Dissertation Report on

Quality assurance study of IT outsourcing in UAE

Submitted in partial fulfilment of the requirement of Executive Masters in Business Administration (EMBA)

Submitted By: Bijoy Raghavan EWD5010/EMBA 5

Mentored By: Dr. Balakrishna Grandhi

SP Jain Center of Management Academic City Dubai UAE

Dissertation

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ACKNOWLEDGEMENT ACKNOWLEDGEMENT

I would like to thank my colleagues and my mentor for all that I have learnt from them during my past two years. The attempt in the report is to utilize some of the concepts of services marketing, market research & quantitative analysis to analyse current market dynamics and forecast future trends for IT outsourcing. I will thank all my colleagues in the college & at work; who have contributed to my research in some forms. Lastly I would thank all the faculty, admin & support staff of SP Jain for their selfless support and co-operation and in making the learning process, absolute fun.

Thanks bijoy

DECLARATIION DECLARAT ON

I hereby declare that the matter included in this dissertation report entitled “Identifying choice drivers & Quantifying Expected Service Levels for IT Outsourcing in UAE using ServQual Analysis” is the result of study and interviews carried out by me with various decision makers. I further declare that this is my original work and has not been published anywhere before. This Project Work has been carried out for the sole purpose of submission in partial fulfilment of Executive Masters in Business Management (EMBA) in Operations Management at SP Jain Center of Management, Dubai.

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Table of Contents
ACKNOWLEDGEMENT ............................................................................................................................................................ 2 EXECUTIVE SUMMARY............................................................................................................................................................ 4 RESEARCH OBJECTIVES ........................................................................................................................................................... 5 BACKGROUND TO THIS PROPOSAL ......................................................................................................................................... 5 DYNAMICS OF UAE IT ENVIRONMENT .................................................................................................................................... 8 ECONOMIC AND POLITICAL ENVIRONMENT ..........................................................................................................................10 SWOT ANALYSIS OF UAE IT SERVICES PROVIDERS ..................................................................................................................12 SERVQUAL ANALYSIS .............................................................................................................................................................13 UAE SERVICES MARKET QUADRANT ......................................................................................................................................24 MARKET DEVELOPMENTS BY SERVICE TYPE ...........................................................................................................................25 MAJOR FINDINGS ..................................................................................................................................................................26 RESEARCH METHODOLOGY ...................................................................................................................................................31 PROJECT SCHEDULE ...............................................................................................................................................................33 ANNEXURE: ...........................................................................................................................................................................34 Questionnaire ................................................................................................................................................................................ 34 Questionnaire Coding .................................................................................................................................................................... 40 Codes of Conduct ........................................................................................................................................................................... 44 References: .................................................................................................................................................................................... 44

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Executtiive Summarry Execu ve Summa y In UAE we have seen steady growth in IT outsourcing over past few years and what began as a low-cost tactic for staff supplementation by managers is morphing into a strategic option available to business planners and technologists. The effort in this report is to identify factors & choice drivers for decision makers to satisfy minimum expectations out of IT outsourcing & services companies. Stark finding of the report was that the companies not only expect the service providers to address their IT situations, add value to existing services but also own specific business areas backed by technology. They clearly expect a strong strategic partner than a tactical efficient vendor. Trust and empathy were the two most sought after parameters by most of the respondents. While UAE always had Multi-sourcing users where they did business with multiple service providers, depending on where they can find the best skills for the best price the new trend shows more and more companies would prefer a one stop IT outsource partner. This partner is expected not only manage and commit to their SLA’s – the traditional yardstick for measuring results, but also play an active role in client’s business imperatives. The report also concluded that most UAE service providers are tactical in their approach. This also kind of explains the reason why many companies continue to have in house IT and cost centre’s for IT support. Respondents expect IT outsourcing companies to form steering committees along with them, which will be empowered to over-ride contract, services & rates if there is a sudden change in the market & business conditions. Such empowerment will help business continuity without impacting the overall performance and also enable the partnership to be of strategic in nature. The big question I tried to address was; in spite of obvious advantages why isn’t outsourcing of services in UAE; adopted as well as in other countries? We also found business loss and project failures to be the biggest insecurity and leading factors for reluctance to outsource. The changing dynamics means that clients will challenge the outsourcing companies not only to explain TCO, ROI of their investments but will also expect them to commit to their IT outsourcing translating into financial benefits. New methodologies are being evaluated for the technology partners to reap benefits if the business improves or pay penalty if technology services disrupts business operations. Overall the trend is positive for companies in achieving the symbiotic relationship which is the backbone of any form of outsourcing. The research involved surveys, questionnaires, fact to face interviews and tools used are SPSS, Excel. ServeQual analysis was used to quantify the expected service levels and resultant gaps.

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Researrch Objjecttiives Resea ch Ob ec ves The objective of this research is to understand the choice drivers & motivators for outsourcing business applications and in house IT services to service providers. Identify factors decision makers consider to satisfy minimum expectations out of IT outsourcing & services providers and the resultant gaps and challenges in the delivery of these services in UAE. Backgrround tto tthiis prroposall Backg ound o h s p oposa UAE has witnessed exponential growth in trade and business in past 4-5 years and its IT services market is expected to worth 1 billion dollars by 2010. The market has steadily matured and operations have become intense. Though deployment, system integration and support services remain the biggest IT services segment; effective management of internal costs and external competition is increasingly exerting pressure on companies to outsource their IT services. In house IT and group IT functions are unable to cope with business pressure and are becoming tactical in nature. Most outsourcing projects to date have sought to reduce costs. This new survey shows that executives who have experienced the full range of outsourcing’s benefits understand it can offer a powerful boost to their business. The right outsourcing strategy can deliver tangible, measurable and predictable value that does more than reduce costs. Even the smallest companies need some form of high availability of their IT solutions. As a result outsourcing of application development, datacenter activities, corporate BOT (Built Operate & Transfer) projects, network and desktop outsourcing, remote managed service categories are seeing impressive growth year-on-year in UAE.

The big question we needed to answer is; in spite of obvious advantages why isn’t outsourcing of services in UAE; adopted as well as in other countries?

The IT services market here continues to remain heavily dependent on standard support and deployment services. Spending on hardware support and installation and customization services is higher in the UAE than in most mature markets. The reluctance to outsource IT infrastructure and services that is so critical to any business remains the single biggest inhibitor in the market. Outsourcing has been the cause of much debate in recent times. There have been arguments for and against outsourcing.

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The supporters of outsourcing are primarily those motivated by the desire to cut costs and streamline their business processes. For all those against outsourcing the worry is primarily business disruptions, job losses, service degradation, project failure and costs. But we have seen recently companies are unleashing the power of outsourcing to help them innovate by speeding business processes, reducing the pain associated with regulatory compliance and allowing companies to focus on the core business. Outsourcing makes companies more competitive and this in turn benefits the end-consumers. Whatever may be the conclusion, the fact remains that in these days of heavy competition, it’s become a necessity to outsource certain components of a business in order to remain competitive.

This report puts an effort to analyze and quantify the expected service levels for corporate outsourcing decisions. We also look at the market dynamics which influences a decision maker during outsourcing decisions. Companies expect financial benefits from outsourcing and that’s the biggest sales challenge for outsourcing providers to present evidence of cost savings and business benefits through outsourcing. Consultative selling coupled with long sales cycle also proves to be an expensive practice. Services companies of the region have gone thru continues improvements to address changing customer needs and articulate their knowledge and understanding of business to reduce companies IT TCO (total cost of ownership).

Unlike some mature markets where service providers benefit from both economies of scale & lower setup costs the companies in UAE have long sales cycle, huge dependence on services and opportunity cost to maximize profits. In the past decade the outsourcing has matured especially since the burst of dot com’s, increased compliance levels and with sharp fall in infrastructure costs. The matrix of profitability and opportunity cost in each segment are driving forces for Service providers to innovate and align their offerings in future to catalyze outsourcing as a practice. Given the immense opportunity it is imperative for the service providers to get the pulse of customer requirements and gear up their focus towards corporate requirements. Similarly it becomes strategic for outsourcing companies to focus on their bottom line and look at their clients as partners and not as customers & to understand the dependencies of their model on this symbiotic relation.

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Why Outtsourrce? Why Ou sou ce? While outsourcing clearly reduces costs, its ultimate benefit to companies is that it offers a shortcut to innovation— which companies in UAE are realizing they need more and more; due competitive and conducive economy for booming business. Successful outsourcing in the other economies of the world has proven that companies are unleashing the power of outsourcing to help them innovate by speeding business processes, reducing the pain associated with rising costs, regulatory compliance and allowing companies to focus on the core business. Even regional players constrained by tradition, legacy information technology and layers of bureaucracy can quickly drive change throughout their organizations by using outsourcing. We have seen many companies in various trade free zones of Dubai, adept to global suppliers and struggle and smart outsourcing can help them eliminate learning curves, acquire best-practice experience, refresh their thinking and embrace new, more efficient methodologies—instantly. In the UAE’s fast-changing marketplace, this can be the difference between success and failure. My interaction with respondents of survey shows that satisfaction levels are high among executives who have successfully outsourced. But some respondents highlighted that companies have had disappointing experiences and that most companies which have outsourced have fired an outsourcing company. While it is easy to find vendors that promise cost savings, it is much harder to find partners who can deliver on their promises. Companies are becoming more sophisticated consumers of outsourcing services. As executives seek new outsourcing partners, they will increasingly look for partners or providers that offer experience—not just in the specific IT functions being outsourced, but also in developing the kinds of partnerships that are critical for success. In the past, many IT outsourcing companies sold their services on the strength of their process quality, infrastructures and certifications. Those things will continue to be the minimum compliance to compete. However, what becomes more critical as companies seek to achieve greater benefits of innovation and shareholder’s value, is the willingness to commit to client success. That partnership will only succeed if service providers share their clients’ risks—as well as their rewards.

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Siittuattiion Overrviiew S ua on Ove v ew Dynamiics off UAE IIT Enviirronmentt Dynam cs o UAE T Env onmen The UAE IT markets have matured since the success of free zones (viz. Internet City), leading to fewer new high-growth niches and pushing companies for differentiation. At the same time competition has increased putting pressure on prices and margins. As long as service providers offer something new, they can charge a premium, but there aren’t that many new technologies around and typically the vendors that are close to the technology development will have a lead in offering IT services related to this new technology. Traditional service oriented companies are swift followers of trends and thus have no drive for service innovation. Support and other entry-level services are barely profitable these days due to increased inflation. Bandwidth is still a premium and thus there is limited maturity in the high end web and over the internet services and solutions. Though IT companies here aren’t renowned for their services there is a marked improvement in the past many years due increased compliance and adoption of standards like ITIL. There are various challenges also which needs to be addressed. Some of the main challenges faced in UAE are

 Rising cost of doing business

There is immense pressure of most IT service providers to increase head counts and look out for bigger office space. Dubai Internet City has more than 600 companies and the free zone will sooner or later have to expand its perimeters. Cost of employees is also on the rise and this puts further pressure of operational expenses.  Resource Crunch

There is increasing demand for specialists & key skills. Companies find it difficult to source right talent locally due to visa restrictions and tough laws. Free zones have led the way but the region is yet to adopt all the best practices. Improper recruitment practices also prevail in many organizations due to poor HR which leads to depleted skill matrix and cartels within various functions.

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 Infrastructure Issues

Due to conservative capacity planning coupled with explosive growth in past few years there is immense pressure on bandwidth, power and datacenter space availability. Unless companies adopt dense infrastructure setups like SAN, Blades, Virtualization UAE will soon run out of datacenter space or faced with a tricky prospect of reinvesting on new setups.

 Best Practices

Due to all the above factors there are many service providers which compromise of best practices within their organizations. For example high available solutions, disaster recovery sites, business continuity practices will not be adopted by many organizations within UAE unless the capital investments are skewed to reasonable levels.  Services

After the collapse of margins in infrastructure and hardware lot of companies focused on services and as a result now margins in services are under lots of pressure. Services are key to survival due to direct contribution to bottom lines and unless companies differentiate, working on reasonable margins will be a tough ask.

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Economiic and Polliittiicall Enviirronmentt Econom c and Po ca Env onmen Economic and political environments play a vital role in the outsourcing both for vendors and decision makers. While outsourcing coupled with off shoring is the only option for unstable regions and stable economic and political environment is a perfect habitat to outsourcing companies to deliver and compete at highest levels. UAE has major advantages on these fronts. It has consolidated on its strong economic performance in past few years and has gained lots of investments and is a preferred destination for IT services for the whole of middle east. Although economic policies are liberal and business-friendly especially in the free zones, government restrictions limit market competition in general, and foreign competition in particular. On the export side, UAE companies that compete internationally are in most cases government-owned, with access to ample finance on favorable terms and their management is frequently the same entity as their regulatory authorities (e.g. airlines and civil aviation authority, ports, the Dubai International Financial Centre). On the IT segment though competition is more even. The UAE's GDP rose an estimated 6.2% in 2004, bringing total gross domestic product to $87.3 billion compared to $80.2 billion in 2003. The current account balance stood at $16.6 billion, or 19% of GDP. The UAE is much more diversified than the other Gulf States, but the oil sector still accounts for approximately 25% of GDP, 34% of exports, and 75% of fiscal revenue. Non-oil sectors are anticipated to expand in the coming years at rates between 4.5% and 6%, underpinning strong growth for the UAE economy. The looming reforms imposed by the UAE's obligations under WTO accession will boost the performance of the non-oil economy. Income tax is not charged in the UAE. Some large foreign businesses pay direct taxes (e.g., banks), whereas oil companies are taxed on profits. Indirect taxation, however low, is imposed at the emirate level. The UAE's interest rate tracks U.S. rates due to the dirham’s peg to the dollar. Low interest rates combined with no to little taxation have helped the UAE to maintain very high investment levels as well as to the support the consumer spending boom, most notably in the property market.

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Basiic Types off outtsourrced IIT Serrviices Bas c Types o ou sou ced T Se v ces  Hardware and Software Installation  Hardware and Software Support  Total IT infrastructure management  In house IT services  Network Infrastructure Management  Systems Integration  Application Management  Hosting Infrastructure Services  On Demand Services  Application Consulting & Development  Datacentre Services  Desktop Outsourcing  Security Services  BOT projects  VOIP & Collaboration  IT Training & consultancy

Total IT Outsourcing

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SWOT ANALYSIIS OF UAE IIT Serrviices Prroviiderrs SWOT ANALYS S OF UAE T Se v ces P ov de s

STRENGTHS

WEAKNESS

 Preferred destination in MENA  Tax Benefits  Booming local economy & increased spending  Cosmopolitan culture

 No USP’s  Processes & best practices  Followers  Segmentation & Target Audience  Internal Audits

OPPORTUNITIES

THREATS

 Growing economy and local spending  Regional instability (Outsourcing/DR/BCS )  Need for consolidation & integration of legacy systems

 Costs  In House IT services  Employee dependence & attrition  Other economical outsourcing regions

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Serrvquall Anallysiis Se vqua Ana ys s In service quality evaluation we have to treat data having different kinds of scales. In order to obtain a measure of the service quality level a conventional ordinal rating scale for each attribute of a service is used. Moreover additional information on the customers or on the objective characteristics of the service is available (interval, ordinal and or categorical scale). In the latter the importance or weight assigned to the different items must be also considered (compositional scale). To analyze these different kinds of data particular precaution should be used, a transformation of quality level perceived (expected) data in quantitative scale is carried out before a multidimensional data analysis.

(1) Tangibles. Physical facilities, equipment and appearance of personnel (2) Reliability. Ability to perform the promised service dependably and accurately (3) Responsiveness. Willingness to help customers and provide prompt services (4) Assurance (including competence, courtesy, credibility and security). employees and their ability to inspire trust and confidence. (5) Empathy (including access, communication, understanding the customer). Caring and individualized attention, that the firm provides to its customers. Corporate In house IT Support Gap Dimension Tangibles Reliability Responsiveness Empathy Expectation 3 5 7 8 Perception 2 6 5 5 Scores -1 1 -2 -3 Weightings 13.04 21.74 30.43 34.78 Weighted Average -0.13 0.22 -0.61 -1.04

personalized services to the business user coupled with Highest Importance given to proactive responses. This function is driven primarily by cost and guaranteed attention to service levels. the service providers infrastructure, brand name etc. This explains the reasons why so many companies in UAE continue to outsource their internal desktop and IT services to small vendors with limited market credentials. They are able to extract maximum support out of such vendors unlike standard companies who regulate the relation based on strict Least importance is give to SLA’s and compliances. SP Jain Institute of Management Studies

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Final average weighted SERVQUAL score

-1.91

Gap Analysis : The servequal score of -1.91 indicates that there is a huge gap in the expected and eventually delivered service levels. This clearly also highlights the fact that companies tend to put cost on priority than committed service levels offered by leading outsourcing players. In the coming few years we will see more and more in house IT & desktop services to be outsourced to bigger players who may not be economical but will offer super services and committed performance.

Server Side Business Applications. Gap Dimension Tangibles Reliability Responsiveness Empathy Expectation 8 7 4 3 Perception 9 4 4 3 Scores 1 -3 0 0 Weightings 36.36 31.82 18.18 13.64 Weighted Average 0.36 -0.95 0.00 0.00

Infrastructure capabilities including Datacenter space, Highest Importance given to bandwidth, IT framework, SLA’s etc. The client also expects the services to be highly reliable and consistent. The client has internal resources and expertise reducing his Dependence on the service providers and thus the expectations are focused on SLA’s and service uptime. Little importance is given to helpdesk and proactive services. Least importance is give to Final average weighted SERVQUAL score -0.59

Gap Analysis : On the server side business applications and managed hosting services the gap isn’t very high probably also due to lenient expectations. Managed hosting services has been adopted by only big enterprise and in some forms by small business but it still has been symbiotic in nature for a long time. In the coming times the expectation will surge and client will expect not only committed infrastructure and server support services but also will demand the service providers to play more strategic role as their technology partner. SP Jain Institute of Management Studies

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Network & Security Services Gap Dimension Tangibles Reliability Responsiveness Empathy Expectation 5 9 8 5 Perception 6 8 6 5 Scores 1 -1 -2 0 Weightings 18.52 33.33 29.63 18.52 Weighted Average 0.19 -0.33 -0.59 0.00

Reliability and pro-activeness due to the nature of services. This segment posses to be a single point of failure in any form of business and has seen systematic growth in the past few Highest Importance given to years As failure is not an option in network and security services the SLA’s and expectations are high. There is very little latitude for any empathy and any disruptions generally translate into loss of business. Least importance is give to Final average weighted SERVQUAL score -0.74

Gap Analysis: Security and network are more of awareness business in nature and is still in a nascent stage with very few client investing proactively on perimeter security and network services. Banks, oil companies, government have been the primary targets in this segments and are driven more by compliance than awareness.

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HW/SW Support and System Integrators Gap Dimension Tangibles Reliability Responsiveness Empathy Expectation 4 5 7 6 Perception 5 5 6 7 Scores 1 0 -1 1 Weightings 18.18 22.73 31.82 27.27 Weighted Average 0.18 0.00 -0.32 0.27

Costs and pro-activeness of the vendor. Services aren’t the Highest Importance given to focus due to the nature of business.

Brand and reputation. System integrators are known to cancel competitors accounts purely on costs exposing the client expectations out of such vendors. More services will have to be layered Least importance is give to Final average weighted SERVQUAL score 0.14

Gap Analysis: Though system integrators continue to be the biggest revenue collectors in the UAE It industry their margins have continued to shrink over the past few years due to maturity in this segment. There is very little expectation in terms of services here as a result price war if inevitable. Unless the system integrators add value to their existing services this will no longer be a lucrative space. Smaller player will struggle and will be dependent of renewal or existing client bases.

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Total IT Outsourcing Gap Dimension Tangibles Reliability Responsiveness Empathy Expectation 7 6 7 8 Perception 6 5 7 4 Scores -1 -1 0 -4 Weightings 25.00 21.43 25.00 28.57 Weighted Average -0.25 -0.21 0.00 -1.14

Empathy. Client expects the service providers to be a partner more than a vendor. Empathy though is intangible in nature can be addressed will strict committed deliveries coupled with Highest Importance given to strong business development initiatives.

IT outsourcing as a function has many perceived notions and Least importance is give to thus it is difficult to isolate any least important functions. -1.61

Final average weighted SERVQUAL score

Gap Analysis It clearly shows that service providers are tactical in nature when commissioning and delivering clients outsourcing requirements. They expect the service providers to insure all the pressure points of business with integrity rather than as deliverables. This is one of the biggest hindrances for IT outsourcing companies to compete against the internal IT divisions of companies.

SPSS SPSS
 68% of respondents claimed Trust for the one of the more critical choice drivers when it comes to outsourcing business critical IT functions to service providers.

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One of the stark findings of the survey was that 68% of respondents felt there was huge scope of improvement in the IT services which they were getting from their internal cost centre.

Almost 60% of respondents claimed business loss and business disruption as one of the most decisive factors to overcome when it comes to taking IT outsourcing decisions.

Project failures and Business loss feature as the top two concerns for most IT outsourcing decision maker. Addressing the insecurities brought upon by threats of datacenter, security & project failures; leading to business loss, will continue to be the biggest challenge for service providers.

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Regression Analysis
Notes Output Created Comments Filter Weight Input Split File N of Rows in Working Data File Definition of Missing Missing Value Handling Cases Used Statistics are based on cases with no missing values for any variable used. 10252 bytes User-defined missing values are treated as missing. <none> 25 <none> <none> 04-NOV-2007 18:30:18

Memory Required Additional Memory Required for Residual Plots Elapsed Time

Resources

0 bytes

0:00:00.13

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Warnings For models with dependent variable Top quality seeked during IT Outsourcing Decision, the following variables are constants or have missing correlations: Expensive. They will be deleted from the analysis.

Variables Entered/Removed(b) Variables Removed

Model

Variables Entered

Method

Job losses, Security Threats, Gaps-Are tactical in nature and not strategic, Business benefits due to IT outsourcing has to always translate into financial benefits, Data Centre Failure, Hidden Costs, They don’t understand business needs, We expect the outsourcing companies 1 to pay penalty for any business loss, Drop in Service Standards, Project or Partnership Failure, Business Loss, Outsourcing sales cycle of UAE are consultative in nature, Good Regional Outsourcing company, Biggest Reluctance is that Business will get affected, It is always good to outsource to a group company or internal IT division, Outsourcing within UAE is expensive, Project Failures, Insufficient Budget(a) a All requested variables entered. b Dependent Variable: Top quality seeked during IT Outsourcing Decision . Enter

Model Summary Model 1 R .945(a) R Square .894 Adjusted R Square .257 Std. Error of the Estimate 1.99

a Predictors: (Constant), Job losses, Security Threats, Gaps-Are tactical in nature and not strategic, Business benefits due to IT outsourcing has to always translate into financial benefits, Data Centre Failure, Hidden Costs, They don’t understand business needs, We expect the outsourcing companies to pay penalty for any business loss, Drop in Service Standards, Project or Partnership Failure, Business Loss, Outsourcing sales cycle of UAE are consultative in nature, Good Regional Outsourcing company, Biggest Reluctance is that Business will get affected, It is always good to outsource to a group company or internal IT division, Outsourcing within UAE is expensive, Project Failures, Insufficient Budget

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ANOVA(b) Model Regression 1 Residual Total Sum of Squares 100.440 11.924 112.364 df 18 3 21 Mean Square 5.580 3.975 F 1.404 Sig. .443(a)

Predictors: (Constant), Job losses, Security Threats, Gaps-Are tactical in nature and not strategic, Business benefits due to IT outsourcing has to always translate into financial benefits, Data Centre Failure, Hidden Costs, They don’t understand business needs, We expect the outsourcing companies to pay penalty for any business loss, Drop in Service Standards, Project or Partnership Failure, Business Loss, Outsourcing sales cycle of UAE are consultative in nature, Good Regional Outsourcing company, Biggest Reluctance is that Business will get affected, It is always good to outsource to a group company or internal IT division, Outsourcing within UAE is expensive, Project Failures, Insufficient Budget b Dependent Variable: Top quality desired during IT Outsourcing Decision

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Coefficients(a) Unstandardized Coefficients Standardized Coefficients Beta Model B Std. Error t Sig.

(Constant) Project or Partnership Failure Drop in Service Standards Gaps-Are tactical in nature and not strategic They don’t understand business needs Data Centre Failure Business Loss Security Threats Hidden Costs Project Failures 1 Outsourcing within UAE is expensive We expect the outsourcing companies to pay penalty for any business loss It is always good to outsource to a group company or internal IT division Outsourcing sales cycle of UAE are consultative in nature Business benefits due to IT outsourcing has to always translate into financial benefits Biggest Reluctance is that Business will get affected Insufficient Budget Good Regional Outsourcing company Job losses a Dependent Variable: Top quality desired during IT Outsourcing Decision

-17.034 -2.092 .832 .445 .978 -.203 -.424 2.742 -1.316 2.030 1.173

57.429 4.325 1.773 3.456 3.782 1.974 1.857 1.926 3.886 5.274 5.149 -.431 .183 .041 .215 -.052 -.112 .468 -.200 .464 .231

-.297 -.484 .470 .129 .258 -.103 -.228 1.424 -.339 .385 .228

.786 .662 .671 .906 .813 .925 .834 .250 .757 .726 .834

2.535

5.089

.470

.498

.653

-.209

3.031

-.065

-.069

.949

.790

3.117

.180

.253

.816

-.256

1.106

-.080

-.232

.832

1.025 -.148 -4.960 4.455

3.261 7.484 5.592 5.179

.726 -.527 -.253 .160

.314 -.020 -.887 .860

.774 .985 .440 .453

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Analysis of SPSS Output
o

R-Square

In statistics, the coefficient of determination R2 is the proportion of variability in a data set that is accounted for by a statistical model. In this definition, the term "variability" is defined as the sum of squares. There are equivalent expressions for R2 based on an analysis of variance decomposition. A general version, based on comparing the variability of the estimation errors with the variability of the original values, is

Our R-Square is 89% for the assumption that a client seeks for trust, empathy & ownership; which in other way means that the service provider steps into the shoes of clients while providing its services. The customers not only expect the client to address their insecurities but also take the addition mile of owning the troubled areas. This is a critical finding and reviews the very integrity of the service offerings.

o

Standardized coefficient or beta coefficient

This is the estimate of an analysis performed on variables that have been standardized so that they have variances of 1. This is usually done to answer the question which of the independent variables have a greater effect on the dependent variable in multiple regression analysis, when the variables are measured in different units of measurement (for example, income measured in dollars and family size measured in number of individuals). The highest Beta are for Budget (0.527) and to the fear of business getting affected ( 0.726). This signifies that both these factors needs to be addressed by the decision maker before is ventures into successful IT outsourcing venture.

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UAE Serrviices Marrkett Quadrrantt UAE Se v ces Ma ke Quad an VETRANS These vendors have large, mature LEADERS These are the current top players of the market, with products & services that have built up large customer bases. These top service providers haven’t become leaders overnight. Most of the companies in this quadrant were first specialists or futurists at some point. As companies reach this stage, they must fight complacency and continue product innovation, or else they’ll be replaced by the next generation of futurists.

installed bases of customers, but no longer set the pace for the rest of the industry. These vendors are no longer considered trend setters as they once were. In some cases, this is by design. If a vendor has made a strategic decision to move in a new direction, it may slow development on one product line and start
M A R K E T S H A R E

another. In other cases, a vendor may simply become complacent as a top vendor and be outdeveloped by hungrier new entrants and other top players. SPECIALISTS Emerging players that are still very new to the industry and have not yet built up much of an installed base. These companies are still developing their strategy and technology. There are many companies in Dubai Internet City who become technology partners of leading global specialists and offer regional services Old players of the regions with

FUTURISTS These vendors offer cutting edge

technology, but have not yet built up a large customer base. With effective marketing and better awareness, these companies hold the power to dethrone the current market leaders. Futurists often shape the future of technology with their innovations and new product designs.

economies; who capitalize on their base by offering niche products.

SERVICES

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UAE Market Quadrants above is designed to illustrate how individual vendors fit within the general technology services markets at any given point in time. I have tried to illustrate the Market Quadrants in four sections. It is common for vendors to move between quadrants over the life of a product and services, as their offerings improve and market requirements evolve.

Marrkett Devellopmentts by Serrviice Type Ma ke Deve opmen s by Se v ce Type In the recent past the lead for the pie of UAE outsourcing has been taken by data centre companies who offer various types of security, hosting and remote management services. Hosting services in the UAE is gaining from growing broadband Internet penetration levels, which are among the highest in the Middle East region. Prior to the rollout of ADSL access by incumbent operators, overall Internet usage levels remained limited due to low bandwidth and the high cost of access. Internet usage levels are, however, on the rise and as a result businesses are seeing a need to invest more in developing an Internet presence for sales and marketing purposes. Demand for hosting services is growing in relation to Internet access penetration levels, and, in particular, broadband penetration. In terms of total number of customers, the market is heavily weighted toward basic managed and co location services. Still, a high percentage of revenues comes from complex managed customers. Although their numbers are small in comparison, average spending levels for complex managed customers are significantly higher compared to basic managed and co location. This dynamic has resulted in a small number of customers generating a large share of the market's value.

End users in the UAE are moving away from the basics of implementation and support to customization and outsourcing. Moreover, organizations are warming to service models because their IT infrastructure has been growing increasingly complex, necessitating highly trained IT specialists and contractors. Competition especially last 2 years has intensified among IT services vendors in the UAE last year. Local players dominated the scene, however, no one vendor controlled the market, with the top ten only accounting for 54.2% of total revenue. Government-owned firms have entered the fray, often winning key government contracts and reducing the available business for private vendors. The time is ripe for consolidation.

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Majjorr Fiindiings Ma o F nd ngs  Almost 90% of respondents felt that their IT service providers are tactical in nature and exposed lack of strategic technological partners.  From the servqual & respondents feedback, one stark finding was that the companies not only expect the SP’s to address their insecurities but also own specific business areas backed by technology. They clearly expect a strong partner than a efficient vendor.  80.7% of the respondents responded negatively to the benefits achieved out of outsourcing their technology services to a group IT arm and highlighting their expectation out of the services market.  Almost 95% of respondents expected/ensured credit notes and compensation for business loss due to IT service disruptions through its technology partners.

 As shown in the graph below business loss and project failures are the biggest concerns of
decision makers followed by Datacenter and Security threats. Another interesting point was hidden costs was the least of bother for 84% respondents clearly signifying their focus is on value additions than on costs.

 A

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Futturre Outtllook Fu u e Ou ook Market Force: Competition Trend Forecast:

Competition will intensify in the coming months and the companies will be forced to compete heavily on differentiated and value added services. Services margins will shrink. Impact:

Smaller companies will find it extremely difficult to compete with increasing operating expenses and will be restricted to small business operations. There can be few big mergers and acquisitions but that will be restricted to top players.

Market Force: Political Stability Trend Forecast: UAE political scenario looks stable and IT services companies most of which is based in Dubai shouldn’t be impacted irrespective of central political activities. Impact: The growth curve should be upwards and IT services should be worth 1 billion within few years.

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Market Force: Regional Instability Trend Forecast: Middle East as a region may continue to experience turbulent times for the coming few years. Impact:

UAE IT services companies especially the Outsourcing players should continue to benefit out of this. Lots of banks and large enterprise will move their central IT systems to UAE and there will be increased spending on security, DR & BCS services. Hosting and data security will sooner or later become a government mandate.

Market Force: Oil Prices Trend Forecast: Oil prices will continue to fluctuate will not lose the appreciation it has got in the last 2 years. Impact:

Companies involved will oil business and government should benefit from the oil prices as we have seen in the past and should fuel additional spending. UAE government continues to be one of the highest spenders in technology service and will continue to be prized prospect for service providers.

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Market Force: Outsourcing Trend Forecast:

Labor and in house IT costs will continue to surge putting lot of pressures especially on large enterprise. Inorganic growth coupled with channel partnership will lead to more and more success of multivendor ecosystems. Impact:

Outsourcing will be a lucrative option but the clients will continue to challenge the sales to prove financial benefits out of outsourcing; which will increase the sales cycles. Outsourcing will be evaluated by many but only the very mature clients with clear paradigms will adopt the practice.

Market Force: Norms and Compliance Trend Forecast:

Internal audits will become more stringent and comprehensive. As outsourcing as a practice picks up IT operations will become more of a financial function for companies and the investments will be scrutinized using various auditing models. Impact:

Service providers will be challenged by the decision makers to prove cost benefits and layer value added services with tangible TCO and ROI calculations. The sales cycle will get more and more consultative in nature and there will be pressing need for SLA’s and penalties to be well defined in contracts.

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Market Force: IT Threats and business vulnerabilities

Trend Forecast: The world for the first time in 2007 witnessed cyber war when Russian hackers launched a systematic campaign on most of the Estonian government sites, crippling many functions and bringing lot of embarrassment to the ruling government. Companies will be adopting more proactive defenses especially on their IT perimeter with every increasing cost of failures due to consolidation and centralization.

Impact: All awareness business (viz. Anti-spam, intrusion detection systems, vulnerability assessment systems, disaster recovery & business continuity services etc ) will continue to gain business and companies will address their insecurities around business disruptions.

Apart from the above analysis some of the trends to monitor will be o o o o o o Consolidation (Mergers & Acquisitions) Channel & Technology Partnerships IT & Data insurance VOIP/Virtualization/IT Frameworks Increasing threat of cyber war Off shoring

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RESEARCH METHODOLLOGY RESEARCH METHODOLOGY ESEARCH ETHODO OGY This research would be qualitative and quantitative by nature, as we don’t know a lot about consumer perceptions, and we want to find out the consumer attitude towards various options available. I intend to use some Face to Face interviews, questionnaires & personal experience to complement my analysis. Respondents will be selected randomly from various segments (viz. SMB’s, MNC’s). Then the data gathered and processed using data analysis software’s and then findings are interpreted. For the sake scoping outsourcing of Application Development is not factored in most of the research sections.

TARGET RESPONDENT TARGET RESPONDENT ARGET ESPONDENT The target respondents for this research are:

Cities: Dubai

Segment: IT Managers, CFO’s, GM’s

Category: SMB’s, MNC’s & Government

Usage: Decision makers & influencers of an organization involved IT services and outsourcing activities.

Arrea off coverrage A ea o cove age

Dubai

Samplle Siize Samp e S ze
o

30 decision makers from SMB’s, MNC’s & Enterprise

IInfforrmattiion Arreas n o ma on A eas While a detailed discussion guide will be prepared and shared with all, below is a brief list of information areas that we plan to cover in this research.
o

Profiling of the respondent
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o o o

Screening information of the respondent as per the eligibility criteria Awareness of Outsourcing. Source of awareness where and their belief? Outsourcing
o o o o

What kind of systems they outsource? What are the expected service levels from the Service Providers? What are the choice factors and salient features they look at when they outsource? What do they feel about managed hosting companies in UAE vs that of North America.?

o

Importance of Services and gaps
o o o

Understanding the Gaps using the servqual analysis Emerging trends in outsourcing industry and regional service offerings Options within UAE

o

Challenges facing outsourcing in UAE
o o o

Market Dynamics Competition with low cost outsourcing outside UAE Cost Benefit Analysis

o

Brief projection and forecasting on future of Outsourcing in UAE

Delliiverrablles De ve ab es Our deliverables for this project include the following:

1. Questionnaire in English 2. Discussion guide English 3. Presentation of findings to the class and guide Anallyttiicall ttechniiques fforr Anallysiis Ana y ca echn ques o Ana ys s While there are several qualitative analytical techniques at our disposal, we anticipate using the following analytical techniques:    ServQual Methodology SPSS Excel

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Prrojjectt Schedulle P o ec Schedu e

Time Week 1

Research stage Defining Research objective

Action Formulation of Statement of objective duly signed by both parties.

week 2 Week 3

Research design Data gathering (Field work)

Preparation of questionnaire Interview (with appointment at customer premise)

Week 4

Data gathering (Field work)

Interview (with appointment at customer premise)

Week 5

Data and processing Analysis

. Editing and coding. Data analysis using SPSS software

Week 6

Conclusion and report

Presentation of conclusion

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Annexurre:: Annexu e Questtiionnaiirre Ques onna e
The following questionnaire is a sample questionnaire which was used during the survey to gather some insight into decision makers psyche.

Choice Drivers & Motivators for IT Outsourcing Decisions

Questionnaire date ……………

signature:

Respondent Serial Number

Interviewer name

Quota for this questionnaire checked

Interview Date

This is a successful interview

Respondent’s Full Name Company Designation

WRITE CLEARLY
(We will call back)

Email: Phone:

City: Mobile:

Head Office

Position

Gender

Company Size

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Dubai

1

Influencer/ Recommender

1

Male

1

20 and below

1

Sharjah Abu Dhabi

2 CL

Manager Head- Business GM/CEO/Director

2 3 4

Female

2

20-50 50-500

2 3 4 5

Company SMB Branch Office Small Enterprise 1 2 3 4

1000 & above 5000 & above

Survey method Interview place Resp’s Home Resp’s Office On the street 1 2 3 Office Email Outdoors 2 3 4

Large Enterprise

Decision Maker Yes No 1 2

Introduction

Good morning/ Good evening/ good day Sir/ Madam. My name is Bijoy Raghavan and I am student of SP Jain Institute of Management Studies. Here is my college ID card. We collect opinion about different products and services that you use now days. Your opinion is very valuable for us and for the survey and will be kept classified or made public. If you have some time now, this interview will take around 10 minutes. Would you like to participate in this survey? Please note that your name and contacts are only for my supervisor to check my work. Otherwise, your name and contacts will remain confidential with us. The final research report will not be shared with any companies. Do I have your permission to start this interview? Let’s go to a comfortable place where we are not disturbed.

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SCREENING SECTION
Q.1 Are you involved in IT outsourcing decisions

Yes CLOSE No

1 2

Q.2

Do you have a group IT company to which you Outsource your IT services

CONTINUE CLOSE

No Yes

1 2

Q.3

What activities of your IT do you or you intend to outsource.

Server side business applications Corporate Desktop & In house IT services Network & Security Operations Total IT operations Hardware & Software Maintenance

1 2

3 4 4

Q.4

What are the top three qualities you would weigh maximum when you have to take any IT Outsourcing decisions? (read list after the respondents’ answer for aided factors)

Factor

Top of Mind

Spontaneous

Aided

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Reliable Competency Trust Brand/Reputation Past Performance Client Base Corporate Relations SLA & SLM Cost UAE Based Empathetic Support Services Support

1 2 3 4 5 6 7 8 9 10 11 12 13 12

1 2 3 4 5 6 7 8 9 10 11 12 13 12

1 2 3 4 5 6 7 8 9 10 11 12 13 12

Q.5

IT outsourcing ( Scope & Benefit Analysis )

N/A

Strongly Agree

Agree

Disagree

Strongly Disagree

The primary benefit of IT outsourcing is cost reduction The primary benefit of IT outsourcing is service improvement I think employees do feel a job threat when they outsource In UAE IT outsourcing will increase We have clear business plans for outsourcing and how to succeed with it We expect the Outsourcing companies to analyze and propose merits and de-merits to us Outsourcing within UAE is expensive We have clear financial understanding of TCO

1

2

3

4

5

1

2

3

4

5

1

2

3

4

5

1 1

2 2

3 3

4 4

5 5

1

2

3

4

5

1 1

2 2

3 3

4 4

5 5

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and ROI when outsourcing We expect the outsourcing companies to pay penalty for any business loss It is always good to outsource to a group company or internal IT division Outsourcing sales cycle of UAE are consultative in nature Business benefits due to IT outsourcing has to always translate into financial benefits The primary benefit of IT outsourcing is service standardization across offices 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

Q.6

What is your biggest reluctance when you have to Outsource your IT operations

N/A

Strongly Agree

Agree

Disagree

Strongly Disagree

Business will get affected Insufficient Budget Good Regional Outsourcing company Job losses Project or Partnership Failure Drop in Service Standards

1 1 1 1 1 1

2 2 2 2 2 2

3 3 3 3 3 3

4 4 4 4 4 4

5 5 5 5 5 5

Q.7

In a scale of 10 (0 being least important & 10 being most significant) rate the following parameters for critical IT outsourcing decisions

(1) Tangibles. Physical facilities, equipment and appearance of personnel. (2) Reliability. Ability to perform the promised service dependably and accurately. (3) Responsiveness. Willingness to help customers and provide prompt service. (4) Assurance (including competence, courtesy, credibility and security). employees and their ability to inspire trust and confidence. (5) Empathy (including access, communication, understanding the customer). Caring and individualized attention that the firm provides to its customers.

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Tangibles Reliability Responsiveness Assurance Empathy

Q.8

Gap Analysis. Please comment. In your past experience; you found most IT Outsourcing companies of UAE

N/A

Strongly Agree

Agree

Disagree

Strongly Disagree

Are tactical in nature and not strategic Have very little service offerings Expensive They don’t understand business needs

1 1 1 1

2 2 2 2

3 3 3 3

4 4 4 4

5 5 5 5

Q.9

What keeps you up at nights

Most often Data Centre Failure Business Loss Security Threats Hidden Costs Project Failures 1 1 1 1 1

Often

Occasionally

Never

2 2 2 2 2

3 3 3 3 3

4 4 4 4 4

Thanks for your time. End of Questionnaire

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Questtiionnaiirre Codiing Ques onna e Cod ng
Do you have a group IT company to Do you believe in Outsourcing Respondents Respondent 1 Respondent 2 Respondent 3 Respondent 4 Respondent 5 Respondent 6 Respondent 7 Respondent 8 Respondent 9 Respondent 10 Respondent 11 Respondent 12 Respondent 13 Respondent 14 Respondent 15 Respondent 16 Respondent 17 Respondent 18 Respondent 19 Respondent 20 Respondent 21 Respondent 22 Respondent 23 Respondent 24 Respondent 25 IT services 2 2 2 2 2 2 2 2 4 2 4 2 2 2 2 2 4 2 2 2 2 2 2 2 2 which you Outsource your IT services 1 1 2 1 1 1 1 1 2 1 2 1 1 1 1 1 2 1 1 2 1 1 2 1 1 What activities of your IT do you or you intend to outsource. 1 4 2 4 2 1 4 2 1 1 2 2 1 4 1 1 2 4 1 1 1 1 4 1 2 Top quality seeked during IT Outsourcing Decision 4 3 3 9 3 4 3 3 3 3 9 3 3 3 4 3 9 3 3 3 4 3 3 9 3 Second most seeked factor during IT Outsourcing Decision 3 1 1 1 1 1 1 4 9 9 3 4 1 9 3 4 1 9 1 1 3 1 9 3 1 The primary benefit of IT outsourcing is cost reduction 3 2 3 3 3 3 4 3 4 3 3 3 3 2 3 3 2 3 3 2 3 2 3 2 3

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We expect the The primary benefit of IT outsourcing is service Respondents Respondent 1 Respondent 2 Respondent 3 Respondent 4 Respondent 5 Respondent 6 Respondent 7 Respondent 8 Respondent 9 Respondent 10 Respondent 11 Respondent 12 Respondent 13 Respondent 14 Respondent 15 Respondent 16 Respondent 17 Respondent 18 Respondent 19 Respondent 20 Respondent 21 Respondent 22 Respondent 23 Respondent 24 Respondent 25 improvement 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 I think employees do feel a job threat when they outsource 4 4 3 4 4 4 4 4 3 4 4 4 4 4 4 4 3 4 4 4 4 4 4 4 4 In UAE IT outsourcing will increase 4 4 4 5 4 5 4 4 5 4 4 5 4 4 5 4 4 4 5 4 4 4 4 5 4 Outsourcing within UAE is expensive 3 3 3 4 3 4 3 3 3 3 4 3 3 3 4 3 3 3 4 3 3 3 4 4 3 outsourcing companies to pay penalty for any business loss 3 3 3 4 3 4 3 3 3 3 3 3 3 3 4 3 3 3 3 3 3 4 3 4 3 It is always good to outsource to a group company or internal IT division 4 4 4 4 3 4 4 3 4 4 4 4 4 3 4 4 5 4 4 5 5 4 2 4 5

Business benefits due to IT outsourcing Outsourcing sales cycle of UAE are consultative in Respondents Respondent 1 Respondent 2 Respondent 3 nature 4 4 4 has to always translate into financial benefits 4 3 3 Biggest Reluctance is that Business will get affected 3 3 4 Insufficient Budget 4 4 3 Good Regional Outsourcing company 4 4 4 Job losses 4 4 3

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Gaps-Are Project or Partnership Respondents Respondent 1 Respondent 2 Respondent 3 Respondent 4 Respondent 5 Respondent 6 Respondent 7 Respondent 8 Respondent 9 Respondent 10 Respondent 11 Respondent 12 Respondent 13 Respondent 14 Respondent 15 Respondent 16 Respondent 17 Respondent 18 Respondent 19 Respondent 20 Respondent 21 Respondent 22 Respondent 23 Respondent 24 Respondent 25 Failure 3 3 3 3 4 4 4 4 3 3 3 3 3 4 4 4 3 3 4 3 3 3 3 3 3 Drop in Service Standards 3 4 3 3 4 3 4 4 3 4 3 4 3 4 3 4 3 3 4 3 3 4 3 4 3 tactical in nature and not strategic 3 3 3 3 3 3 3 3 3 3 3 3 4 3 3 3 3 3 3 3 4 3 3 3 3 Expensive 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

They don’t understand business needs 4 4 3 4 4 3 3 4 3 4 3 4 3 3 4 3 3 4 3 3 4 3 4 4 4

Data Centre Respondents Respondent 1 Respondent 2 Respondent 3 Respondent 4 Respondent 5 Respondent 6 Respondent 7 Respondent 8 Respondent 9 Respondent 10 Respondent 11 Respondent 12 Respondent 13 Failure 3 3 2 2 3 1 3 2 2 2 2 2 2

Business Loss 1 1 2 1 1 1 1 1 3 1 1 1 1

Security Threats 3 3 3 3 3 3 3 3 2 3 3 2 3

Hidden Costs 4 4 3 4 4 4 3 4 4 4 4 4 3

Project Failures 2 2 3 2 2 2 2 2 3 2 3 2 2

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Codes off Conductt Codes o Conduc Respondents are not forced and cannot be forced to participate in the interviews. Respondent’s identity and his individual feedbacks are classified information. No references to any companies or technologies.

Refferrences:: Re e ences
 Services Marketing – Christopher Lovelock  Marketing Management – Kotler-Keller  www.spss.com

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