quality assurance study of it outsourcing in dubai

7/23/2019 Quality assurance study of IT Outsourcing in Dubai

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SP Jain Center of Management

SP Jain Institute of Management Studies | 2

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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

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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 ............................... ................................. ................................ ........................... 25MAJOR 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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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 SLAs the traditional yardstick for measuring results, but also play an active role in

clients 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 centres 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 isnt 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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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.

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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 outsourcings 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 isnt 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, its 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 thats 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 coms, 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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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 methodologiesinstantly. In the UAEs 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 experiencenot 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 risksas well as their rewards.


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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 arent 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 arent 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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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

dirhams 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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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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STRENGTHS

Preferred destination in MENA Tax Benefits Booming local economy & increased

spending

Cosmopolitan culture

WEAKNESS

No USPs Processes & best practices Followers Segmentation & Target Audience Internal Audits

OPPORTUNITIES

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

legacy systems

THREATS

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


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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

Dimension Expectation Perception

Gap

Scores Weightings Weighted Average

Tangibles 3 2 -1 13.04 -0.13

Reliability 5 6 1 21.74 0.22

Responsiveness 7 5 -2 30.43 -0.61

Empathy 8 5 -3 34.78 -1.04

Highest Importance given to

personalized services to the business user coupled with

proactive responses. This function is driven primarily by cost

and guaranteed attention to service levels.

Least importance is give to

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

SLAs and compliances.


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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


Tangibles 8 9 1 36.36 0.36

Reliability 7 4 -3 31.82 -0.95

Responsiveness 4 4 0 18.18 0.00

Empathy 3 3 0 13.64 0.00


Infrastructure capabilities including Datacenter space,

bandwidth, IT framework, SLAs 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 SLAs and service uptime. Little

importance is given to helpdesk and proactive services.


Gap Analysis :

On the server side business applications and managed hosting services the gap isnt 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.


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Network & Security

Services


Gap


Tangibles 5 6 1 18.52 0.19

Reliability 9 8 -1 33.33 -0.33


Empathy 5 5 0 18.52 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

years


As failure is not an option in network and security services the

SLAs and expectations are high. There is very little latitude for

any empathy and any disruptions generally translate into loss

of business.


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


Tangibles 4 5 1 18.18 0.18

Reliability 5 5 0 22.73 0.00


Empathy 6 7 1 27.27 0.27


Costs and pro-activeness of the vendor. Services arent the

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

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


Tangibles 7 6 -1 25.00 -0.25

Reliability 6 5 -1 21.43 -0.21

Responsiveness 7 7 0 25.00 0.00

Empathy 8 4 -4 28.57 -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

strong business development initiatives.


IT outsourcing as a function has many perceived notions and

thus it is difficult to isolate any least important functions.


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 pointsof 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.

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68% of respondents claimed Trust for the one of the more critical choice drivers when it comes tooutsourcing 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 ofimprovement 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 decisivefactors 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 decisionmaker. 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 04-NOV-2007 18:30:18

Comments

Input

Filter

Weight

Split File

N of Rows in Working Data File 25

Missing Value

Handling

Definition of Missing User-defined missing values are treated as missing.

Cases UsedStatistics are based on cases with no missing values for any variable

used.

Resources

Memory Required 10252 bytes

Additional Memory Required for Residual

Plots0 bytes

Elapsed Time 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)

Model Variables EnteredVariables

RemovedMethod

1

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 dont 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(a)

. Enter

a All requested variables entered.

b Dependent Variable: Top quality seeked during IT Outsourcing Decision

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .945(a) .894 .257 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 dont 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 Sum of Squares df Mean Square F Sig.

1

Regression 100.440 18 5.580 1.404 .443(a)

Residual 11.924 3 3.975

Total 112.364 21

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 dont 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

t Sig.

Model B Std. Error

Beta

1

(Constant) -17.034 57.429 -.297 .786

Project or Partnership Failure -2.092 4.325 -.431 -.484 .662

Drop in Service Standards .832 1.773 .183 .470 .671

Gaps-Are tactical in nature and not strategic .445 3.456 .041 .129 .906

They dont understand business needs .978 3.782 .215 .258 .813

Data Centre Failure -.203 1.974 -.052 -.103 .925

Business Loss -.424 1.857 -.112 -.228 .834

Security Threats 2.742 1.926 .468 1.424 .250

Hidden Costs -1.316 3.886 -.200 -.339 .757

Project Failures 2.030 5.274 .464 .385 .726

Outsourcing within UAE is expensive 1.173 5.149 .231 .228 .834

We expect the outsourcing companies to pay penalty for any

business loss2.535 5.089 .470 .498 .653

It is always good to outsource to a group company or internal IT

division-.209 3.031 -.065 -.069 .949

Outsourcing sales cycle of UAE are consultative in nature .790 3.117 .180 .253 .816

Business benefits due to IT outsourcing has to always translate into

financial benefits-.256 1.106 -.080 -.232 .832

Biggest Reluctance is that Business will get affected 1.025 3.261 .726 .314 .774

Insufficient Budget -.148 7.484 -.527 -.020 .985

Good Regional Outsourcing company -4.960 5.592 -.253 -.887 .440

Job losses 4.455 5.179 .160 .860 .453

a Dependent Variable: Top quality desired during IT Outsourcing Decision


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Analysis of SPSS Output

oR-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 ofindividuals).

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.
http://en.wikipedia.org/wiki/Statisticshttp://en.wikipedia.org/wiki/Sum_of_squareshttp://en.wikipedia.org/wiki/Sum_of_squareshttp://en.wikipedia.org/wiki/Variableshttp://en.wikipedia.org/wiki/Variancehttp://en.wikipedia.org/wiki/Independent_variablehttp://en.wikipedia.org/wiki/Dependent_variablehttp://en.wikipedia.org/wiki/Multiple_regressionhttp://en.wikipedia.org/wiki/Units_of_measurementhttp://en.wikipedia.org/wiki/Incomehttp://en.wikipedia.org/wiki/Dollarhttp://en.wikipedia.org/wiki/Family_sizehttp://en.wikipedia.org/wiki/Numberhttp://en.wikipedia.org/wiki/Individualhttp://en.wikipedia.org/wiki/Individualhttp://en.wikipedia.org/wiki/Numberhttp://en.wikipedia.org/wiki/Family_sizehttp://en.wikipedia.org/wiki/Dollarhttp://en.wikipedia.org/wiki/Incomehttp://en.wikipedia.org/wiki/Units_of_measurementhttp://en.wikipedia.org/wiki/Multiple_regressionhttp://en.wikipedia.org/wiki/Dependent_variablehttp://en.wikipedia.org/wiki/Independent_variablehttp://en.wikipedia.org/wiki/Variancehttp://en.wikipedia.org/wiki/Variableshttp://en.wikipedia.org/wiki/Sum_of_squareshttp://en.wikipedia.org/wiki/Sum_of_squareshttp://en.wikipedia.org/wiki/Sum_of_squareshttp://en.wikipedia.org/wiki/Statistics


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VETRANS

These vendors have large, mature

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

another. In other cases, a vendor may simply

become complacent as a top vendor and be out-

developed by hungrier new entrants and other

top players.

LEADERS

These are the current top players of the

market, with products & services that have built

up large customer bases. These top service

providers havent 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 theyll be replaced by the next generation

of futurists.

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 witheconomies; who capitalize on their base

by offering niche products.

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.

SERVICES

MA

R

K

E

T

S

H

A

R

E


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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.

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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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Almost 90% of respondents felt that their IT service providers are tactical in nature and exposedlack of strategic technological partners.

From the servqual & respondents feedback, one stark finding was that the companies not onlyexpect the SPs 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 outsourcingtheir 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 lossdue to IT service disruptions through its technology partners.

As shown in the graph below business loss and project failures are the biggest concerns ofdecision 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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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

shouldnt 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 SLAs 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 Consolidation (Mergers & Acquisitions)o Channel & Technology Partnershipso IT & Data insuranceo VOIP/Virtualization/IT Frameworkso Increasing threat of cyber waro Off shoring


31/44



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This research would be qualitative and quantitative by nature, as we dont 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. SMBs, MNCs). Then the data

gathered and processed using data analysis softwares and then findings are interpreted. For the sake

scoping outsourcing of Application Development is not factored in most of the research sections.

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The target respondents for this research are:

Cities: Dubai

Segment: IT Managers, CFOs, GMs

Category: SMBs, MNCs & Government

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

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Dubai

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o 30 decision makers from SMBs, MNCs & Enterprise

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

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

o Importance of Services and gapso Understanding the Gaps using the servqual analysiso Emerging trends in outsourcing industry and regional service offeringso Options within UAE

o Challenges facing outsourcing in UAEo Market Dynamicso Competition with low cost outsourcing outside UAEo Cost Benefit Analysis

o Brief projection and forecasting on future of Outsourcing in UAE

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Our deliverables for this project include the following:

1. Questionnaire in English2. Discussion guide English3. Presentation of findings to the class and guide

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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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Time Research stage Action

Week 1 Defining Research objective Formulation of Statement of objective duly

signed by both parties.

week 2 Research design Preparation of questionnaire

Week 3 Data gathering (Field work) 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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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

Respondents Full Name

Company

Designation

WRITE

CLEARLY

(We will call back)

Email: City:

Phone: Mobile:

Head Office Position Gender Company Size


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Dubai 1 Influencer/

Recommender

1 Male 1 20 and below 1

Sharjah 2 Manager 2 Female 2 20-50 2

Abu Dhabi CL Head- Business 3 50-500 3

GM/CEO/Director 4 Company 1000 & above 4

SMB 1 5000 & above 5

Branch Office 2

Small Enterprise 3

Survey method Large Enterprise 4

Interview place

Resps Home 1 Office 2 Decision Maker

Resps Office 2 Email 3 Yes 1

On the street 3 Outdoors 4 No 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? Lets go to a comfortable place where we are not disturbed.


36/44



SCREENING SECTION

Q.1 Are you involved in IT outsourcing decisions

Yes 1

CLOSE No 2

Q.2 Do you have a group IT company to which you

Outsource your IT services

CONTINUE No 1

CLOSE Yes 2

Q.3 What activities of your IT do you or you intend

to outsource.

Server side business applications 1

Corporate Desktop & In house IT

services

2

Network & Security Operations 3

Total IT operations 4

Hardware & Software Maintenance 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 1 1 1

Competency 2 2 2

Trust 3 3 3

Brand/Reputation 4 4 4

Past Performance 5 5 5

Client Base 6 6 6

Corporate Relations 7 7 7

SLA & SLM 8 8 8

Cost 9 9 9

UAE Based 10 10 10

Empathetic 11 11 11

Support 12 12 12

Services 13 13 13

Support 12 12 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

1 2 3 4 5

The primary benefit of IT outsourcing is service

improvement

1 2 3 4 5

I think employees do feel a job threat when they

outsource

1 2 3 4 5

In UAE IT outsourcing will increase 1 2 3 4 5

We have clear business plans for outsourcing and

how to succeed with it

1 2 3 4 5

We expect the Outsourcing companies to

analyze and propose merits and de-merits to us

1 2 3 4 5

Outsourcing within UAE is expensive 1 2 3 4 5

We have clear financial understanding of TCO 1 2 3 4 5


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and ROI when outsourcing

We expect the outsourcing companies to pay

penalty for any business loss

1 2 3 4 5

It is always good to outsource to a group

company or internal IT division

1 2 3 4 5

Outsourcing sales cycle of UAE are consultative

in nature

1 2 3 4 5

Business benefits due to IT outsourcing has to

always translate into financial benefits

1 2 3 4 5

The primary benefit of IT outsourcing is service

standardization across offices

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 1 2 3 4 5

Insufficient Budget 1 2 3 4 5

Good Regional Outsourcing company 1 2 3 4 5

Job losses 1 2 3 4 5

Project or Partnership Failure 1 2 3 4 5

Drop in Service Standards 1 2 3 4 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.


39/44



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 StronglyAgree

Agree Disagree StronglyDisagree

Are tactical in nature and not strategic 1 2 3 4 5

Have very little service offerings 1 2 3 4 5

Expensive 1 2 3 4 5

They dont understand business needs 1 2 3 4 5

Q.9 What keeps you up at nights

Most

often

Often Occasionally Never

Data Centre Failure 1 2 3 4

Business Loss 1 2 3 4

Security Threats 1 2 3 4

Hidden Costs 1 2 3 4

Project Failures 1 2 3 4

Thanks for your time.

End of Questionnaire


40/44



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Respondents

Do you believe

in Outsourcing

IT services

Do you have a

group IT

company to

which you

Outsource your

IT services

What activities

of your IT do you

or you intend to

outsource.

Top quality seeked during

IT Outsourcing Decision

Second

most seeked

factor

during IT

Outsourcing

Decision

The primary

benefit of IT

outsourcing is cost

reduction

Respondent 1 2 1 1 4 3 3


























41/44



Respondents

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

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


























Respondents

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





42/44












Respondent 13 3 4 3 4 4














43/44



Respondents

Project or

Partnership

Failure

Drop in

Service

Standards

Gaps-Are

tactical in

nature and not

strategic Expensive

They dont

understand

business

needs




















Respondent 20 3 3 3 4 3Respondent 21 3 3 4 4 4





Respondents

Data Centre

Failure

Business

Loss

Security

Threats

Hidden

Costs

Project

Failures















44/44














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Respondents are not forced and cannot be forced to participate in the interviews.

Respondents identity and his individual feedbacks are classified information.

No references to any companies or technologies.

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Services Marketing

Christopher Lovelock

Marketing Management Kotler-Keller www.spss.com
http://www.spss.com/http://www.spss.com/http://www.spss.com/

quality assurance study of it outsourcing in dubai

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