performance. Resources that are valuable and rare can lead to the creation of competitive advantage. That advantage can be sustained over longer time periods to the extent that the firm is able to protect against resource imitation, transfer, or substitution. In general, empirical studies using the theory have strongly supported the resource-based view. Resource Dependence TheoryRDT rest on some assumptions: 1- Organizations are assumed to be comprised of internal and external coalitions which emerge from social exchanges that are formed to influence and control behaviour 2- The environment is assumed to contain scarce and valued resources essential to organizational survival. As such, the environment poses the problem of organizations facing uncertainty in resource acquisition. 3- Organizations are assumed to work toward two related objectives: acquiring control over resources that minimize their dependence on other organizations and control over resources that maximize the dependence of other organizations on themselves. Attaining either objective is thought to affect the exchange between organizations, thereby affecting an organization’s power.
- Agency Main dependent construct(s)/factor(s) Efficiency, alignment of interests, risk sharing, successful contracting Main independent construct(s)/factor(s) Information asymmetry, contract, moral hazard, trust RBTMain dependent construct(s)/factor(s) Sustainable competitive advantage Main independent construct(s)/factor(s) Assets, capabilities, resources RDTMain dependent construct(s)/factor(s) Power of one organization (unit) upon another Main independent construct(s)/factor(s) Resource Importance, Alternatives (for the resource), Discretion (Unfettered Discretion) SETMain dependent construct(s)/factor(s) Value and utility: profit, rewards, approval, status, reputation, flexibility, and trust. Main independent construct(s)/factor(s) Exchange relation, dependency, and power TCTMain dependent construct(s)/factor(s) Governance structure, degree of outsourcing, outsourcing success, inter-organizational coordination and collaboration Main independent construct(s)/factor(s) Coordination costs, transaction risk (opportunity costs), coordination costs, operational risk, opportunism risk, asset specificity , uncertainty, trust