supervisor: eng martin manuhwa

AN EVALUATION OF OUTSOURCING AS A SOURCE OF

COMPETITVE ADVANTAGE IN THE ZIMBABWE

TELECOMMUNICATIONS INDUSTRY: THE CASE OF LIQUID

TELECOM (2009 TO 2012)

STANLEY MAGEDE (REG NO R0021928)

A dissertation submitted in partial fulfilment for the requirements of the Degree of

Masters of Business Administration (MBA)

Graduate School of Management

University of Zimbabwe

P.O. Box MP167

Mount Pleasant

Harare

July 2012

Supervisor: Eng Martin Manuhwa

ii

Declaration

I, Stanley Magede, do hereby declare that this dissertation is the result of my own

investigation and research, except to the extent indicated in the Acknowledgements,

References and by comments included in the body of the report, and that it has not

been submitted in part or in full for any other degree to any other university.

______________ Date_________

Student signature

_______________ Name:_____________ Date:_________

Supervisor’s Signature

iii

Dedication

To the important people in my life, my wife Pretty, my son Tatenda and my

brothers and their families.

iv

Acknowledgements

I would like to thank Liquid Telecommunications for affording me the opportunity to

conduct this dissertation with their employees and also I would like to thank all the

participants who returned the survey questionnaires.

I am also thankful to my dissertation supervisor, Eng. Manhuwa, for giving me

valuable inputs. I am grateful for the guidance that the Engineer provided at every

stage of my dissertation.

I would also like to thank my family for helping me enjoy (rather than endure) the

MBA journey. Thank you to my classmates for assistance on how to analyse the

data and present the results.

Unto Him who is able to exceedingly, abundantly, beyond what we think or ask,

according to the power that works in us. I love you Jesus.

v

Abstract

Outsourcing is one of the most researched and commonly used business practices.

Most scholars agree that outsourcing can be harnessed to achieve competitive

advantage. But is it all outsourcing approaches that give competitive advantage? Is

the current outsourcing approach at Liquid Telecom bringing any strategic benefits?

This paper explores how Liquid Telecommunications employees view the current

outsourcing model employed by Liquid Telecom, with a primary focus on whether it’s

a source of sustainable competitive advantage or not.

Questionnaireswere distributed among Liquid Telecom employees using stratified

and convenient sampling.Interviews were also carried out especially amongst senior

managers to bring out the strategic thrust of the outsourcing model.

The research highlighted five major reasons why the current outsourcing approach

cannot be regarded as a source of competitive advantage. Interviewees specifically

reported that themajor problem is the small, immature market.

vi

TABLE OF CONTENTS

DECLARATION.................................................................................................................... II

DEDICATION....................................................................................................................... III

ACKNOWLEDGEMENTS ................................................................................................. IV

ABSTRACT ............................................................................................................................ V

TABLE OF CONTENTS ..................................................................................................... VI

LIST OF TABLES ................................................................................................................ XI

TABLE OF FIGURES ........................................................................................................ XII

LIST OF ABBREVIATIONS ........................................................................................... XIV

CHAPTER 1 INTRODUCTION ......................................................................................... 1

INTRODUCTION ................................................................................................................................................ 1

INTRODUCTION TO THE STUDY.................................................................................................................. 1

BACKGROUND TO THE STUDY .................................................................................................................... 2

1.1.1 Telecommmunications Industry in Zimbabwe ........................................................................................ 2

1.1.2 Licensed Operators .................................................................................................................................. 2

1.1.3 Environment/Situational Analysis ........................................................................................................... 3

1.1.4 Liquid Telecommunications (Pvt) Limited............................................................................................ 11

RESEARCH PROBLEM ................................................................................................................................... 23

RESEARCH OBJECTIVES .............................................................................................................................. 23

RESEARCH QUESTIONS ................................................................................................................................ 24

1.1.5 Overall research question ...................................................................................................................... 24

1.1.6 Specific Reserch Questions ................................................................................................................... 24

RESEARCH HYPOTHESIS ............................................................................................................................. 25

vii

JUSTIFICATION ............................................................................................................................................... 25

SCOPE OF RESEARCH ................................................................................................................................... 26

ETHICAL ISSUES ............................................................................................................................................. 27

ASSUMPTIONS OF THE STUDY ................................................................................................................... 27

DISSERTATION STRUCTURE ...................................................................................................................... 28

CHAPTER SUMMARY .................................................................................................................................... 29

CHAPTER 2 LITERATURE REVIEW ........................................................................... 30

INTRODUCTION .............................................................................................................................................. 30

THE OUTSOURCING CONCEPT .................................................................................................................. 30

2.1.1 Definitions of outsourcing ..................................................................................................................... 30

2.1.2 The Theories behind outsourcing .......................................................................................................... 31

2.1.3 Types of outsourcing ............................................................................................................................. 35

2.1.4 Benefits of Outsourcing ......................................................................................................................... 39

2.1.5 Disadvantages and/or risks of outsourcing ............................................................................................ 41

TRENDS IN THE TELECOMMUNICATIONS INDUSTY .......................................................................... 42

OUTSOURCING OPTIONS IN TELECOMMUNICATIONS ..................................................................... 43

2.1.6 Staff Augmentation Model .................................................................................................................... 43

2.1.7 Out-Tasking Model ............................................................................................................................... 44

2.1.8 Project Based Outsourcing .................................................................................................................... 44

2.1.9 Managed services Model ....................................................................................................................... 44

2.1.10 Selecting Appropriate Sourcing Model ............................................................................................... 45

2.1.11 The concept of relationships in outsourcing ........................................................................................ 48

2.1.12 Telecommunications value chain dynamics ........................................................................................ 50

2.1.13 Telecommunications Business Processes (eTOM Model) .................................................................. 52

FIGURE 2-4: ETOM LEVEL 0 MODEL. ....................................................................................................... 54

SOURCE: TMFORUM, (2008) ......................................................................................................................... 54

COMPETITIVE ADVANTAGE ....................................................................................................................... 54

2.1.14 The Position/Environmental View ...................................................................................................... 55

CONCEPTUAL FRAMEWORK ..................................................................................................................... 57

CHAPTER SUMMARY .................................................................................................................................... 58

viii

CHAPTER 3 RESEARCH METHODOLOGY .............................................................. 59

INTRODUCTION .............................................................................................................................................. 59

RESEARCH DESIGN ........................................................................................................................................ 59

RESEARCH PHILOSOPHY ............................................................................................................................ 60

3.1.1 Phenomenology ..................................................................................................................................... 60

3.1.2 Interpretivism ........................................................................................................................................ 60

3.1.3 Positivism .............................................................................................................................................. 61

3.1.4 Post-Positivism ...................................................................................................................................... 61

RESEACH APPROACH ................................................................................................................................... 62

3.1.5 Quantitative Research ............................................................................................................................ 63

3.1.6 Qualitative Research .............................................................................................................................. 63

3.1.7 Triangulation ......................................................................................................................................... 63

RESEARCH STRATEGIES ............................................................................................................................. 64

3.1.8 Survey .................................................................................................................................................... 65

3.1.9 Case Study ............................................................................................................................................. 65

3.1.10 Experiment .......................................................................................................................................... 67

3.1.11 Grounded Theory ................................................................................................................................ 67

DATA COLLECTION ....................................................................................................................................... 68

3.1.12 Primary data ........................................................................................................................................ 68

3.1.13 Secondary data .................................................................................................................................... 69

3.1.14 Population of Study ............................................................................................................................. 69

3.1.15 Sampling ............................................................................................................................................. 70

3.1.16 Sample Size ......................................................................................................................................... 72

CONTROL OF VALIDITY AND RELIABILITY ......................................................................................... 74

RESEARCH LIMITATIONS ........................................................................................................................... 74

CHAPTER CONCLUSIONS ............................................................................................................................ 75

CHAPTER 4 RESULTS, ANALYSIS AND DISCUSSION ........................................... 76

INTRODUCTION .............................................................................................................................................. 76

RESPONSE RATE ............................................................................................................................................. 77

DEMOGRAPHIC ANALYSIS .......................................................................................................................... 78

4.1.1 Gender and Age of Respondent ............................................................................................................. 78

ix

4.1.2 Employee Category ............................................................................................................................... 79

4.1.3 Respondents by department ................................................................................................................... 80

4.1.4 Crosstabulation of number of years with organization and time in current position cross tabulation. .. 81

4.1.5 Training on managing relationship with Vendor ................................................................................... 83

OBJECTIVE RELATED FINDINGS .............................................................................................................. 85

4.1.6 Reasons for Outsourcing ....................................................................................................................... 85

4.1.7 In-house performance of currently outsourced activities would lead to a lack of strategic focus? ........ 88

4.1.8 Alignment between organization outsourcing and strategy ................................................................... 90

4.1.9 Outsourcing has improved service delivery timelines ........................................................................... 92

4.1.10 Contractors have expertise in their area of work ................................................................................. 93

4.1.11 Cotractors handle Liquid customers with due care .............................................................................. 94

4.1.12 Contractors understand standard telecommunications business processes (eTOM)? ......................... 95

4.1.13 Outsourcing reduced costs? ................................................................................................................. 97

4.1.14 Contractors require ongoing supervision? ........................................................................................... 99

4.1.15 Market demands are forcing contractors to improve performance at same cost ............................... 100

4.1.16 Relationship with Contractors is strong............................................................................................. 102

4.1.17 Type of outsourcing employed by Liquid ......................................................................................... 103

4.1.18 Outsourcing is supported by management ......................................................................................... 104

4.1.19 Relationship between Liquid Telecom and Outsourcing patners ...................................................... 105

4.1.20 Corporate culture clashes between contractors and Liquid Telecom are an ongoing issue ............... 107

4.1.21 Outsourcing has improved the quality of work ................................................................................. 109

4.1.22 Choosing wrong contractors has caused ongoing quality problems .................................................. 110

4.1.23 Insourced work (using internal staff) is of better quality than outsourced work ............................... 111

4.1.24 Liquid Telecom has more experienced staff who do a better job than contractors............................ 112

TESTING THE HYPOTHESIS ...................................................................................................................... 113

4.1.25 Current Outsourcing helped Liquid Telecom to achieve sustainable competitive advantage (direct

hypothesis testing question) .......................................................................................................................... 113

FINDINGS OF THE RESEARCH STUDY ................................................................................................... 117

CHAPTER SUMMARY .................................................................................................................................. 118

CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS .................................. 119

INTRODUCTION ............................................................................................................................................ 119

CONCLUSIONS ............................................................................................................................................... 119

x

DECLARATION ON RESEARCH HYPOTHESIS ..................................................................................... 122

RECOMMENDATIONS ................................................................................................................................. 122

REFERENCES ......................................................................................................................... I

APPENDICES .................................................................................................................... XIII

APPENDIX 1: QUESTIONNAIRE.................................................................................. XIV

APPENDIX 2: STATISTICAL FORMULAE AND CALCULATIONS ..................... XXI

APPENDIX 3: INTERVIEW WITH SENIOR MANAGEMENT .............................. XXII

xi

LIST OF TABLES

Table 1-1: Zimbabwe Licensed Telecommunications Service Providers .................................. 2

Table 1-2 : Liquid Telecom SWOT.............................................................................................. 18

Table 2-1 Benefits of Outsourcing .............................................................................................. 40

Table 2-2: Sourcing Maturity Model. .......................................................................................... 46

Table 4-1: Response rate ............................................................................................................ 77

Table 4-2: Crosstabulation of Gender and Age of Respondents ............................................. 78

Table 4-3: Reasons for outsourcing ............................................................................................ 85

Table 4-4: Outsourcing and Organizational strategy ................................................................. 90

Table 4-5:Type of outsourcing employed by Liquid Telecom ................................................. 103

Table 4-6: Relationship between Liquid Telecom and Outsourcing partners ....................... 105

xii

TABLE OF FIGURES

Figure 1-4 PORTER’s FIVE FORCES MODEL. .......................................................................... 7

Figure 1-1 Source: Liquid Telecom HR Report (2012). ............................................................ 12

Figure 1-2: Liquid Telecom Value Chain .................................................................................... 16

Figure 1-3: Source: Management Accounts Annual Report (2011).) ....................................... 18

Figure 2-1:Sourcing Maturity Model ............................................................................................ 47

Figure 2-2:Linkage Map for Outsourcing. ................................................................................... 50

Figure 2-3: The Firm’s value chain. ............................................................................................ 51

Figure 2-4: eTOM Level 0 Model. ................................................................................................... 54

Figure 2-5: Linkage Map for Outsourcing. .................................................................................. 57

Figure 3-1: Sampling .................................................................................................................... 70

Figure 3-2: Determining the Size of a Random Sample ........................................................... 73

Figure 4-1: Employee Categories ............................................................................................... 79

Figure 4-2: Respondents by Department ................................................................................... 80

Figure 4-3:Respondents’ duration with Liquid ........................................................................... 81

Figure 4-4: Responses to involvement in decision to outsource by department .................... 82

Figure 4-5: Training on managing relationship with contractors. ............................................. 83

Figure 4-6: In-house performance of currently outsourced activities would lead to lack of

strategic focus?............................................................................................................................. 88

Figure 4-7: Outsourcing has improved service delivery timelines ............................................ 92

Figure 4-8: Contractors have expertise in their work. ............................................................... 93

Figure 4-9: Contractors handle Liquid customers with due care .............................................. 94

Figure 4-10:Contractors understand telecommunications processes? ................................... 95

Figure 4-11: Outsourcing reduced costs? .................................................................................. 97

Figure 4-12:Contractors require ongoing supervision? ............................................................. 99

Figure 4-13:Contractors' performance improving due to market demands? ......................... 100

Figure 4-14:Relationship with Contractors is strong? ............................................................. 102

Figure 4-15: Outsourcing is supported by management? ....................................................... 104

Figure 4-16: Corporate Culture Clashes? ................................................................................ 107

Figure 4-17:Performance feedback measures ........................................................................ 108

xiii

Figure 4-18:Outsourcing has improved the quality of work .................................................... 109

Figure 4-19: Choosing wrong contractors has caused ongoing quality problems. ............... 110

Figure 4-20: Quality of internal work is higher than outsourced work .................................... 111

Figure 4-21:Liquid Telecom has more experienced staff who do a better job than

contractors. ................................................................................................................................. 112

Figure 4-22: Outsourcing as a source of competitive advantage ........................................... 113

Figure 4-23:Outsurcing as a source of competitive advantage for Liquid Telecom ............. 114

xiv

List of Abbreviations

POTRAZ Postal and Regulatory Authority of Zimbabwe

VPN Virtual Private Network

MPLS Multiple Label Protocol Label Switching

SDH Synchronous Digital Hierarchy

CAFP Central Africa Fibre Project

ZINX Zimbabwe Internet Exchange

JINX Johannesburg Internet Exchange

LINX London Internet Exchange

ISP Internet Service Provider

NOC Network Operations Centre

VPLS Virtual Private LAN service

Mbps Mega Bits per second

ARPU Average Revenue per User

VOIP Voice over Internet Protocol

IP Internet protocol

IAP Internet Access provider

RBV Resource Based View

1

CHAPTER 1 INTRODUCTION

Introduction

Introduction to the study

A growing trend in the global telecommunications industry is for operators to

outsource certain jobs to Managed Services Providers, where work, responsibilities

and decision rights are transferred to an external expert entity that may be located

within or outside the country. Although nothing much has been written about this

concept in the Zimbabwe Telecommunications industry, the concept has had a great

impact on the telecommunications industry value chain and competitive strategy

globally. For example, British Telecom recently outsourced the support of its global

customers and its own internal systems to Tech Mahindra at a cost of over $1 billion

for a five-year period (Tijun, Sandel, Li and Chang, 2012). The driving force in these

outsourcing initiatives is the perceived fast clockspeed in the telecommunications

industry, which ultimately drives the architectural innovations of telecommunications

service providers in order to gain or maintain competitive advantage. The concept of

outsourcing or “outside resource using” (Arnold, 2000) can be defined as the

strategic reliance on external, specialized, efficient service providers for major, non-

core functions (The Outsourcing Institute, 2001).

The research analyses the current outsourcing approach in an effort to suggest the

best form of outsourcing for Liquid Telecom Zimbabwe to achieve competitive

advantage. The primary focus of the study is to recommend good outsourcing

strategy and highlight issues to consider in coming up with a workable outsourcing

strategy for a telecommunications organisation in Zimbabwe.The role played by the

outsourcing startegy in ensuring successful service deployment, improving the

quality of work and reducing costs is also explored with the view of recommending

how an organisation can assess and evaluate the strategic benefits of outsourcing.

2

Background to the study

1.1.1 Telecommmunications Industry in Zimbabwe

It can be argued that the Zimbabwean telecommunications industry is at the heart of

development of all the industries in the economy. Although the Zimbabwean

economy is traditionally driven by agro-based industries, it would not be wayward to

claim that telecommunications provides the “nervous system” that integrates all the

economic industries and helps focus their contribution towards economic growth.

This section gives an overview of the business environment within which Liquid

Telecommunications operates focusing on Zimbabwe’s macroeconomic environment

and micro-environments.

1.1.2 Licensed Operators

According to POTRAZ (2012) the industry has several players falling into the

categories shown in Table 1-1 ;

Table 1-1: Zimbabwe Licensed Telecommunications Ser vice Providers

Market Segment Licenced Players

Fixed telephony TelOne and *TeleAccess (Suspended)

Mobile Telephony Net One, Econet and Telecel

Internet Access Providers (Class A) Ecoweb (Liquid Telecom ), Powertel,

Africom, Telecontract, TelOne, Aptics,Valley

Technologies, Acquiva Wireless,

Dandemutande, Pecus Enterprises, BlueSat

Technologies, Transmedia Corporation;

Internet Access Providers (Class B) CommIT and Net One

Public Data Network Operators Broadlands and Qualtime Investments

Source: POTRAZ), (2012).

3

1.1.3 Environment/Situational Analysis

1.1.3.1 Macro environmental/PESTELEG analysis

Allen (1999) defines the external environment as consisting of all the outside

institutions and forces that have an actual or potential interest or impact on the

organisation's ability to achieve its objectives: competitive, economic, technological,

political, legal, demographic, cultural, and ecosystem.

1.1.3.1.1 Political, Legal and Regulatory environment

The telecommunications industry in Zimbabwe is regulated by the Postal and

Telecommunications Regulatory Authority of Zimbabwe (POTRAZ). POTRAZ was

established by an Act of Parliament, The Postal and Telecommunications Act

(Chapter 12:05), and falls under the Ministry of Transport and Communication. The

major regulations require companies to be licenced in order to operate within this

industry. Licenced operators can only offer services that are specifically stipulated in

their licence documents even though they might wish to offer additional services. As

an example, Liquid Telecommunications cannot offer mobile voice services since

they are only licenced to offer data and voice over internet protocol (VOIP) services.

POTRAZ also regulates the quality of service offered to customers and the pricing of

telecommunications products. Prior to the multi-currencies era, the price regulation

made it very difficult for players to operate profitably, since prices would be reviewed

quarterly, yet inflation rate was changing hourly. Historically therefore, the

political/legal framework has always been a critical source of risk in the

telecommunications industry.

4

1.1.3.1.2 Technological environment

The technological environment refers to new technologies, which create new product

and market opportunities. Global technological developments are a critical force in

the ICT industry as the industry is technology driven. The ICT industry is arguably

one of the fast-clockspeed industries and as such survival in the industry requires a

company to always update its technology and architectural design to match the

times. Of critical importance is for the company to recoup its initial investment from a

given product before it becomes obsolete. As an example, all the three licenced

mobile voice companies have invested in third generation (3G) technology to offer

mobile data services. However, there already exists newer technology (Long Term

Evolution (4G)) which offers much better download speeds and better mobility.

However, the mobile operators cannot migrate to this new technology before getting

returns from the investment in 3G, given the low, and dwindling Average Revenue

per User (ARPU) from data and voice services.

The fast-clockspeed in the technology industry forces many organisations in the ICT

industry to quickly adapt in terms of how they develop, price, distribute, and promote

their products. Failure to do this may result in a company having redundant products

that no longer meet the technological requirements of the consumers. To counter

this, there is a global trend towards outsourcing the research and development

(R&D) portion of the value chain to specialized telecommunications vendors.

1.1.3.1.3 Socio-cultural environment

The need for social substitute goods such as computers and television that allow

people who are alone to feel as if they are not has opened up new markets in the

ICT industry in Zimbabwe. Liquid Telecommunications has tried to capitalise on this

market by providing fiber to the home which will provide a digital home, where voice,

video and internet will be available via one connection at affordable rates. In addition

to this, the changes in the demographic environment have proved beneficial to the

5

ICT industry in Zimbabwe. The major change of interest is the increase in the

literacy rate, where Zimbabwe is ranked number one in Africa. This has led to a

higher appreciation of data communication especially by urban dwellers and has

resulted in Zimbabwe being ranked as the second most cloud-computing-ready

country on the continent (Laverty, 2011). This has resulted in the influx of third

generation (3G) mobile wireless and fibre data networks that are aimed at individual

home users and small offices.

1.1.3.1.4 Economic factors

The Zimbabwean decade of economic stagnation is well documented and did not

spare the telecommunications industry. The period of hyperinflation affected the

capacity of telecommunications players to expand their networks as most of the

equipment required for this expansion is purchased in foreign currency. This was a

scarce commodity during the era. Similarly, the level of disposable income amongst

customers was so low that it adversely impacted on the demand for ICT products.

The situation for ICT companies was also exacerbated by the regulatory authority

which reviewed the prices quarterly while the inflation rate was changing hourly.

When the multicurrency system was incepted, consumers could readily spend on

ICT products and service providers could expand on their capacity. However, even

after dollarization, the cost of money continues to be very expensive in Zimbabwe,

limiting the amount of expansion that service providers can embark on. Currently,

Zimbabwe has no control on interest rates since the reserve bank of Zimbabwe has

no control on the United States dollar, which is the major currency in use. The

liquidity crunch means that lending rates continue to be relatively high (10%-25%),

and mostly on a short term basis. Most of the projects in the telecommunications ar

long term in nature and capital intensive and cannot be funded using short term

borrowing.

6

1.1.3.2 Telecomunications industry anaysis

The competitors in the internet access provision business are TelOne, PowerTel,

Africom, Dandemutande, Telco, Aptics, Acquiva Wireless, Valley Technologies,

Broadlands and Gigatel. These can be divided into two broad categories; those

providing international connectivity, intercity connectivity and last mile solutions and

those that only provide last mile solutions. Of Liquid’s competitors TelOne,

PowerTel, Dandemutande and Africom can be classified in the first category while

the rest are in the last category.

Powertel is Liquid’s biggest competitor in the fibre based products, followed by

Africom. These two also have connections to international fibre links both via

Mozambique. All the other players have no backbone to offer to the market but offer

last mile solutions through wireless connections and copper and fibre. Of these

companies Aptics, Gigatel, Valley and Africom all get their intercity bandwidth (and

Internet bandwidth) from Liquid Telecom. Telco is a licenced Internet Access

Provider (IAP) but does not have intercity fiber links, choosing to concentrate on

metro fiber links. Other competitors are the Internet service providers which until

recently did not require licencing. However, after some disputes between IAPs and

ISPs (for example ZOL and Telecontract), the regulatory body now seeks to define

licencing for the ISPs (www.zimbabwesituation.com, 23 April 2013).

1.1.3.3 Business Outlook

Since the multicurrency regime, and subsequent licencing of many other players in

the field, the industry has been one of the fastest growing sectors in the

Zimbabwean economy. There has been significant investment into new

infrastructure and technology upgrades. For example, before 2009, Powertel had the

largest stretch of fibre backbone (1000km) but this has since changed after Liquid

Telecom laid a total of 4500km of fibre in Zimbabwe. The issuing of new licenses,

coupled with the converging technologies implies that there will be more competitive

rivalry as boundaries between mobile operators for example and internet access

providers becomes blurred. This has been the case as voice operators or even

mobile phone operators have

based products. The average revenue per user (ARPU) continues to dwindle

globally and is expected to continue in this trend as more and more players are

offering more or less similar products. It is such

Telecommunications companies to seek new ways of gaining

advantage.

1.1.3.4 PORTER’S FIVE FORCES ANALYSIS OF THE INDUSTRY

Figure 1-1 PORTER’s FIVE FORCES MODEL.

Adapted from Porter, (1985)

Porter (1985) provided a framework that models an industry as being influenced by

five forces. The five forces analysis will zero in on the internet access providers

7



mobile phone operators have begun offering mobile data connectivity as well as fibre



offering more or less similar products. It is such trends that put pressure on

Telecommunications companies to seek new ways of gaining

PORTER’S FIVE FORCES ANALYSIS OF THE INDUSTRY

PORTER’s FIVE FORCES MODEL.

from Porter, (1985)





offering mobile data connectivity as well as fibre



trends that put pressure on

Telecommunications companies to seek new ways of gaining competitive

PORTER’S FIVE FORCES ANALYSIS OF THE INDUSTRY



8

(IAP) industry within Zimbabwe and not on the telecommunications industry as a

whole. According to POTRAZ, companies in this sector are licenced to “construct,

operate, develop, extend, and maintain a public data and internet access network.

The data and internet backbone that shall comprise of the national data and internet

service, the international data and internet service, the local access data and

internet service, the internet content service as well as Voice over Internet Protocol

(VOIP) services”. The core business of this industry is to provide local, national and

international links between two points, as well as gateways to internet access. The

media for providing data links to customers include optical fibre cable, copper wires,

and radio systems. Optical fibre cable provides the best quality and reliable link with

the highest availability time. The data communications industry is generally

characterised by high competition for the large customers who constitute the bulk of

business for any data services company.

1.1.3.4.1 Rivalry

Rivalry among existing competitors takes the familiar form of jockeying for position;

using tactics like price competition, product introduction, and advertising slugfest.

Data communications industry growth has been on the increase after the

introduction of the multi-currency. Major buyers in the industry are the large

corporate organisations and the competitors in the market jostle for these large

buyers.

The four biggest competitors in this industry are Liquid, Tel One, Africom and

Powertel but the customer base is equally smaller thereby intensifying rivalries

between the few competitors. The fibre based products have high switching costs

due to the substantial initial investment in the civil works to bring fibre to the client’s

premises. The two biggest competitors, Liquid Telecom and Powertel have roughly

similar market shares and strategic stakes are high because the existing service

providers have a potential for great gains by innovatively introducing new value

added services on the network. These potential gains ride on the current service

9

provision performance and this increases the jockeying for market positions among

the players.

High exit barrier exist in the industry and these place a high cost on abandoning the

service. The intensity of rivalry is also manifested by the way competitors’ counter-

respond to any actions by rival firms. Any advert run by a competitor is answered by

a counter advert from the competitor. Market stability and changes in supply and

demand affect rivalry. Demand for communications services is relatively stable (as

opposed to cyclic).

1.1.3.4.2 Threat of New Entrants

There is no serious threat of entry in the industry due to the existing barriers to entry.

Barriers to entry reduce the rate of entry of new firms, thus maintaining a level of

profits for those already in the industry. These include;

Capital requirements: Telecommunications infrastructure is generally expensive to

setup and any aspirant will have to invest equally or surpass them lest the entrant

depend on the existing competitor thereby becoming a buyer of the service.

Product differentiation: In the business of data provisioning, the reliability and

quality of data links is of uttermost importance. Most of the customers like banks are

very sensitive to disruptions. A company seeking to carve a market niche will aim to

differentiate its offered service by providing highly reliable data links which are way

above the market values.

Government Policy: The Zimbabwean government limits entry into the

telecommunications industry through the licence control requirements.

Cost disadvantage independent of size: Most of the industry players enjoy huge

cost advantage stemming from the effects of the learning curve (experience curve),

proprietary technology, assets purchased at pre-inflation prices and favourable

locations.

10

Economies of scale: The most cost efficient level of production is termed minimum

efficient scale (MES). This is the point at which unit cost for production are at a

minimum. In the data communications industry, a certain percentage of the market

(large buyers) is necessary for MES.

1.1.3.4.3 Power of Suppliers

Suppliers can exert bargaining power on participants in an industry by raising prices

or reducing the quality of purchased goods and services. Powerful suppliers can

squeeze profitability out of an industry. The supplier market, which for long was

dominated by two Chinese suppliers, is now flooded by would be suppliers from

around the globe. The buyers (operators) are numerous, Liquid, Powertel, TelOne,

Africom, Net One, Telecel and Econet. The buyers have some power over the

suppliers due to the current Global Economy downturn. The bargaining power of

suppliers is limited as they are desperate to make a sale, yet at the same time

cannot advance long-term repayment solutions. This is where the Chinese suppliers

have an edge as China continues to record surpluses and has backing of an

economically sound government. The intensity of competition among equipment

vendors works out to be good for the operators.

1.1.3.4.4 Power of Buyers

Major buyers of the service are large corporates and ISPs who purchase a sizable

percentage of industry’s product. The high end buyers are by and large insensitive to

price, paying more attention rather to quality. This is particularly so for customers

like banks where there is zero tolerance for errors.

The new individual user market wields no power over the suppliers or operators

because their service expectations can be met and there is no danger of group think.

It is the large buyers mentioned above who have some degree of influence over the

11

suppliers. In the end user market, switching costs are slowly approaching zero, and

hence the bargaining powers are increasing as number of service providers

targeting that market has increased. The buyers cannot integrate backwards due to

the barriers to entry highlighted above which tends to dilute some of the large

buyers’ power.

1.1.3.4.5 Substitute products

By placing a ceiling on the prices a company can charge, substitute products or

services limit the potential of an industry. Substitute products that deserve the most

attention strategically are those that are subject to trends improving their price-

performance trade-off with the industry’s product or are produced by industries

earning high profits. Substitute products include individual point to point radios and

3G mobile data access (from mobile operators) and this has become a real threat to

fibre based products.

1.1.4 Liquid Telecommunications (Pvt) Limited

Liquid Telecom Zimbabwe is a subsidiary of the Liquid Telecom Group of companies

which in turn is owned by the Econet Wireless Global Group. The Liquid Telecom

Group was founded in 2001, then as Econet Carrier Services, with the aim of

providing a complete range of wholesale international carrier services to Econet and

other African operators as well as cost-effectively servicing the needs of African

operators wishing to establish multiple links to the rest of the world via a convenient

central point in Europe. After the installation of a number of submarine cables to

most of the coastal landing points in Africa, Liquid Telecom identified a gap where

most landlocked countries did not have a reliable, sufficiently redudant fibre network

to link them to the undersea cables. This led to the Central Africa Fibre Project

(CAFP), which targeted installation of over 8500km of optic fibre cable in cental and

southern Africa. The project began in Zimbabwe and has ex

Africa and the Democratic Republic of Congo.

1.1.4.1 The Company’s Vision, Mission and Strategic Intent

Liquid Telecommunications is unique in that it has no documented vision or mission.

The company chooses to operate on what can be termed

titled, “Winning the Race”

1.1.4.2 Structure/Organogram

Figure 1-2 Source: Liquid Telecom HR R

1.1.4.3 Liquid Telecom Business Model

A business model is a conceptual tool that

relationships and allows expressing the business logic of a specific firm

(Osterwalder, Pigneur and Tucci, 2005).

Chief Operating Officer

Head FinanceHead Planning and

12

southern Africa. The project began in Zimbabwe and has extended to Zambia, South

Africa and the Democratic Republic of Congo.

The Company’s Vision, Mission and Strategic Intent


The company chooses to operate on what can be termed its strategic intent simply

titled, “Winning the Race”

Structure/Organogram

Source: Liquid Telecom HR R eport (2012).

Liquid Telecom Business Model

A business model is a conceptual tool that contains a set of elements and their


(Osterwalder, Pigneur and Tucci, 2005). Slywotzky (1995) terms it business design

Managing Director

Chief technical Officer

Head Planning and

BuildHead Operations and IS Head of Engineering

Head Human

Resources

tended to Zambia, South

The Company’s Vision, Mission and Strategic Intent


its strategic intent simply

contains a set of elements and their


Slywotzky (1995) terms it business design

Head of Engineering

Head Human

Head Risk and Audit

13

and posits that it is the totality of how a company selects its customers, defines and

differentiates its offerings, defines the tasks it will perform itself and those it will

outsource, configures its resources, goes to market, creates utility for customers,

and captures profit.A synthesis of literature shows that there are mainly nine building

blocks to help describe a business model.

1.1.4.3.1 Value Proposition

According to Osterwalder & Pigneur (2010), value proposition is part of product

innovation and describes a bundle of products and services that together form a

coherent value proposition. This attribute captures the reasoning on why the firm

thinks its products or services could be valuable to the customer. Liqud Telecom’s

value proposition can be summarized as;

a) Design and Usability

Liquid’s network has been designed to make customer connectivity simple but

easy to use. The use of the Multiprotocol Label Switching (MPLS) technolgy

(a mechanism in high-performance telecommunication networks which directs

and carries data from one network node to the next) makes it easy to create

"virtual links" between customer branches. It gives customers a lot of flexibilty

that they cannot get on other networks.

b) Reliability

The Liquid Multi-Protocol Label Switching (MPLS) network which extends

from Lusaka through Harare to London, rides upon a Synchronous Digital

Hierarchy (SDH) network that is robust and has full redudancy to London. If

one link is disturbed, traffic is automatically rerouted to the backup link without

customers noticing.

c) Superior Performance

14

Liquid is able to offer fast, low latency internet connection to various Internet

exchanges and the rest of the world because it connects directly (peers) with

various internet content providers at the Zimbabwe Internet Exchange (ZINX),

Johannesburg Internet Exchange (JINX) as well as the London Internet

Exchange (LINX). LINX is one of the top three Internet Exchanges in the

world, thus giving customers fast access to international websites..

1.1.4.3.2 Target Customer Segments

The target customers can be divided into three groups, namely the telecom service

providers, corporates and small (consumer) markets. The telecom service providers

are mostly looking for reliable intercity and intracity links to connect the equipment

that they use to offer service back to their control equipment in their data centres.

Others like Internet Service Providers (ISPs) will mostly be focusing on getting

reliable, fast internet at wholesale pricing. The corporates are mostly looking for

reliable unified, interbranch communication, while the consumer market’s focus is

affordable internet products.

1.1.4.3.3 Distribution Channels

Currently, Liquid Telecom has two branches in Zimbabwe, one in Harare and one in

Bulawayo. Service is brought to the customer via a team of Account managers

tasked with bringing awareness of Liquid’s products to the market. Since Liquid

Telecom is selling a service, the most critical factor is to bring the cable within the

customer’s reach. Of late, this has been achieved by an aggressive approach in the

market where civil works are subsidized to expand the fibre footprint. Liquid also

uses its website for customers to order service.

1.1.4.3.4 Customer Relationships

These refer to the types of relationships that the business entertains with each

customer segment (Osterwalder & Pigneur (2010). For Liquid Telecom, each

15

customer is handled by an account manager. The account manager is responsible

for maintaining a relationship with the customer on behalf of the business.

Wholesale accounts are managed by a senior “Key Account Manager” as they are

critical to Liquid telecom’s financial performance. Liquid Telecom also offers

customer support through a 24-hour Network Operations Center (NOC), where

customer problems are usually identified and addressed well before the customer

notices. Any changes on the network that may affect the client are communicated to

the client via a maintenance window application.

1.1.4.3.5 Core Capabilities

From the value proposition description, it is clear that Liquid’s core capabilities

centre on the skills within the organization. Liquid Telecom has managed to attract

most of the good engineers in Zimbabwe and has managed to retain them so far.

Liquid’s global reach has also helped in ensuring that the technical team has

exposure to the latest technologies and practices.

1.1.4.3.6 Configuration of activities (Value Chain)

The value chain is as shown in Figure 1.2 below;

16

Figure 1-3:Liquid Telecom Value Chain

Adapted from International Telecommunications Union (ITU) (2012)

1.1.4.3.7 Partners

Liquid’s partners can be described according to the value chain shown above. In the

research and design, and manufacturing, Liquid depends on the vendors who supply

telecom equipment and these include Huawei, ZTE as well as Cisco. In the Network

Build section, Liquid Telecom depends mostly on contractors who include Sanyathi

Construction, KST construction, Huawei, Eastlight technologies as well as Amazing

Ville technologies. This is the focus of this study as it has implications to the quality

of the network that is produced, service delivery as well as the cost of providing

service.

Also in the build section other Liquid’s partners include the local authorities (for way-

leaves to trench), Generator and back up power solution providers such as Tendo

17

and AC Controls.In the Network and field operations, the partners include Huawei,

Genesis Office systems as well as Frolgate.

1.1.4.3.8 Revenue Streams

Liquid telecom currently offers a number of services that differentiates it from any

other player in the internet access provision sector. The products/services include;

• Managed MPLS Based Virtual Private Networks (VPN) which are divided into

a) Layer 3 VPN services

b) Layer 2 VPN services

c) Layer 2 Virtual Private LAN services (VPLS)

• Fibre Based Internet Access

a) Retail Internet with burst capabilities

b) Wholesale internet (also with burst capability)

The bandwidth links are offered through a combination of an optical Synchronous

Digital Hierarchy (SDH) network and last mile access networks that comprise of fibre

access equipment.The revenue streams are broken down according to the products

and customer segments as below;

1.1.4.3.9 Cost Structure

Liquid’s costs mostly comprise of the costs to build network, to maintain it and to

manage the customer relationship. The pie chart below show Liquid’s cost

distribution as of March 2012.

18

Figure 1-4:Source: Management Accounts Annual Report (2011).)

1.1.4.4 Profitability

An analysis of Liquid Telecom financials shows that the company is operating

profitably. The major concern though is on the cost structure of the organization as

presented in the business model discussion above.

1.1.4.5 SWOT Analysis

The Liquid Telecom Strengths, Weaknesses, Opportunities and Threats are

summarized in Table 1.3 below;

Table 1-2 : Liquid Telecom SWOT

10%

13%

77%

Liquid Telecom Cost Structure

Operatios Other Build

19

STRENGTHS

Strong unique backbone

infrastructure

Highly skilled staff

Permission to use of power line

infrastructure

State of the art technology

Lean focused structure

Deep pockets

Exposure to world class practices

Major

√

√

√

√

√

√

Minor

OPPORTUNITIES

Deregulation of the

telecommunication sector

Low Tele-density

Internet explosion

Increasing bandwidth

requirements

Convergence in ICT industry

Rural electrification

Economic empowerment

High Literacy rate

Government shareholding

Additional licensing

High demand for telecoms

services

Econet’s growing data

subscriber base

Major

√

√

√

√

√

√

√

√

√

Minor

√

THREATS

Harsh economic environment

Country risk perception

Regulatory framework

High input costs

HIV/AIDS pandemic

Brain drain

Technology changes

Major

√

√

√

√

√

Minor

√

WEAKNESSES

High input cost

Expensive last mile solution

High Turnaround time (customer

connection)

Multicultural organisational

clashes

Major

√

√

√

Minor

√

1.1.4.5.1 Strengths

One of the major strengths of Liquid Telecom is the largest stretch of fibre that has

been laid in a very short time to overcome Powertel as the largest fibre network

20

operator in Zimbabwe. Another inherent strength of the organisation is its origins

from Econet which gave it a ready market for the intercity and inter-base station

bandwidth provision. Liquid’s relationship with Econet provides it with a ready market

for backhaul bandwidth as well as international internet and voice traffic. The

company recently struck a deal with ZESA where it will use the power utility’s

infrastructure to quickly roll out a fibre backbone to areas that had not been covered.

This gives the company an edge over competitors because Optical Ground Wire

(OPGW) is both cheaper to string and more reliable (less prone to vandalism).

Liquid’s most noticeable strength is the deep pockets. The company has proven to

be highly liquid in a market that is facing liquidity and funding challenges. This has

allowed the company to overtake incumbent operators in terms of fibre footprint as

well as market share.

1.1.4.5.2 Weaknesses

One of Liquid’s weaknesses has been its relationship with the Ecoweb brand. Most

customers in the market express their reservations whenever they hear of this

relationship. Other weaknesses of the company include:

• The lack of records or documentation. This has resulted in faults taking longer

than expected and this has been slowly eating away on the company’s good

reputation.

• Liquid is a relatively young company, where organizational culture and processes

are still being perfected. This obviously results in poor customer satisfaction in

some cases and frequent restructuring exercises.

• Cultural differences in a multi-cultural, international organization is also another

weakness that sometimes results in poor communication within the company,

information asymmetry and some level of infighting.

21

1.1.4.5.3 Opportunities

Opportunities are many in the Zimbabwean telecommunications industry. The

market is huge with high demand for telecommunications services due to low

teledensity. The changes in the regulatory environment present an opportunity for

Liquid to grow its product portfolio. The increasing shift towards more data, with

machine to machine (m2m) communication increasing, as well as exploding internet

usage in Sub-Saharan Africa presents an opportunity for regional business for the

company. Due to high costs associated with satellite communications, terrestrial

fibre will offer cheaper, reliable and huge bandwidth for interconnection. Similarly

growth in cloud-computing solutions indicates growing bandwidth requirements in

the future, thus presenting more opportunities. The prospect of 4G technologies

(LTE and WIMAX) means that more and more backhaul capacity will be required by

mobile communications companies, representing strong opportunities for Liquid

Telecom.

1.1.4.5.4 Threats

The regulatory authority also presents a threat to the company as this introduces

new dimensions to the competitive environment. The regulator, which came out of

TelOne, and has strong links with the government owned operator has for long been

accused of being partisan in its dealings. For example, although other operators

were not granted authority by Ministry of Transport to trench and lay fibre to Mutare

because Tel One had already done so, the same ministry did not stop Tel One from

trenching to Bulawayo although two other players had already laid fibre to Bulawayo.

The unreliable power network also affects the service quality and this has worked

against the good reputation built by the company.

22

1.1.4.6 Challenges Faced by Liquid Telecommunications

Although Liquid Telecom is currently enjoying phenomenal growth, and is operating

profitably as discussed above, the following challenges have started to affect the

organization;

• Long Customer connection turnaround time – Most customers complain that

once they sign up for service with Liquid Telecom, it takes long to be finally

connected.

• Dwindling Average Revenue per User (ARPU) for data products - The world

over, the internet and data prices are going down, and the same pressures

are evident in the Zimbabwe telecommunications industry.

• Switching Costs are high – costs to lure customers captured by first movers

such as Powertel and Tel One are high in a world where prices for data

products are generally going down. The major challenge is to reduce

operational costs and optimize capital expenditure in order to maintain or

grow profits. Liquid Telecom made a late entry into the fibre based

telecommunications market, and has to win customers that had already been

captured by incumbents.

• Unmet Orders (Poor service delivery timelines) – Liquid Telecom currently

has a backlog to connect over 400 customers who have signed up for service,

some have been on the waiting list for more than three months. Customers

are normally promised connection within six weeks of signing up, but this has

rarely been achieved.

• Stakeholder complaints on the quality of work- Complaints have been

received from some of the stakeholders (such as residents, Ministry of

transport and local authorities (city/town/rural councils)) on the quality of work

done by Liquid Telecommunications. Cases such as when a road is trenched

to lay optic fibre ducts and has had to be reinstated several times after initial

works are not rare.

23

Research Problem

Liquid Telecom made a late entry into the fibre based networks market and as such

most clients had been captured by incumbent operators. The fibre based data

communications products, however have high switching costs and as such, to win

market share, costs have to be kept to a minimum to ensure viability. Additionally,

the Average Revenue per User in the data communications industry is dwindling

globally and hence the need for telecommunications organizations to relook at their

strategies. As evidenced by the cost structure in the Liquid Telecom business model

discussion above, the bulk of Liquid’s costs come from the network build portion of

the value chain. Outsourcing and offshoring, which began as cost-cutting measures

in the developed world, have been proposed as some of the ways companies can

create real sustained value, by gaining capabilities that they don't have in-house,

and strengthening capabilities they do have (Heric and Singh, 2012). Although

outsourcing has been presented as having various benefits, it is not evident if this

has been the case at Liquid Telecom. In pursuit of cost cutting through outsourcing,

the organisation might actually have introduced other variables that have affected

network quality, service delivery and cost of providing service. In a forward looking

organization that is looking to wrest market share from existing players, it is

therefore critical to analyse the benefits accrued from the current outsourcing

approach (if any), assess the competitive gains that it is bringing (if any) and

establish ways of improving gains obtained from the outsourcing model.

Research Objectives

The major objective is to establish the degree to which the current outsourcing

approach has helped in achieving sustainable competitive advantage for Liquid

Telecom Zimbabwe in the period 2009 to 2012. The research seeks to identify the

role played by outsourcing in the growth that has been enjoyed by Liquid Telecom

24

during this period (2009-2012). The research sub-objectives derived from the

research topic and major objective are listed below:

1. To evaluate the impact of outsourcing on Liquid Telecom service delivery in

the period 2009 to 2012.

2. To determine the level of cost reduction achieved by using contractors in

Liquid Telecom.

3. To establish the impact of using contractors on the quality of the Liquid

Telecom Network.

4. To establish the effectiveness and/or maturity of the Liquid Telecom

outsourcing approach with the view of recommending best practices.

Research Questions

The following research questions have been designed to complement research

objectives and form the basis for the questionnaire design:

1.1.5 Overall research question

• Has the current Liquid Telecom outsourcing approach been of strategic

benefit to the organization?

1.1.6 Specific Research Questions

• What has been the impact of Liquid’s outsourcing approach on service

delivery?

• Does Liquid Telecom’s sourcing maturity level match the type of outsourcing

employed by Liquid Telecom?

• Has outsourcing resulted in significant cost reduction?

25

• Has outsourcing resulted in operational efficiency?

• Has the current outsourcing approach improved the quality of work in the

Liquid Telecom Network?

• What are the reasons behind the success or otherwise of Liquid Telecom’s

outsourcing approach?

Research Hypothesis

In this research, the null hypothesis (H0) and the alternative hypothesis (H1) were

formulated as follows;

H0: Liquid Telecom approach to outsourcing has result ed in sustainable

competitive advantage for the organization.

H1: There is no sufficent evidence to show that Liqui d’s approach to

outsourcing has resulted in sustainable competitve advantage for Liquid

Telecom Zimbabwe.

A Z test based on the assumption that the data is normally distributed shall be used

to test the research hypothesis statistically in chapter four.

JUSTIFICATION

There are three major stakeholders in a research process namely, the academia, the

researcher and the organisation under investigation. This section seeks to clearly

outline how these stakeholders benefit from the research process or research output

practically and academically. It is in this section that the capacity of the researcher to

handle the research portfolio shall be demonstrated as part of research justification.

Benefits that are directly related to academia are as follows : Results of this

research are expected to assist new and future researchers by exploiting related

important theoretical constructs. This would assist the academia in building new

bodies of knowledge and add value to the existing corperate strategies for

26

telecommunications organizations. The primary focus in this research is to build on

existing literature on outsourcing by identifying issues specific to Zimbabwean

telecommunications outsourcers and give an academic analysis of outsourcing in

the telecommunication industry.

Importance to the firm and the country (Zimbabwe) a re as follows : The

recommendations, which will be made, based on the research findings are expected

to facilitate the adoption of outsourcing strategies for the 21st century by firms in the

telecommunications sector in Zimbabwe. Liquid Telecom, as relatively new player on

the Zimbabwean market, is aiming to grow the market share. The research will

identify the outsourcing philosophy at liquid Telecom, investigate how this is being

used to enhance the company’s competitiveness, investigate Liquid’s relationship

with contractors as well as assess the contractors’ capabilities with the aim of

providing recommendations on areas of outsourcing that might need to be

addressed within the organisation as a whole. Identifying holes in the outsourcing

model will enhance the efficiency and hence reduce costs in the network build, thus

representing a possible downstream effect in the entire economy.

This research is important to the researcher indivi dually in two ways : Firstly

this falls in the researcher’s scope of professional work and it will enhance and fortify

the researcher’s business understanding and appreciation of the business

operations. Secondly it gives the researcher a sense of self-worth and self-

contentment as a scholar.

SCOPE OF RESEARCH

The primary target for this research is the 85 employees in Liquid Telecom

Zimbabwe. The population will cover both the management and non-managerial

staff. The study has been limited to the period 2009 to 2012, the period in which

Liquid Telecom has been fully operational. The dominant theoretical concepts

27

applied in research are strategic management theories, supply chain management

theories, telecommunications management theories as well as economic theories.

Ethical Issues

Ethical considerations integrated into this research to protect the rights of research

participants are as follows:

1. The principle of voluntary participation was followed: This requires that in this

research people are not coerced into participating. No “captive audiences” were

used in this research. The covering letter accompanied each questionnaire

clarifying all ethical issues.

2. Informed consent concept: The research participants were fully informed about

the procedures, objectives, stakeholders and risks involved in the research.

3. Risk of harm: Closely associated to 2, care was taken not to expose the

participants to harm which may be physical or psychological as a result of their

participation.

4. Principle of privacy: This was observed in two dimensions;

(i) Confidentiality: respondents were assured that identified information

was not going to be made available to anyone not directly involved in

the research.

(ii) Anonymity: All participants were assured of anonymity throughout the

study.

ASSUMPTIONS OF THE STUDY

The study assumes that:

28

• Respondents are going to be co-operative and sincere in

responding to the needs and requirements of the study.

• No changes will be made to the current outsourcing practices

at Liquid Telecom until the end of study.

• The tools and instruments used were valid and reliable.

• The sample is representative of the population

Dissertation Structure

This research document comprises of five chapters whose composition is as follows:

Chapter 1: Gives an overview of the research by providing an introduction,

background material and justifications for carrying out this research;

Chapter 2: Explores literature that is relevant to this study and the theoretical

framework within which this study will be carried;

Chapter 3: Describes the research methodology used in the study. The philosophies

used will be discussed in detail as well as the information on the data collection

methods. The chapter also tackles data presentation and analysis tools used in the

study;

Chapter 4: Analyses the results obtained from the study in detail and discusses

their significance in relation to other research findings;

Chapter 5: Gives a conclusion on the research finding. Recommendations are given

based on the finding. Areas of possible future researches are also outlined.

29

Chapter Summary

This chapter has introduced the study and explored the background to the problem

as well as the objectives of the study. The research questions, which derive from the

research objectives were also listed. The chapter discussed the problem statement,

leading to the justification of the study. These discussions form the basis of the next

chapter which reviews existing literature on the subject under investigation.

30

CHAPTER 2 LITERATURE REVIEW

Introduction

This section seeks to demystify the pivotal technical issues in outsourcing

associated with this research and present an awareness of the relevant concepts.

The section explores and reviews literature on the strategic importance of

outsourcing in the telecommunications industry. This entails a review of the

theoretical and empirical literature that specifically underpins the study in line with

the research objectives with a view to identifying any gaps in literature. The section

will assess the context in which outsourcing is being discussed and identify key

elements of the concept, and its linkage to an organization’s competitive advantage.

An examination of the case for outsourcing in the telecommunications industry will

be made. Contributions and arguments from other researchers will be explored and

summarised.

The Outsourcing concept

2.1.1 Definitions of outsourcing

A plethora of literature on outsourcing exists, and most authors seem to agree that

outsourcing is one of the most important management practices in the 21st century

and that the practice is on the increase. Whereas Greaver (1999) defines

outsourcing as the act of transferring some of an organization's recurring internal

activities and decision rights to outside providers, as set forth in a contract,

Domberger (1998) defines it as the transfer of the production of goods and services

that have been carried out internally to an external provider. Of note in Domberger’s

definition is that it excludes any goods and services that have not been produced

internally. Brown and Wilson (2005) on the other hand define outsourcing as the act

of obtaining services from an external source. Linder (2004) provides a broader

31

dimension of outsourcing by defining it as the purchasing of ongoing services from

an outside company that a company currently provides, or most organizations

normally provide, for themselves. Lei and Hitt (1995) broaden it further by stating

that outsourcing is the reliance on external sources for the manufacturing of

components and other value-adding activities. McIvor (2003) argues that the term

outsourcing can cover many areas, including the outsourcing of manufacturing as

well as services. For the purposes of this research, a combination of the last two

definitions will be used to define outsourcing as the reliance on external sources for

ongoing services and other value-adding activities that a company currently

provides, or most organizations normally provide, for themselves. The opposite of

outsourcing could be defined as vertical integration or insourcing which entails the

production of goods or services within the firm.

Other terms similar to outsourcing are contracting, contracting out (Domberger,

1998) and farming out (Doig, Ritter, Speckhals and Woolson, 2001). Friedman

(2006) uses the term “out-tasking” to refer to hiring an external provider on a limited

basis for a particular project. In this research out-tasking is treated as another form

of outsourcing. The difference between outsourcing and out-tasking is that

outsourcing is long term in nature (and hence strategic), whereas out-tasking may

be a one-time deal. However, when discussed in terms of outsourcing, out-tasking is

simply another type of outsourcing, which is tactical in nature rather than strategic.

2.1.2 The Theories behind outsourcing

The conceptual basis for outsourcing can be traced from Williamson’s (1975)

transaction cost analysis theory, which is essentially a combination of economic

theory and management theory used to determine the optimal relationships an

organization should develop in the marketplace (McIvor, 2005). The driving principle

in transaction cost theory is “achieving efficiency depends on balancing the risks and

benefits” (Lee, Huynh, Kwok & Pi, 2003 p.95). Williamson (1985) concludes that the

32

organization should consider outsourcing those activities that would require

excessive investment to get lower unit cost when produced internally. Modern day

outsourcing can aslo be traced to the work of Porter (1985) who suggested that firms

should manage their resources by optimizing transaction cost involved in

outsourcing. From the evidence above, it is can be concluded that outsourcing exists

to create value (Samuel, 2004)

Outsourcing can be directly linked to the Core Competence theory, Resource-based

theory, Transaction cost theory, Network theory, Contractual Theory, and

Contingency theory.

2.1.2.1 Core Competence theory

Hamel and Prahalad (1994, p.4) define core competencies as “the collective skills

and learning inside an organization that create competitive advantage.” However,

there seems to be disagreement amongst many scholars as to what really

constitutes a core competence. Quinn and Hilmer (1994) contend that core

competencies are neither products nor those things an organization does well, but

are in fact those things that the company is very good at, especially those that

require mental reasoning. Alvarenga and Manmiera (n.d., p.6) on the other hand

observe that some executives think of their companies’ core competencies as the

things we need to get right, others describe them as “the things we do best” and

some executives define a core competency as “the basic skills required to compete

in our industry” while, interestingly, some leaders simply ignore the concept

altogether. However, other authors argue that the simple dichotomy core — non-

core is weak in that there are several circumstances when outsourcing of core

competencies can be very beneficial (Baden-Fuller, Targett, & Hunt, 2000). The

difference between core and non-core arguably builds on a static view of the world,

where “managers can place big bets about their markets, future technologies, and

33

suppliers’ capabilities and motives with a great deal of certainty. The real world is

however too turbulent, too unpredictable and complex” (Lacity & Willcocks, 1995).

McIvor (2003) found it very difficult to distinguish the core in practice from the non-

core.

2.1.2.2 Resource-Based Theory

This theory views organisations as a collection of productive resources and

considers company resources, whether physical or not, as a source of competitive

advantage. It is premised on the assumption that organisations gain competitive

advantage by their internal resources. According to Barney (1991), the Resource

Based View (RBV) can be seen as a substitute of Porter’s (1985) five forces model

in analysing sources of competitive advantage. A company should be able to

leverage on its resources to differentiate itself from competitors. Outsourcing brings

another perspective where, if a company does not have sufficient physical and/or

intangible assets, it uses outside resources for competitive advantage. Thus a firm

can co-operate with partners, so that the firm’s knowledge is enriched by the

partners’ knowledge and capability (Barney, 1991) to create sustained competitive

advantage. As such, a firm with strategic outsourcing capability is likely to achieve

success by leveraging on partners' capabilities and competencies (Khwanruedee et

al., 2010).

2.1.2.3 Transaction Cost Theory

According to Williamson (1981, p.552), a transaction cost occurs “when a good or a

service is transferred across a technologically separable interface”. The theory is a

framework for analysing the “comparative costs of planning, adapting, and

monitoring task completion under alternative governance structures” (Williamson

34

1985, p. 2). Henisz and Williamson (1999) argue that transaction cost economics is

a relative legal advancement to economic organization where the focus is on

information of transaction and governance activities. According to Logan (2000) the

theory helps companies to identify non-core activities that could be outsourced.

2.1.2.4 Network Theory and Agglomeration

According to the Industrial Network Theory, any market can be described as a kind

of macro network (Axelsson and Easton 1992). A business network may be defined

as a set of connected exchange relationships between firms (Forsgren and

Johanson, 1992). The Network theory explains how firms' cooperation can be

affected by viewing business as a network of relationships among communities or

industry and among organizations or firms (Wilkinson and Young, 2002). The

business network view seems to suggest that a company cannot develop strategic

outsourcing and implement it in isolation, without a strong understanding of the

embeddedness of individual relationships within wider networks (Gadde and

Håkansson, 2001).Therefore, firms with strategic relationships gain competitive

advantage, due to access to information and opportunities, over those firms that do

not have.

Closely linked to the network theory is the concept of Spatial Agglomeration ,

Spatial Agglomeration could be defined as the location of firms within a dense

industrial area, increasing the probability of finding specialised suppliers (Antonietti &

Cainelli, 2009) According to Quigley (2004), the concept of agglomeration, (which is

not new but appeared in writings as old as 1849), is closely linked to the network

theory. Hawkins (2011) notes that there are 3 main drivers of agglomeration

economies;

• Externalities arising from the presence of a large number of firms in the same

industry in a specific location

35

• Externalities arising from the presence of a large number of closely related

industries, including suppliers and buyers, in a specific location, and

• Those that arise from the presence of a large number of firmsin unrelated

industries in the same location.

Additionally, the sources of agglomeration economies and their relative importance

differ with the degree of sophistication of the product manufactured. Adretech (2003)

observe that the influence of agglomeration externalities on a firm’s profits depends

on the efficiency benefits it derives from collocating and on the contributions it

makes to its competitors’, suppliers’ and buyers’ production processes.

2.1.2.5 Contractual Theory

Gurbaxani (2007) defines an outsourcing arrangement as a long-term contractual

arrangement in which one or more service providers are assigned the responsibility

of managing all or part of a client’s infrastructure and operations. Solli-Saether and

Petter (2009) observe that the outsourcing contract provides a legal framework that

binds the right, roles and responsibilities of the parties in the contract and the

inherent goals, policies and strategies of the arrangement. The contractual theory is

the basis upon which the outsourcing relationship is based and is usually

accompanied by Service Level Agreements which clearly spell out the

responsibilities and benchmarks for performance measurement.

2.1.3 Types of outsourcing

A search of the Emerald research database with the key word outsourcing, (as at

February 26, 2012) yields 6281 journals and 466 books. It is therefore clear that the

topic of outsourcing is by no means a new area. As such, a number of classifications

36

of outsourcing exist, and those that are relevant to this research will be reviewed

here.

Hillary (2005) identifies three high level “flavours” of strategic outsourcing, namely;

2.1.3.1 Tactical Outsourcing

Tactical outsourcing is the practice of outsourcing a very specific problem or task

which is usually applied where in-house resources cannot immediately deliver what

is required. It can be mixed with in-house services creating a blend of in-house and

outsourced services and is thus essentially a short-term approach.

2.1.3.2 Strategic Outsourcing

In strategic outsourcing, the overall corporate 'big picture' has to be considered,

rather than individual projects or required skill-sets. As the cut-throat global

competition increases, the scope of outsourcing and managed services changes

from the traditional concept to strategy (Quinn & Hilmer, 1994). According to

(Mazzawi, 2002) strategic outsourcing is concerned with creating value to align the

business processes with the strategic goals. In this case the organization ceases to

focus on whether to outsource or not and begins to consider what it does best and

how. Strategic outsourcing can be an opportunity for the senior management of a

company to do some serious re-engineering on the products and services offered.

According to Hillary (2004), Haveckin (2012), the main reasons for choosing a

strategic outsourcing solution are:

• To provide access to the best resources in the business by ensuring

that only leading experts work on your projects.

37

• Internal resources can be freed from non-core activities and allowed to

focus on revenue generation.

• It allows the business to focus on its core competencies rather than

reinventing the wheel.

• It allows the company to save costs

• As a response to industry competitive forces

• To provide staff versatility

• To introduce new technology and,

• To gain competitive advantage.

2.1.3.3 Transformational Outsourcing

This goes beyond strategic considerations and works on the basis of how the

business might be run if there was an opportunity to start over again. This complete

business redesign would use outsourcing as a strategic tool to ensure that the

benefits of strategic outsourcing are achieved as a new way of doing business is

created. This is a complete corporate overhaul and has far-reaching long-term

consequences.

According to Gilley, McGee, & Rasheed (2000) there are two broad types of

outsourcing which are discussed below;

2.1.3.4 Substitution

This is outsourcing that arises from the substitution of internal activities by external

purchases. In this case, an internal supplier is discontinued in preference of an

external supplier and may be viewed as vertical disintegration.

38

2.1.3.5 Abstention

This type of outsourcing is not limited to activities shifted to external suppliers, but

may also arise when a firm purchases goods or services not provided in-house

previously. Abstention-based outsourcing differs from basic procurement because

provision of the good or service outsourced is within the acquiring firm’s managerial

capacity.

Gewald and Rouse (2012) on the other hand identify two major classes of

outsourcing as;

2.1.3.6 Information Technology outsourcing (ITO)

IT outsourcing, is contracting for delivery of IT services and/or equipment by an

external party. Closely linked to IT outsourcing is the concept of Cloud Computing.

• Cloud Computing: In essence, cloud computing is a new way of delivering

and using IT services “on demand” and in a manner in which the services are

flexible, scalable and cost effective (Borts, 2012). It allows users to access

and store information and use software functionality on remote servers owned

and/or operated by third parties as and when they are needed. Some of the

benefits of such an outsourced service include;

Cost saving: allows organisation to easily respond to fluctuations in

demand

Capex reduced : no longer extensive expenditure on IT infrastructure

(people, software, hardware)

Ease of integration and use: can access services/data/files anytime

and from anywhere

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2.1.3.7 Business Process outsourcing (BPO)

They define Business process outsourcing as outsourcing one or more specific

business processes together with the IT that supports them, where business process

is defined as a set of logically related tasks performed to achieve a defined business

outcome.

Since the focus of this research is competitiveness, which is strategic in nature, the

classification by Hilary (2000) will be adopted. However, the classification by Gilley,

et al., (2000) will also be used in order to provide the broad picture where

outsourcing is not limited to activities that are transferred to external suppliers, but

also include those not provided in-house previously.

2.1.4 Benefits of Outsourcing

Cost-cutting is often cited as the major advantage of outsourcing, though it can

sometimes lead to disappointment, since outsourcing does not always produce a

cost benefit (Lankford and Parsa, 1999). They further argue that outsourcing works

best when it is an outgrowth of reengineering. A much better reason is the

specialized knowledge that the contractor can provide (Davies, 1995). Domberger

(1998) and Hendry (1995) identified five advantages of outsourcing: namely; lower

production costs, strategic focus, cost avoidance, relational rents and flexibility.

Admittedly, outsourcing has a number of benefits which include enabling a company

to redirect energy to its core competencies by making more efficient use of

worldwide labour, capital and technology for non-core work, and allowing for the

purchase of intellectual capital that would not otherwise be available. Gerwald and

Rouse (2000) observe that, although there is a lot of literature that examines the

benefits and risks of outsourcing, the majority of research was published on the

benefits of outsourcing, and this may be due to the fact that the primary research

40

objects – managers responsible for outsourcing – are much more focused on the

benefits than the risks of outsourcing. This is turn may explain the seemingly

increasing advantages of outsourcing that are being discovered in literature. The

table below, summarises this trend.

Table 2-1Benefits of Outsourcing

Burkholder(2006) Outsourcing Institute

(1998)

Elliot and

Terke(1996)

Ciandella (1996) Carter (1995)

Acceleration of reengineering

benefits

Focus on core

Business

Focus on core

Business

Focus on core

business

Focus on

core

Business

Access to world-class

capabilities

Access to leading

practices/

technology

Access to leading

practices/

technology

Access to

leading

practices/

technology

Access to

leading

practices/

technology

Cash infusion Flexibility Flexibility Lack of internal

resources

Reduce costs

Freeing up resources for other

purposes

Reduce costs New skills/culture Flexibility

Function difficult to manage or

out of control

Lack of internal

Resources

Customer/supplier

orientation

Improved company focus

Free internal

Resources

Reduce costs

Reducing operating costs

Function out of

Control

Reducing risk Access capital

Resources not available

internally

Share risks

41

Adapted from McDonagh and Hayward, (2000)

2.1.5 Disadvantages and/or risks of outsourcing

Academic work has been done to identify the drawbacks of outsourcing and the

ones that stand out include hollowing out, opportunistic behaviour, transaction costs,

reduced learning and innovation (Domberger, 1998; Hendry, 1995). McDonagh and

Hayward (2000) identify the most common problem areas reported in academic

studies as

• Outsourced workers less in tune with organisational needs or culture

• A time-consuming bid or management process;

• Failure by service providers to deliver promised service;

• Slower response times;

• Lack of control; and

• Poor communication.

As enterprises continue to adopt varying operating models for outsourcing

agreements, Pai & Basu (2007) assert that they must evaluate and weigh the

importance of four key factors:

• cost savings;

• service quality/delivery;

• level of control/governance; and

• risk tolerance

These provide a key measure of the benefits outsourcing. These measures will also

be adopted in measuring the success of Liquid Telecom outsourcing.

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Trends in the telecommunications industry

Unlike general outsourcing, there has not been much academic work done on

outsourcing in the telecommunications industry. In fact most of the work in this field

has either been done on, or by, original equipment manufacturers (OEMs) (for

example, McIvor, 2000). Such studies have two limitations in relation to the focus of

this research. Firstly, studies by telecommunications equipment vendors are likely to

be biased and present outsourcing as a competitive advantage as the vendors seek

to forward integrate by providing managed services to telecommunications service

providers. Secondly, the value chain of the vendors is essentially different from that

of service providers, thus studies on these organizations cannot be extrapolated to

telecommunications service providers. Most of the other studies on outsourcing have

focused on IT outsourcing, which is also essentially different from the outsourcing in

telecommunications organizations. As such, most of the available documentation on

outsourcing by telecommunications service providers is by telecommunications

research organizations, International Telecommunications Union (ITU) publications

and by individual industry commentators. This lack of academic research on the

subject of outsourcing in telecommunications service providers forms the basic

motivating factor for embarking on this research work.

According to a Technology Forecasters Inc.'s (www.tfi.com, 27/04/2012) consultant

“countries including Japan, Finland, and Sweden are looking at 100 percent

penetration in cell phone ownership”. Given this high penetration rate and advancing

technology, outsourcing is a necessity." Another management consulting firm,

Authur D Little, claims that outsourcing and infrastructure sharing can increase the

telecommunications carrier’s operating free cash flow by up to 10 %

(www.adlittle.com, 27/04/2012). In 2004, an American research company, Booz&Co

in a research on the outsourcing trends in North America, found out that more than

75% of the telecommunications industry executives consider outsourcing as a key

business lever that allows their business to better respond to market challenges

(Jaruzelski, Katz, Ribeiro, & Bordia,2004). The same research concluded that, the

number one reason telecommunications Service Providers give for outsourcing is

43

Operational expenditure (OPEX) reduction and Capital Expenditure (CAPEX) opti-

mization.Most of the industry experts, and vendor presentations, site the pace of

technology change as the greatest influence for the trend toward more outsourcing

and managed services for operators.

Outsourcing options in telecommunications

Within the Telecommunications industry, there are a number of options for

outsourcing, where the operators can decide to outsource a part or the whole

process. The options can be listed as;

• Staff Augmentation

• Out-Tasking

• Project Based Outsourcing

• Managed Services

2.1.6 Staff Augmentation Model

Staff Augmentation is whereby a company takes on contract employees to meet

temporary or short term increase in demand for their products or services (Tapscot &

Ticoll, 2003). The challenge with such an approach is on how quickly the temporary

workers can understand a company’s processes, strategy, culture and policies as

such an understanding is a crucial variable in employee productivity. In this model,

the contract workers can be supplied by an outsourcing vendor, but the vendor does

not take full accountability.

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2.1.7 Out-Tasking Model

According to Chambers (2003), out-tasking is a modified version of outsourcing

where the client maintains control over the strategy and implementation, and their

out-tasking partner executes on it. The observation in this model is that the vendors

are responsible for specific functions in the company while the client controls and

manages all internal activities. In such an arrangement the service providers do not

have ownership of any project as they only perform certain tasks from the project

and are responsible for their activities. Crucially, the out-taskingclient remains

completely in control of the overall strategic systems architecture andthe data

architecture.

2.1.8 Project Based Outsourcing

Project-based outsourcing is whereby the outsourcing service provider is given

responsibility for a project. A popular example of this model in the

Telecommunications industry are the turn-key projects that are normally carried out

by Telecommunications Equipment Vendors. In this type of setup, the client hands

over overall project control and management to the vendor, but constantly monitors

progress against specific deliverables and benchmarks.

2.1.9 Managed services Model

According to an Erricsson white paper, the managed services model “typically

include establishing, operating and managing day-to-day operations of a telecom

operator’s network, services and business support systems (www.erricsson.com, 27

April 2012). The term also covers the case where a provider takes responsibility for

providing the required network capacity to an operator, when and where needed, as

well as hosting of content, applications and enablers.” Manish and Rohini (2007), on

45

the other hand define managed service model as one in which the service provider

has complete ownership for the delivery of services. The service provider

responsibilities include design, building, operating and improving processes,

applications, and infrastructure.

Of these models out-tasking, staff augmentation and project-based outsourcing are

the most widely used in Zimbabwe. Although Managed services model is on the

increase globally, no telecom company in Zimbabwe has embraced this model yet.

2.1.10 Selecting Appropriate Sourcing Model

According to Manish & Rohini (2007), the appropriate sourcing model for an

organization is determined by its existing sourcing maturity level and its willingness

to improve on it. He further argues that there is no one perfect sourcing maturity

level, it depends on the business dynamics and strategic thrust of the organization

as far as sourcing is concerned. Critical to the success of any model adopted is the

willingness of the organization to actually support the partnership structures required

at a given level of outsourcing. The two propose a sourcing maturity model that

organizations can use to evaluate their readiness to use a given sourcing model.

46

Table 2-2:Sourcing Maturity Model.

Sourcing

Considerations

Goals

SOURCING MATURITY LEVEL

Low Medium High

Short to Medium term

tactical focus

Long-term thinking in

some selected areas

Comprehensive,

enterprise-wide focus on

long term goals

Return Prospects Immediate-short-term

gain

Willing to accept a

model that requires

initial investment with

returns over a longer

horizon

Balanced portfolio

approach with mix of

short-term initiatives

yielding immediate returns

and long-term initiatives

requiring initial investment

Impact Localized to individual

groups or projects

Starting to realize some

benefits

Impact at business unit

level

Pockets of excellence

beginning to emerge

Organization-wide impact

Global sourcing

incorporated into

company’s business

model, leading to

enterprise-wide

transformation.

Awareness Low levels of

awareness, mostly in

Growing awareness

across divisional

Significance of Global

Delivery Model well

47

“silos” that are “testing

the waters” on

offshoring

boundaries

Knowledge being

managed, organization

is learning valuable

lessons from previous

experience.

understood across the

organization

Organization develops

sourcing expertise, and is

able to adapt sourcing

strategy to various

situations.

Source: Manish & Rohini, ( 2007).

It is thus clear that organizations that can take the strategic, enterprise wide

approach to outsourcing are those that are highly mature in their sourcing models.

An organization that has low sourcing maturity has limited options in their sourcing

models and thus it is critical for management to assess current sourcing maturity

level and take a strategic decision to move up the sourcing maturity curve in order to

derive more benefits from outsourcing. The diagram below summarizes this model.

Figure 2-1:Sourcing Maturity Model

Source: Manish & Rohini, (2007)

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2.1.11 The concept of relationships in outsourcing

Closely linked to the sourcing maturity analysis model by Manish and Rohini (2007)

is the concept of relationships. This is closely linked to the Network Theory

discusssed in section 2.1.2.4 above. Various researchers have added additional

dimensions to include a ‘relationship’ which is based on trust, commitment, culture,

interdependence and communication (Goles & Chin, 2005).

These key terms are defined as follows:

• trust: exchange relationships among participants;

• commitment: keep promises and perform as per specified agreements;

• culture: vendor and company communicate well and understand business

rules and etiquette;

• interdependence: balanced interdependence between entities in the service

partnership;

• communication: quality, accuracy, timeliness and credibility (Haveckin,

2012)

These “relationship” measures are key to the success of any outsourcing

arrangement.

Haveckin (2012) further proposes the linkage map below to explain the key issues in

outsourcing. Although the map was used in the analysis of IT outsourcing, the

concepts that are pertinent to telecommunications organizations, which will be

analysed among others include;

1) Benefits

Competitve Advantage and Bottom line costs

2) Drivers

49

Competitve advantage, Profits, Globalization, Technology and Versatility

3) Success Factors

Management support, User/provider relationship and internal controls.

4) Major Reasons

Cost control, increased service levels, Access to technical expertise and

freeing up internal resources.

50

Figure 2-2:Linkage Map for Outsourcing.

Source: Haveckin, (2012).

2.1.12 Telecommunications value chain dynamics

Value chain analysis views the organisation as a sequential process of value

creating activities (Dess and Lumpkin, 2002). Porter (1985) argues that competitive

51

advantage cannot be understood by looking at a firm as a whole. He further argues

that competitive advantage stems from many discrete activities a firm performs in

designing, producing, marketing, delivering and supporting its products. Each of

these activities can contribute to a firm’s relative cost position and create a basis for

differentiation. The value chain disaggregates a firm into its strategically relevant

activities in order to understand the behaviour of costs and the existing and potential

sources of differentiation.

Figure 2-3:The Firm’s value chain.

Source: Turban,McLean& Wetherbe,(2004).)

The goal of these activities is to offer customers a level of value that exceeds the

cost of the activities thereby resulting in a profit margin. The value chain enables a

firm to implement a generic strategy of their choice by monitoring closely the value

activities.

The telecommunications industry value chain is one characterised by an array of

competitive dynamics, rapid innovation, and continuous re-alignment. In analysing

52

outsourcing in the telecommunications, it is crucial to look at the fundamental

principles of value chain analysis and the value it adds to assessing relationships. All

the activities that form the telecommunications value chain have the potential of

being outsourced. However, which activities are outsourced in a

Telecommunications environment will depend on the position of the organization on

the sourcing maturity curve (Manish and Rohini, 2007)

2.1.13 Telecommunications Business Processes (eTOM Model)

As discussed in section 2.1.5 (drawbacks of outsourcing) one of the major problems

of outcourcing is that the outsourced workers are less in tune with organisational

needs, culture and processes. In the telecommunications industry however, there is

a model (the Enhanced Telecommunications Operations Map (eToM)) which is a

Business Process Framework that describes and analyses different levels of

enterprise processes according to their significance and priority for the service

provider business (eToM, Release 8.0, 2008). The enhanced Telecom Operations

Map (eTOM) is a guidebook built on TeleManagement Forum’s Telecom Operations

Map (TOM) and is currently one of the most widely used and accepted standards for

business processes in the telecommunications industry. The framework is defined

as generically as possible so that it remains organization-, technology-, and service-

independent. The Business Process Framework serves as the blueprint for

telecommunications service provider process direction, and provides a neutral

reference point for;

• internal process reengineering needs,

• partnerships, alliances, and

• general working agreements with other companies.

The eTOM model attempts to describe the whole scope of business processes key

to a telecom service provider and defines critical elements and how they interact

53

with each other.Such a framework will therefore be useful in analysing the

relationship between Liquid Telecommunications and its outsourcing patners.

1.5.1 Enhanced Telecommunications Operations Map Brief

Background

The Business Process Framework is an ongoing initiative of the TeleManagement

Forum (TM Forum) and can be viewed as having the following three major process

areas:

• Strategy, Infrastructure, and Product (SIP) covering planning and lifecycle

management

• Operations covering the core of day-to-day operational management

• Enterprise Management covering corporate or business support management

54

Figure 2-4: eTOM Level 0 Model.

Source: TMForum, (2008)

CompetitiveAdvantage

A competitive advantage exists when the firm is able to deliver the same benefits as

a competitor but at a lower cost or delivering benefits that exceed those of

55

competing products (Porter, 1985). Barney (1991) says competitive advantage is

attained when a firm is implementing a value creating strategy not simultaneously

being implemented by any current or potential competitors. He differentiates this

from sustained competitive advantage by defining sustained competitive advantage

as implementing a value creating strategy not simultaneously being implemented by

any current or potential competitors and when those other firms are unable to

duplicate the benefits of this strategy. A competitive advantage is only sustained if it

continues to exist after efforts to duplicate that advantage have ceased; sustained

competitive advantage is an equilibrium position (Barney, 1991). A firm enjoying

sustained competitive advantage may experience major shifts in the structure of the

competition and may see its competitive advantage nullified by such changes. He

further argues that, a sustained competitive advantage is not nullifies through

competing firms duplicating the benefits of that competitive advantage. There are

two major views of competitive advantage:

1. The Position or Environmental model

2. The Resource Based View

2.1.14 The Position/Environmental View

This view is mainly based on models put forward by Michael Porter (1980): the value

chain analysis and the generic strategies. The strategies focus on advantages

derived from industry and competitive positioning.

2.1.14.1 Generic Strategies

Michael Porter presented three generic strategies that a firm can use to overcome

the five forces in a competitive environment and achieve competitive advantage. The

generic strategies are “approaches to outperforming competitors in an industry”

(Porter, 1980 p. 35)

1. Overall Cost Leadership

Using this strategy, a firm aims at creating a low-cost-position relative to their peers

(Dess and Lumpkin, 2002).With such a strategy, a firm must manage the

56

relationships throughout the entire value chain and be devoted to lowering costs

throughout the chain.

2. Differentiation

This strategy requires the creation of products and services that are viewed industry

wide as unique (Porter, 1980) and valued. The emphasis is on “non price” attributes

for which customers will gladly pay a premium (Dess and Lumpkin, 2002). It should

however be noted that differentiation strategy does not allow the firm to ignore costs,

but rather they are not the primary strategic target (Porter, 1980 p. 37)

3. Focus

A firm must direct its attention towards narrow product lines, buyer groups or target

geographic markets. The entire focus strategy is built around serving a particular

target very well, and each functional policy is developed with this in mind (Porter,

1980 p. 38).The strategy rests on the premise that the firm is thus able to serve its

narrow strategic target more effectively or efficiently than competitors who are

competing more broadly

The notion underlying the concept of generic strategies is that competitive

advantage is at the heart of any strategy, and achieving competitive advantage

requires a firm to make a choice - about the type of competitive advantage it seeks

to attain and the scope within which it will attain it (Porter, 1985 p.12)

Porter (1980 p. 40) cites two major risks in pursuing the generic strategies in

general:

• Failing to attain or sustain the generic strategy;

• The value of the strategic advantage provided by the strategy being eroded

by industry revolution.

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Conceptual Framework

Outsourcing for competitive advantage in the telecommunications industry in

Zimbabwe can best be analysed by using the outsourcing linkage map adopted from

the one proposed by Havenick, (2012). Although Havenick’s map was drawn up for

analysing IT outsourcing in Australia, the issues pertinent to telecommunications

organizations in Zimbabwe were adopted and used in the study.

Issues tackled and discussed in the study were therefore derived from the objectives

and from the map as follows;

Figure 2-5: Linkage Map for Outsourcing.

Adapted From: Haveckin, (2012).

58

ChapterSummary

The chapter looked that the outsourcing concepts and the theory behind outsourcing

as given by theorists. It was established that although there is not much literature on

outsourcing by Telecommunications companies in Zimbabwe, the concepts used in

analysing outsourcing in other industries and in other nations could be used in

Zimbabwe with some level of conceptualization. The next chapter looks at the

methodology that was used to carry out the research study.

59

CHAPTER 3 RESEARCH METHODOLOGY

Introduction

This chapter looks at the research methodology employed in the study. Dawson

(2002) defines the research methodology as the philosophy or general principle

which will guide the research. It is the overall approach to studying the topic under

investigation and includes issues to be tackled such as the constraints, dilemmas

and ethical choices within your research. The research methodology provides the

rationale for the particular methods utilized in investigating outsourcing at Liquid

Telecom Zimbabwe. Methodology is the bridge that brings theory and method,

perspective and tool together (Hesse-Biber & Leavy, 2006 p 36-40). Dawson (2002)

distinguishes the methodology from the research methods by defining the research

methods as the tools used for gathering data such as questionnaires or interviews.

The research methodology adopted has arisen because the researcher wants to

solve the problems as stated in Chapter 1.

Research Design

Cooper& Schindler, (2003) argues that research methodology involves the

systematic procedures by which the researcher starts from the initial identification of

the problem to its final conclusions. Buckingham & Saunders (2004), go on to say

that the role of the methodology is to carry out the research work in a scientific valid

manner.

60

Research philosophy

All research is based on assumptions about how the world is perceived and how we

can best come to understand it. These assumptions form the basis of different

research philosophies. Research philosophy can be divided into two: epistemology

and methodology. Epistemology involves the philosophy of how we come to know

and methodology involves the practice of knowing. In choosing research philosophy

the researcher took into consideration the following philosophies:

3.1.1 Phenomenology

Hussey and Hussey (1997 p. 53) define phenomenology as being, “concerned with

understanding human behaviour from the participant’s own frame of reference…” It

has been established that phenomenological approach includes considerations of

multiple realities, different actors’ perspectives, and the contextual interpretation of

data (ibid). Phenomenology analyses phenomena (that which appears), as they are

perceived from a first person perspective in the natural attitude. According to

Saunders et al (2000 p. 86), phenomenology facilitates understanding of how and

why and enables the researcher to be alive to changes that occur during the

research. Phenomenology is not only a philosophy, but also a research method for

capturing the lived experiences of individuals. For the phenomenologist there is no

“one reality” to how each of these events is experienced; experience is perceived

along a variety of dimensions (Hesse-Biber and Leavy 2006 p. 36-40)).

3.1.2 Interpretivism

This is a phenomenological approach based on the argument that “…the social

world of business and management is far too complex to lend itself to theorising by

definite ‘laws’ in the same way as the physical sciences” (Saunders et al, 2000 p

102). Saunders et al further argue that this is a result of the complexity and

uniqueness of business situations. Interpretivism is often associated with

constructionism or social constructionism. This is a view that reality is socially

construed. The insights generated are not seen as being universally applicable but

of use to individuals in a similar situation (Bhattacharjee and Paul, 2002). Each

61

situation is viewed as essentially unique, but having subjectively-interpreted

elements in common with other situations.

The interpretive approach was selected as the most appropriate philosophy for the

research as the research sought to establish some fundamental truth about a

situation as viewed by those concerned in the organisation under investigation.

However to some extent triangulation of philosophies was used to draw from the

positivist view.

3.1.3 Positivism

Polit and Hungler as cited in Shepard et al, (1993) define positivism as the process

whereby evidence rooted in objective reality and gathered directly or indirectly

through the human senses is used as a basis for generating knowledge. Hussey and

Hussey (1997 p. 52) are of the opinion that a researcher should remain distant when

conducting their research, and not allow values and bias to distort their objective

views. This is called the positivistic view which seeks the facts or causes of social

phenomenon, with little regard to the subjective state of the individual. Logical

thinking is applied in this case so that precision, objectivity and rigor replace

launches, experience and intuition as the means of investigating research problems.

3.1.4 Post-Positivism

Post-positivism to some extend holds similarities to positivism – the difference being

that in the study of social reality, post-positivism recognises that researchers cannot

be absolutely certain about the knowledge claims. Post-positivists build evidence to

support pre-existing theory. In other words, relying on deductive logic and

hypothesis testing, post positivism attempts to create evidence that will confirm or

refute a theory, though no in absolute terms (Hesse-Biber & Leavy, 2006 p 36-40)

62

Research approach

The research approaches draw their meaning from the research philosophies. On

deciding on the research approach theresearcher looked at deductive and inductive

approaches respectively in order to build a case for triangulation of research data.

The deductive approach associated with positivism is when the researcher develops

a theory and hypothesis and designs a research strategy to test the hypothesis. The

deduction approach emphasises scientific principles, the need to explain causal

relationships between variables, the collection of quantitative data and the

researcher’s independence with what is being researched. This approach involves

the development of a theory that is subjected to a rigorous test. It is the dominant

research in the natural sciences where, “laws provide the basis of explanation,

permit the anticipation of phenomena, predict their occurrence and therefore allow

them to be controlled”, (Hussey and Hussey 1997 p 52). The inductive approach

associated with Interpretivism is when the researcher collects data and develops

theory as a result of data analysis. The induction approach emphasises on the

collection of qualitative data, a realisation that the researcher is part of the research

process and less concern with the need to generalise.

To a large extent this study found the inductive approach appropriate, but however

borrowed from the deductive approach to a lesser extent in a bid to draw

comparison between the approaches. The research approach is important to the

research project in three ways. Firstly it enables the researcher to take a more

informed decision about the research design; secondly it helps the researcher to

think about those research approaches that work and those that will not work; and

thirdly the knowledge of the different research approaches enables the researcher to

adapt the research design to cater for constraints.

63

3.1.5 Quantitative Research

This approach mainly involves the collection of quantitative data which are put to

rigorous quantitative analysis in a formal structured manner. These studies are

concerned with measurement and quantification of data to answer research

questions. Eastrerby-Smith et al (1996 p 16) has established that “to be useful data

needs to be analysed and interpreted using quantitative analysis techniques. With

quantitative work, the process of data collection becomes distinct from analysis”.

The weight the researcher attaches to responses in the study helps to generalize the

findings and allow the researcher to make value judgments’ on the findings.

Quantitative research excels at summarizing large amounts of data and reaching

generalizations based on statistical projections. The advantage of the quantitative

research approach is that it places emphasis on numerical analyses and objectivity,

reliability and replication of findings. On the down side the approach may not always

suit social science and validity of findings is reduced since social phenomena cannot

be reliably measured.

3.1.6 Qualitative Research

The approach involves the subjective assessment of opinions, behaviour and

attitudes. Qualitative research puts emphasis on individual interpretation of

behaviour and their environment, (Marchington and Wilkinson; 2005). The emphasis

is on understanding what is going on in an organisation in participants’ own terms

rather than those of the researcher. As Fineman and Mangham (1983 p 296)

observe, “If behaviour is viewed as situationally specific, idiosyncratic multivariate or

holistic, then a richer more descriptive analysis may well be taken to be worthwhile”.

3.1.7 Triangulation

Gil and Johnson (1997) believe that there is no one best method but many methods

contingent on the issue being studied. Each method has its advantages and

disadvantages in the kind of data it generates and its vulnerability to particular kinds

of error. Like Saunders et al, (2000) they claim that one way of overcoming each

64

method’s weaknesses and limitations is to deliberately combine different methods

within the same investigation.

In triangulating the data, the researcher uses a comparison of findings from the

qualitative and quantitative methods. Denzil (1970 p 13) posits that,” if each method

leads to different features of empirical reality, then no single method can ever

completely capture all the relevant features of that reality; hence, there is need to,

“learn to employ multiple methods in the analysis of the same empirical events”.

Using a number of approaches is termed triangulation.

Triangulation was the research approach of choice for this study. The quantitative

approach to research was instrumental in analysing and summarising different

results obtained from respondents. The qualitative approach helped in assessing

answers to open ended questions as well as the results from face to face interviews.

Robson (1993) as cited in Hussey and Hussey (1997 p. 248) says that the challenge

to qualitative data analysis is that,” there is no clear accepted set of conventions for

analysis corresponding to those observed with quantitative data”. The observed

challenges included reducing the data, structuring the data and detextualizing it.

Research strategies

Saunders et al. (2000 p. 90) defines the research strategy as the general plan of

how the research answers the research questions. The research strategy contains

clear objectives, specifies the sources from which data intends to be collected and

highlights the constraints that the researcher will inevitably have. Available strategies

in the field of research include experiments, survey, case study, grounded theory,

ethnography, action research, cross-sectional and longitudinal studies. In

consideration of the research method used, the researcher looked at complimentary

research strategies in a bid to meet research objectives.

65

3.1.8 Survey

Surveys involve selecting a representative and unbiased sample of subjects drawn

from the group you wish to study. This is usually associated with the deductive

approach. It is a popular and common strategy in business and management

research, (Saunders 2000 p. 93). The strategy is less costly, quick to administer,

and provide a much wider coverage than other strategies say an experiment. The

use of this research strategy is adequately amplified in the primary design of the

primary data collection methods that is the questionnaire. The main aim of the

survey is to collect information from, or about, a defined group or population,

(Eastrerby-Smith et al 1996). Saunders et al (2000 p. 94) note that the data is less

wide ranging than that collected by qualitative methods, as there is limit to the

number of questions that can be asked.

There are two main types of survey: a descriptive survey: concerned with identifying

& counting the frequency of a particular response among the survey group, or an

analytical survey: to analyse the relationship between different elements (variables)

in a sample group. The researcher made use of both the descriptive and analytical

surveys to collect data from the participants.

3.1.9 Case Study

Liquid Telecom is here used as a case study to try and establish whether

outsourcing is a source of competitive advantage in the telecommunications industry

in Zimbabwe. Robson (1993) as cited in Saunders (2000) defines case study as the

development of detailed, intensive knowledge about a single case or a small number

of related cases. On the other hand Mitchell (1983 p 191) describes the case study

as ‘a detailed examination of an event which the analyst believes exhibit the

operation of some identified general theoretical principle”. According to Morris and

Wood (1991) this strategy will be of interest if the researcher wishes to gain a rich

66

understanding of the context of the research and the processes being enacted. The

case study strategy also has considerable ability to generate answers to the

question “why?” as well as the “how?” questions. Rather than using large samples

and following a rigid protocol to examine a limited number of variables, case study

methods involve an in-depth, longitudinal examination of a single instance or event:

a case. They provide a systematic way of looking at events, collecting data,

analysing information, and reporting the results. As a result the researcher may gain

a sharpened understanding of why the instance happened as it did, and what might

become important to look at more extensively in future research. Limitations to the

case study method have been noted, with theorists arguing that there can be a bias

in results, either via the inherent limitations of any single method, (Saunders, et al

2000) or due to the effect of the researcher on the situation itself.

3.1.9.1 Applications of the Case study method

Case study procedures have been used extensively in the fields of law and juvenile

delinquency, psychiatry, psychology, education, business administration and

journalism among others. Normally, the case study is supplementary to or related to

other investigational procedures. The life history of an individual or an institution or a

community resembles historical research in sources and techniques. Case

investigation uses many of the data gathering instruments as used in descriptive

survey studies (Teti, 2005). Such a method, which has direct relationship with the

descriptive method as well as traceable application in organizations and

communities, will work well for the study focusing on Liquid Telecom as a

telecommunications organization.

A comparison of case studies and other methods

Case studies resemble survey studies in that they are concerned with the present

status phenomena. In this study, a combination of survey and case was used in

order to get the most out of the two. This is because, while survey studies

67

determines the present status, case goes beyond this and answers the more

fundamental question of how it got that way. Case study differs from experimentation

in that they display a greater element of subjectivity. Although case studies

constitute the most comprehensive means of studying the whole situation, a

distinction needs to be made between their guidance and their research functions

(Singh, 2006)

3.1.9.2 Why the case study method was used

Since the research sought to find understand the circumstance surrounding

outsourcing in telecommunications, the case study method was deemed appropriate

to answer the qualitative part of the research problem. A combined approach of

quantitative and qualitative was considered adequate to fully explore the reasons

behind success or otherwise of outsourcing at Liquid Telecom, and to improve the

validity and reliability of the results and findings. The research sought to contribute to

the existing body of knowledge on outsourcing by suggesting the best way of

implementing outsourcing for telecommunications companies in Zimbabwe.

3.1.10 Experiment

The researcher sets up a project in the lab and conducts the experiment by altering

one variable at a time so they can study the relationship between different variables,

(Bryman and Bell, 2003 p. 39). The researcher controls the independent variables

while measuring the effect on the dependent variables and keeping intervening

factors constant.

3.1.11 Grounded Theory

To generate or discover a theory, the investigator needs to set aside as much as

possible, theoretical ideas or notions so that the analytic, substantive theory can

emerge. The researcher must still keep in mind that this form of inquiry is laden with

68

specific steps in data analysis. The deductive approach was used because the

research seeks to establish relationships through the use of analysis of relationships

and collected data.

DATA COLLECTION

In carrying out research there are two major types of data used: primary data and

secondary data. Primary data is data that is being collected for the first time for the

purpose of the research being undertaken. Secondary data is data that has been

already collected and used earlier for something other than the research at

hand.Primary Data was mainly used in this study.

3.1.12 Primary data

Primary sources of data include observation and interviews gathered in the field by

the researcher.

3.1.12.1 Observation

Direct observation occurs when a field visit is conducted during the case study. It

could be as simple as casual data collection activities, or formal protocols to

measure and record behaviours. This technique is useful for providing additional

information about the topic being studied. The reliability is enhanced when more

than one observer is involved in the task.

3.1.12.2 Questionnaires

Questionnaires were found attractive in this study as they require minimal resources,

do not cost much but can provide a large sample, (Marchington and Wilkinson,

2005). The types of questionnaire used included self-administered questionnaires

such questionnaires where hand delivered to respondents. The researcher took into

consideration the fact that the type of questionnaire chosen will affect the number of

people who responded to questionnaires (Saunders 2000 p. 281).

69

Marchington and Wilkinson (2005) advise that the questionnaire be pilot tested to

check that respondents are able to understand all the questions and they make

sense. The researcher pilot tested the questionnaire with a view to edit all grey

areas.

3.1.12.3 Interviews

The structured interview method of data collection was applied. A questionnaire was

designed with four broad areas that were addressing the research questions.

The advantage of structured interviews to the management group is that it increased

the response rate because managers are generally busy and may not respond to

self-administered questionnaires. In the personal interview, the interviewer worked

directly with the respondent and the interviewer had the opportunity to probe or ask

follow-up questions.

3.1.13 Secondary data

Marchington and Wilkinson (2005) have established that data can be collected via

the inspection of documentary information produced by individuals within the

organisation involved. Very little secondary data was made use of in the study.

3.1.14 Population of Study

The population for this study shall be defined as composed of the directors

(executive and non-executive), managerial and non-managerial employees of Liquid

Telecommunications Zimbabwe at the time of the study.

Table 3-1:Liquid Telecom Staff complement and sample size for study

Description Count Sample Size Required

Directors and Senior Management 10

Middle Management 12

First Level Supervisors 14

70

Junior Staff 49

Total 85

3.1.15 Sampling

Factors such as expense, time and accessibility usually prevent researchers from

gaining information from the whole population. Smaller groups or subsets of the

total population are thus used in such a way that the knowledge gained is

representative of the total population (however defined) under study (Dowdy et al,

1990). A sample thus constitutes a certain portion of the population or universe

under study. Sampling design refers to the technique or procedure the researcher

adopts for selecting items for the sample from the population or universe. A sample

design helps to decide the number of items to be included in the sample; that is the

size of the sample. A sample design must be reliable and suitable for the research

study being undertaken.

Figure 3-1:Sampling

Source: Dowdy et al, (1990)

71

3.1.15.1 Sampling techniques

Sampling techniques enable a researcher to reduce the amount of data he needs to

collect by considering only data from a sub group rather than all possible cases,

(Saunders et al, 2000). Sampling techniques can be broadly classified into two as

probability and non-probability sampling.

3.1.15.1.1 Probability Sampling/ Random Sampling

In probability sampling every item of the universe has an equal chance of being

included in the sample. Only chance determines whether an item or the other would

be included in the sample or not. The results obtained from probability sampling

would be assured in terms of probability. The researcher can measure the errors of

estimation or the significance of results obtained from the random sample.

Probability sampling satisfies the law of statistical regularity, according to which if on

an average the sample chosen is random, then it would have the same composition

and characteristics of the population.

With probability samples the chances or probability of each case being selected from

the population is known and is usually equal for all cases, (ibid). Examples of

methods falling under probability sampling are simple random sampling; systematic

sampling; stratified random sampling; cluster sampling and multistage sampling.

According to Saunders et al (2000 p. 177), “statistical analysis usually require a

minimum sample size of 30”

The population was divided into strata as directors and senior management, middle

management and professional, and skilled and semi-skilled employees. The

stratified sampling method is a modification of simple random sampling in which you

divide the population into strata based on a number of attributes. Stratified sampling

is useful when the population from which the sample is to be selected does not

comprise a homogenous group.

72

3.1.15.1.2 Non-Probability Sampling

This is sampling that does not afford any basis for estimating the probability that

each item in the population would have an equal chance of being included in the

sample. The items for the sample are deliberately chosen by the researcher. Non-

probability sampling is often the approach used in qualitative data collection and for

case studies. It was employed in this study in determining the number of people to

be interviewed per strata. Saunders et al (2000 p. 152) advise that using non-

probability sampling may still allow the researcher to generalize from non-probability

samples about the population, but not on statistical grounds. In this study,

convenience sampling was relied upon in selecting those respondents which were

easiest to reach for the research sample per strata. The researcher went around

people’s working areas and distributed questionnaires to those that were available

until the required sample size was reached.

3.1.16 Sample Size

Sample size refers to the number of items to be chosen from the population to form

a sample. An optimum sample is one that satisfies the requirements of

representativeness, flexibility, efficiency, and reliability. When deciding sample size,

there is need to take into consideration the desired precision and the acceptable

confidence level for the estimates. Sample size is also determined to some extent by

the style of the research. For example, a survey style usually requires a large

sample, particularly if inferential statistics are to be calculated (Cohen et al, 2000).

The size of a probability (random) sample can be determined in two ways, either by

the researcher exercising prudence and ensuring that the sample represents the

wider features of the population with the minimum number of cases or by using a

table which, from a mathematical formula, indicates the appropriate size of a random

sample for a given number of the wider population (Morrison, 1993 p. 117). One

such example is provided by Krejcie and Morgan (1970) in Figure 3.4 below

73

Figure 3-2:Determining the Size of a Random Sample

74

Control of validity and reliability

According to Wegner, (2010) data are valid if they provide a true picture of what is

being studied. A researcher instrument is said to be valid if it measures what it is

supposed to measure. In this study primary and secondary data was employed in

order to ensure that one form of data checks on the other’s validity especially where

conclusions are similar.

Reliability is the extent to which a test or procedure produces similar results under

constant conditions on all occasions, (Wegner 2010). Data can be reliable without

being valid .In this study pretesting or pilot studying was one way to ascertain

feasibility, validity and reliability of self-administered questionnaires.

Research Limitations

The research limitations of this study are as follows:

• The research is confined to Harare. The sample built in this study is expected to

be representative of the population; however the sample could have covered

Bulawayo where Liquid Telecom has its second office. Other constituent

stakeholders in the Liquid Telecom group of companies were not approached.

• Contractors’ sentiments or external views on the outsourcing approach by Liquid

Telecom were not sought. This may result in a bias depending on the

organisational culture.

• The results obtained can only be generalised with certain limitation as the

research was carried out with a focus on a single company whose environment

can be different from other companies. This means the results can be true of a

situation in Zimbabwe but are not universally applicable

75

Chapter Conclusions

This chapter has discussed the research methodology adopted by the study and the

associated justifications. The chapter also discussed concepts such as the research

methodology, population of study, sampling, research instruments and data

processing, analysis and presentation. The results of the study were viable to

answer research questions and meet the laid down objectives. The next chapter

presents research findings and discussion thereof.

76

CHAPTER 4 RESULTS, ANALYSIS AND DISCUSSION

Introduction

This chapter presents and analyses research findings from the research in relation

to the research objectives as outlined in Chapter 1. The chapter presents facts that

were discovered by the researcher and discusses and interprets research results

using references from relevant literature as discussed in Chapter 2, and making

relevant inferences. Excel spreadsheets and SPSS were used in the compilation,

validation and analysis of results. Findings were presented using tables, graphs,

charts and narratives.

The responses were presented on pie-charts, histograms and bar graphs. All

percentages were calculated to two decimal places but rounded down to whole

numbers for presentation. The notation (x,y%) was used where x is the number of

responses and y% is the number of responses expressed as a percentage of the

total number of received responses. Only close ended and Likert scale rating

questions were analysed using SPSS. The use of SPSS entailed first codifying

questions and expected responses into numerical representations. The responses

from the questionnaires were then captured for each question according to the

codes assigned to each question and response. All objective-related questions were

coded according to Likert scale ratings used in the research instrument (1=strongly

disagree: 2=disagree: 3=not sure: 4=agree: 5=strongly agree).

77

Response Rate

Table 4.1 below, shows the breakdown of the responses received according to

position within the company, which was the basis of the stratified sampling used.

Table 4-1:Response rate

Executive

Manageme

nt

Senior

Management

Middle

Managers

First Level

Supervisors

Support

Staff

Total

s

Questionnaires

administered

5 5 10 5 29 54

Responses

Received

4 3 9 5 22 43

Response Rate 80% 60% 90% 100% 76% 79.6%

A total of fifty-four (54) structured questionnaires were sent out (invited sample size)

and of these, fourty-three (43) were returned to give an overall response rate of

79.6%. The highest response rate was from executive and senior managers given

their small number. This was critical in that these are clear about the company’s

strategic focus. The response rate was overally high as expected due to the small

size of the organisation. At the time of the research, Liquid Telecom had a staff

compliment of 85. The sample was chosen from candidates who best provide an

insight into the issue under investigation through mainly experience thus the

population was made up of 75 employees. The sample size selected was 93% of the

population and the actual sample of respondents was 57% of the population. The

sample size is in agreement with the recommendations of Bartlett, Kotrlik, & Higgins

(2001) who recommended a sample size of at least 46 (for continuous data) and 74

(for categorical data) for a population of 100. The overall response rate as well as

the response rate within each employee category is high enough to enable the

researcher to generalise the results to the whole organisation, based on Bartlett’s et

78

al. (2007) recommended response rate of at least 50% for a research to be

considered valid.

Demographic Analysis

The demographic factors that the researcher considered to be of major significance

to the study are discussed below:

4.1.1 Gender and Age of Respondent

Respondents were mostly (41.2% of all respondents) middle-aged males between

31 and 40 years while females were mostly (62.5% of all females) in the 20 to 30

years age group. The age and gender was of interest to derive possible patterns

within different age-groups since the study was for an ICT company, and ICT

technologies are normally for the young. The finding is shown in Table 4-2 below,

which is a cross tabulation of the gender and the age of the respondents.

Table 4-2:Cross-tabulation of Gender and Age of Respondents

Gender * Age of respondent Cross tabulation

Count

Age of respondent Total

20-30 31-40 41-50 51-60

Gender Male 12 18 4 1 35

Female 5 2 0 1 8

Total 17 20 4 2 43

The percentage distribution of the population is representative of the employees at

Liquid Telecom, and the relatively young age of the workforce is as expected in a

technology company.

4.1.2 Employee Category

The findings as shown in

Managers) of the respondents fall in the senior management category, 21% are

middle management, 12% are first level supervisors while the remainder (51%) are

the junior staff.

Figure 4-1: Employee Categories

12

21

7

79

percentage distribution of the population is representative of the employees at


Employee Category

The findings as shown in Figure 4.1 , show that 12% (9% Directors plus 7% Senior



Employee Categories

51

12

9

percentage distribution of the population is representative of the employees at


irectors plus 7% Senior



Junior Staff

First Level Supervisor

Middle Manager

Senior Manager

Director

All employee categories within Liquid Telecom are represented. This reduces biases

associated with any single employee category and enables views that are diverse to

be collected. The directors have the

staff are the ones who deal with the contractors on a frequent basis.

4.1.3 Respondents by department

Thirty-seven percent (37%) of the respondents are from the Planning and Build

department while 28% of these

and Commercial each have 9% while Audit and Risk and Human Resources

constitute 2% of the respondents.

respondents amongst the Liquid Telecom departments.

Figure 4-2: Respondents by Department

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

37%

80



be collected. The directors have the strategic view, while the supervisors and junior


Respondents by department

seven percent (37%) of the respondents are from the Planning and Build

department while 28% of these are from the Operations department. Engineering


constitute 2% of the respondents. Figure 4.3 shows the distribution of the

respondents amongst the Liquid Telecom departments.

Respondents by Department

9%

2%12%

28%

9%

2%



strategic view, while the supervisors and junior


seven percent (37%) of the respondents are from the Planning and Build

are from the Operations department. Engineering


shows the distribution of the

Series1

81

The two biggest departments are Planning and Build and Operations. This

information is vital in that these are the core departments involved daily in the core

business of the organization and mostly deal directly with contractors. This shows

that the sample was highly representative in order to capture views from both the

core, operational as well as the support departments (such as Finance and HR).

4.1.4 Crosstabulation of number of years with organization and time

in current position cross tabulation.

Figure 4-3:Respondents’ duration with Liquid

The majority of the respondents (41.86%) had been with the organization between

one and two years and had been in these positions for an average of 1-2 years. The

questions were asked to check on the consistency of the respondents as time in

current position could only be less or equal to the number of years with organization.

The respondents’ duration in service is important as it has a major influence on the

quality of responses received as well as on the analysis on the company’s sourcing

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

<1 Years 1-2 Years >2 Years

Number of years within the organisation

Time in current position <1

Year

Time in current position 1-2

Years

Time in current position >2

Years

82

maturity level. In order to reduce bias due to time in service a range of respondents

were chosen with differing durations of service within the organisation. Respondents

with less than one year experience have the ability to look at the situation with fresh

eyes and offer an unbiased view and were thus included in the sample. On the other

hand respondents who have served a very long time have a detailed understanding

of the history of events up to the present and might have a strong appreciation of the

organisation’s needs but they might also have a strong bias towards the status quo

and might not provide very valuable insights. Being in service for a very long time

might also mean that the respondent does not have proper reference to be able to

offer opinions.

4.1.4.1 Were you involved in decision to outsource by position in firm

Figure 4-4:Responses to involvement in decision to outsource b y department

The results show that 70% of the respondents were not involved in the decision to

outsource. None of the senior managers indicated that they were involved in the

decision to outsource although 50% of the directors indicated that they had a part to

play in the decision to outsource. This question was asked in order to bring out the

level of involvement of the strategy-defining directors in the decision to outsource,

35

7

16

75

70

16

5 50

5

30

0

10

20

30

40

50

60

70

80

Junior Staff First Level

Supervisor

Middle

Manager

Senior

Manager

Executive Total

No

Yes

and whether outsourcing was an

indicated that they were involved in the decision to outsource, although the majority

indicated that they were not consulted in this decision. This brings out the fact tha

the decision to outsource was a deliberate, strategic move made by the directors

without consulting the junior staff. One of the key success factors for outsourcing

success is for the outsourcing philosophy to be understood by all involved with the

outsourcing partner (Manish & Rohini, 2007). As such, this finding has a bearing on

the success or failure of outsourcing at Liquid Telecom.

4.1.5 Training on managing relationship with Vendor

Figure 4-5:Training on m

From the questionnaire results over 86% of the respondents had not received formal

training on managing contractors and were thus not educated regarding outsourcing.

Only 15% of those who deal daily with contractors i

formal training on managing outsourcing relationships (translating to 14% of the

sample). The findings show that the level of understanding of outsourcing

relationships is generally low amongst Liquid Telecom employees. While it

mandatory that one should have a clear understanding of the outsourcing

75

80

85

90

95

100

Daily Weekly

Your involvement with contractor's work

85

100

15

83

and whether outsourcing was an enterprise-wide approach. Some of the junior staff


indicated that they were not consulted in this decision. This brings out the fact tha




urcing partner (Manish & Rohini, 2007). As such, this finding has a bearing on

the success or failure of outsourcing at Liquid Telecom.

Training on managing relationship with Vendor

Training on m anaging relationship with contractors.



Only 15% of those who deal daily with contractors indicated they had received



relationships is generally low amongst Liquid Telecom employees. While it


Weekly Monthly Total

Your involvement with contractor's work

100 100

86

0 0

14

Have you received formal training

on managing relationship with

contractors? Yes



contractors? No

approach. Some of the junior staff


indicated that they were not consulted in this decision. This brings out the fact that




urcing partner (Manish & Rohini, 2007). As such, this finding has a bearing on

Training on managing relationship with Vendor

anaging relationship with contractors.



ndicated they had received



relationships is generally low amongst Liquid Telecom employees. While it was not




contractors? Yes



contractors? No

84

relationships, such knowledge and training is key in order to provide useful insight

since it implies that the respondents are aware of what the researcher is

investigating. The question also has implications on the organization’s sourcing

maturity. An organization with a large number of people with an understanding of

managing contractor relationship implies that the organization has a long term view

of its outsourcing relationships and is willing to improve its sourcing maturity (Manish

& Rohini, 2007).

An understanding of the area of the subject under investigation was also deemed

crucial as failure to do so might have led to inappropriate answers. The responses to

the questionnaire overall however shows that all respondents could easily

understand the key issues that the researcher was looking for and answered the

questions appropriately.

85

Objective Related Findings

4.1.6 Reasons for Outsourcing

Table 3-3 below shows the mean response for each possible reason and the

ranking obtained from the results, with 1 being the highest ranked reason and 9 the

lowest ranked.

Table 4-3: Reasons for outsourcing

Reason for Outsourcing

Mean

Response (2

decimal

places)

Standard

Deviation Ranking

To save costs 2.35 1.38 9

Organization’s long term strategy 3.44 0.67 6

Improved service levels 3.65 0.95 4

Access to technical expertise 3.74 1.18 3

To free up internal resources 3.86 1.08 2

Response to industry competitive

forces 3.51 1.05 5

To provide staff versatility 2.77 1.13 8

To introduce new technology 3.21 1.12 7

To gain competitive advantage 3.88 0.98 1

86

The respondents identified gaining competitive advantage, freeing up internal

resources, access to technical expertise and improved service levels as the top four

reasons for outsourcing at Liquid Telecom. The other five possible reasons had

mean responses in the not-sure/disagree regions and hence were lowly ranked. The

reasons were ranked in the following order of decreasing importance;

Highly Ranked reasons for outsourcing (in the order of importance)

• To gain competitive advantage

• To free internal resources

• To gain access to technical expertise

• Improved service levels

Lowly ranked reasons

• Response to industry competitive forces

• Organization’s long term strategy

• To introduce new technology

• To provide staff versatility

• To save costs

The identified reasons agree to a certain extent with the findings of Lacity, Willcocks

& Feeny (1996) who summarized the major drivers for outsourcing as

• contracting specialisation,

• market discipline,

• flexibility, and

• Cost saving.

However the ranking obtained from this research seems to be diametrically opposite

to the one established by Burdon and Bhala (2005) as the benefits of IT outsourcing.

The two grouped the benefits into three categories, with cost-saving being the highly

ranked benefit of outsourcing and the nice-to-have as the least;

Primary Benefits

87

Reducing costs

Increasing reliability

Access to best practices

Secondary benefits

Flexibility to changes

Focus on core competencies

Achieving innovation and continual change

Being the catalyst for transformational change

Nice to Have

Understanding of business objectives

Conserving capital

Increasing speed to market

4.1.7 In-house performance of currently outsourced activities would

lead to a lack of strategic focus?

Figure 4-6:In-house performance of currently outsourced activities woul d lead

to lack of strategic focus?

A total of 35% of the respondents were of the opinion that

the currently outsourced activities would lead to lack of strategic focus. The mean

response 2.37 is sufficiently in the disagreement region to conclude that the

currently outsourced activities would not affect strategic focus if performed

0

5

10

15

20

25

30

35

Strongly

Disagree

Disagree

35

88

house performance of currently outsourced activities would

lead to a lack of strategic focus?

performance of currently outsourced activities woul d lead

to lack of strategic focus?

A total of 35% of the respondents were of the opinion that in-house


sponse 2.37 is sufficiently in the disagreement region to conclude that the

currently outsourced activities would not affect strategic focus if performed

Disagree Neutral Agree Strongly

Agree

23

14

26

2

house performance of currently outsourced activities would

performance of currently outsourced activities woul d lead

house performance of


sponse 2.37 is sufficiently in the disagreement region to conclude that the

currently outsourced activities would not affect strategic focus if performed in-house.

Strongly

Series1

89

This was followed up with interview questions, and again, it was realized that it is

mostly the senior management (directors) who believe in the outsourcing

philosophy. These strongly agree with the statement that in-house performance of

currently outsourced activities would lead to lack of strategic focus. One of the

directors (Mr Kinnear, Executive Director Fibre Projects Southern Africa) specifically

mentioned the British Telecom HR outsourcing initiative (BT started outsourcing its

HR to Accenture is 2003). The senior management’s line of thinking is supported by

DiRomualdo and Gurbaxani (1998) who argued that outsourcing allows

organisations to add value to products by allowing them to focus on critical business

processes, thus gaining a competitive advantage that forces other companies to

follow the leader.

90

4.1.8 Alignment between organization outsourcing and strategy

Table 4.4 below shows the responses to questions tyo measure the alignment

between current outsourcing approach and overall business strategy.

.

Table 4-4: Outsourcing and Organizational strategy

Question

Strongly

Disagree

and

Disagree

Non

Committa

l

Strongly

Agree and

Agree

Mean

Response

a) Organization is

planning additional

outsourcing in the

future

20.90% 41.90% 37.20% 3.14

b) Outsourced

activities are of high

strategic importance.

25.60% 46.50% 27.90% 3.14

c) Organization’s

outsourcing is aligned

to the company’s

business strategy

7.00% 55.80% 37.20% 3.44

d) Organization’s

outsourcing is aligned

to the company’s

technology strategy

18.60% 39.50% 41.90% 3.26

91

Forty-one percent (41%) of the respondents were neutral about whether

organization is planning additional outsourcing in the near future. Similarly, 46.5%

were neutral in their response to the question on the strategic importance of the

outsourced activities. 37.2% respondents believed that outsourcing is aligned to the

company’s business strategy. However, most of the respondents were not sure

about the strategic alignment between outsourcing and the business and technology

strategies (all mean responses were in the non-committal region (2.5<mean<3.5). In

an interview, one of the respondents indicated that the major problem is that Liquid

Telecom’s strategy is not clearly documented and thus employees infer the strategy

from day to day activities. Most were also not sure of the organizational plans

regarding outsourcing. This is to be expected since most of the respondents were

junior staff.

Strata analysis however shows that there is general agreement (50%) that

outsourcing is aligned to Liquid’s business and technology strategy amongst the

senior management and executives. This can be attributed to the fact that the

executives do understand the company strategy and have a long term view of the

business. This finding is in harmony with Gulla and Gupta (2011) who noted, in their

paper on IS outsourcing, that in analysing the strategic values of outsourcing, the

company should consider the likely impact of outsourcing on the strategic interests

of the business organization as well as its effect on the routine operations of the

organization in the form of short, medium and long-term effects. The two encourage

that such analysis should include having clarity of business strategic versus IS

strategy orientation which provides an insight into the level of IS strategic alignment

(ibid). The same argument could be extended to outsourcing in the

telecommunications industry, where there should be a clear alignmentbetween the

outsourcing goals and the strategic direction of the company.

4.1.9 Outsourcing has improved

Figure 4-7: Outsourcing has improved service delivery timelines

Findings: According to 49% of the respondents the organisation’s outsourcing has

not improved the service delivery timelines in any way. 26% of the respondents were

neutral and 26% believed outsourcing had a positive impact on service delivery

timelines. The mean response for this question was 2.74 with a skewness of 0.408

(positive). This implies that there is general

employees about the fact that outsourcing improved service delivery timelines.

A conclusion can be made based on

that the organisation’s outsourcing has not aided in improving service delivery

timelines.

0

5

10

15

20

25

30

35

40

45

Strongly

Disagree

Disagree

7

42

Oursourcing has improved service delivery

92

Outsourcing has improved service delivery timelines


According to 49% of the respondents the organisation’s outsourcing has



response for this question was 2.74 with a skewness of 0.408

(positive). This implies that there is general disagreement amongst Liquid Telecom


A conclusion can be made based on the finding from the majority of the respondents



Agree

2621

5


timelines

Oursourcing has improved

service delivery timelines



According to 49% of the respondents the organisation’s outsourcing has



response for this question was 2.74 with a skewness of 0.408

amongst Liquid Telecom


the finding from the majority of the respondents



Oursourcing has improved


93

4.1.10 Contractors have expertise in their area of work

Figure 4-8:Contractors have expertise in their work.

47% of the respondents disagreed with the statement, while 49% were neutral. The

important observation is that only 5% had confidence in the expertise of the

contractors. Further analysis by the frequency of interactions with the contractors

shows that over 93 % of those that deal daily with the contractor did not have

confidence in the expertise of the contractors, while only 7% agreed that the

contractors have expertise in their area of work. This is in harmony with the

observation made in the interviews that some of the contractors only sprouted up to

take advantage of Liquid’s outsourcing philosophy, but had not had prior

specialization in the area before. This again brings in the concept of spatial

agglomeration, where, as argued before, there was no existent market for

specialized telecommunications network build prior to Liquid telecom outsourcing.

14%

33%49%

5%

Strongly Disagree

Disagree

Neutral

Agree

94

In interviews with the Head of Network Planning and Build, another question asked

was whether they had considered looking beyond Zimbabwe’s borders for the

expertise. His response is quoted herein “The problem with South African

contractors is that most of them come with the wrong attitude. Some of the

contractors we tried misrepresented facts, and were not experts at all in the fibre

network build field”

4.1.11 Contractors handle Liquid customers with due care

Figure 4-9: Contractors handle Liquid customers with due care

There was general feeling that contractors do not handle Liquid customers with due

care where agreement based on a Likert score of 4 and 5 only got 5%. This has a

strong bearing on the quality of service delivered to the customers and customer

satisfaction. This correlates with the findings in question 4.3.5 above that contractors

7%

49%

40%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Strongly Disagree Disagree Neutral Agree

Series1

do not have expertise in their area of work. According to The Economist (2011) there

are a variety and colourful

that sometimes vendors overpromise in order to win a contract and then fail to

deliver. This has been prevalent at Liquid Telecom, where service delivery timelines

have been promised to customers based on contractor promises, yet customers

have been disappointed

another article in Haveckin, (2012), the most valuable commodity a business has,

and the most difficult one to come by, is positive word of mouth. It is therefore critical

that whoever does work on b

customers.

4.1.12 Contractors understand standard telecommunications

business processes (

Figure 4-10:Contractors understand telecommunications processes ?

0%

Strongly Disagree

Disagree

Neutral

Agree

95


colourful ways in which outsourcing can go wrong, one of which is

imes vendors overpromise in order to win a contract and then fail to



disappointed after failure to meet the delivery timelines. According to



that whoever does work on behalf of an organization understands how to handle

Contractors understand standard telecommunications

processes (eTOM)?

Contractors understand telecommunications processes ?

20% 40% 60% 80% 100%

9%

56%

19%

16%


ways in which outsourcing can go wrong, one of which is

imes vendors overpromise in order to win a contract and then fail to



er failure to meet the delivery timelines. According to



ehalf of an organization understands how to handle

Contractors understand standard telecommunications

Contractors understand telecommunications processes ?

100%

Series1

96

Research Findings: 65% of the respondent’s disagreed with the statement implying

serious doubts by Liuid Telecom on whether contractors understand

telecommunications business processes. This has serious implications on how

smooth the outsourcing arrangement operates. According to The Enhanced

Telecom Operator (eTOM), the Business Process Framework discussed in chapter 2

serves as a blueprint for telecommunications service provider process direction, and

provides a neutral reference point for internal process reengineering needs,

partnerships, alliances, and general working agreements with other companies. The

research finding shows a discrepancy on the part of the contractors as failure to

understand the business processes is one of the reasons for failure of outsourcing

partnerships. As noted by Haveckin (2012), outsourcing results in more complexity

in the business processes, and it is thus important that both partners have an

understanding of the processes involved. Otherwise operational efficiency will not be

achieved.

4.1.13 Outsourcing reduced costs?

Figure 4.11 shows the percentage responses to the question on cost reduction.

Figure 4-11: Outsourcing reduced costs?

56% of the respondent did not

reduce costs of Network Build, while 30% of the respondents agreed with the

statement. The mean response of 2.6 shows that overally; Liquid Telecom

employees disagree with the view that outsourcing reduces ope

coefficient of variation {(STD dev)/ (Mean)} is 54.5% (As shown in the response

analysis spread sheet (Appendix A). This gives the range of the mean within (

4.017) showing that there is sufficient level of disagreement with the s

outsourcing and operational costs.

This finding is in harmony with the earlier finding

advantage, where the majority of the respondents were not sure if outsourcing had

helped the Liquid to gain

model, network build, which is currently outsourced, constitutes a huge chunk of the

costs for the company. Any cost savings in this portion of the value chain, will

14

16

97

Outsourcing reduced costs?

shows the percentage responses to the question on cost reduction.

Outsourcing reduced costs?

56% of the respondent did not believe that outsourcing helped Liquid Telecom



employees disagree with the view that outsourcing reduces ope


analysis spread sheet (Appendix A). This gives the range of the mean within (

showing that there is sufficient level of disagreement with the s

outsourcing and operational costs.

This finding is in harmony with the earlier finding on outsourcing


helped the Liquid to gain competitive advantage. As discussed in the business



28

28

14

shows the percentage responses to the question on cost reduction.

believe that outsourcing helped Liquid Telecom



employees disagree with the view that outsourcing reduces operational costs. The


analysis spread sheet (Appendix A). This gives the range of the mean within (1.183,

showing that there is sufficient level of disagreement with the statement on

on outsourcing and competitive


age. As discussed in the business



Strongly Disagree

Disagree

Not Sure

Agree

Strongly Agree

98

translate to a huge saving by the company, hence leading to competitive advantage.

The research finding is in line with the observation that “vendors and outsourcing

partners have diametrically opposite requirements in outsourcing arrangement (Pai

& Basu, 2007). This is because contractors are naturally looking to increase profits

but the sourcing partner is looking for lower costs. Therefore in as far as cost

reduction is concerned; contractors and client are not partners, because profit

motives are not shared.

However, many researchers have argued that the overall amount of cost savings

(mostly from IT outsourcing) can range between 20% and 60% (Greene, 2006).

However, some of the claims are made by outsourcing vendors and may not be

trustworthy.

99

4.1.14 Contractors require ongoing supervision?

Figure 4-12:Contractors require ongoing supervision?

The majority (72%) of the respondents strongly agreed with the statement that

contractors require ongoing supervision in the field. The mean response (4.67) is

well within the affirmative region and none of the respondents disagreed with the

statement. This is in harmony with the research findings by Hijazi (2005), who

concluded that outsourcing requires ongoing supervision.

Such findings mean that Liquid has to invest in personnel to constantly supervise the

contractors hence reducing the likelihood of reducing costs by outsourcing. A

possible explanation of this finding is what Havenick (2012), termed self-defeating

prophecy, which can be explained as a fear of some consequence that drives people

in a given firm to find a solution before the problem actually occurs and hence the

5%

23%

72%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Neutral

Agree

Strongly Agree

Series1

non-occurrence of the problem is unanticipated. In Liquid Telecom’s case, it could

be the fear of outsourcing partners not performing to

them performing to standard is not anticipated). In this case Liquid ends up

employing unnecessary supervisory staff (hence increasing costs).

4.1.15 Market demands are forcing contractors to improve

performance at same cost

Figure 4-13: Contractors’

Most (63%) of the respondents were in the agreement region (agree and strongly

agree), implying that on average Liquid Telecom acknowledges that market

demands are forcing contractors to improve their performance at the same cost. The

mean response of 3.72

contractors to result in possible reduction of costs in the future.

40%

23%

100

occurrence of the problem is unanticipated. In Liquid Telecom’s case, it could

be the fear of outsourcing partners not performing to standard (thus the possibility of



Market demands are forcing contractors to improve

performance at same cost

Contractors’ performance improving due to market demands?




mean response of 3.72 shows that in general there is competition among the

contractors to result in possible reduction of costs in the future.

14%

23%

40%

23%

occurrence of the problem is unanticipated. In Liquid Telecom’s case, it could

standard (thus the possibility of



Market demands are forcing contractors to improve

performance improving due to market demands?




shows that in general there is competition among the

Disagree

Neutral

Agree

Strongly Agree

101

Closely linked to this observation is the concept of spatial agglomeration or, more

specifically, the location of firms within a dense industrial area, increasing the

probability of finding specialised suppliers (Antonietti & Cainelli, 2009).

On interviewing senior management, these views were supported by observations

that most of the contractorscontracted by Liquid Telecom actually started operations

as a way of taking advantage of Liquid Telecom’s outsourcing philosophy. Thus,

prior to Liquid Telecom, there was no market to have these specialized suppliers in

Zimbabwe. However, as Liquid maintains its outsourcing philosophy, some of the

companies have started becoming specialized in this market and hence competition

is forcing them to produce better results at the same cost. Thus there are scale

economies to be gained as the numbers of closely related industries begin to

increase in Zimbabwe.

4.1.16 Relationship with Contractors is strong

Figure 4-14:Relationship with Contractors is strong?

The compacted results shown in

are non-committal about the relationship between the business and the outsourcing

vendor. The mean response is 2.93 showing that in general, the respondents neither

agree nor disagree with the statement that the relationship with contractors is strong.

This correlates with the finding in the major objective, that there is no sufficient

evidence to conclude that outsourcing has improved the

business. A plethora of researchers have concluded that relationship between the

outsourcing partners is key for success, and can be used as a proxy for a company’s

sourcing maturity as discussed in

(2007), “business value from outsourcing is increasingly dependent on how well the

relationship between the client and i

0 20

Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

5

21

19

2

102

Relationship with Contractors is strong

Relationship with Contractors is strong?

The compacted results shown in Figure 4.14 indicate that 53% of the respondents

about the relationship between the business and the outsourcing



ates with the finding in the major objective, that there is no sufficient

evidence to conclude that outsourcing has improved the competitiveness


key for success, and can be used as a proxy for a company’s

sourcing maturity as discussed in Chapter 2. According to Han, Lee and Seo


relationship between the client and its service provider(s) is managed”. Without

20 40 60 80 100

53 Relationship with contractors is

strong

indicate that 53% of the respondents

about the relationship between the business and the outsourcing



ates with the finding in the major objective, that there is no sufficient

competitiveness of the


key for success, and can be used as a proxy for a company’s

According to Han, Lee and Seo


ts service provider(s) is managed”. Without

Relationship with contractors is

103

strong relationship between Liquid and its outsourcing partners, it would be difficult

to gain competitive advantage from outsourcing. To further analyse the relationship

between Liquid Telecom and its partners, as well as bring out the sourcing maturity

of the former, the following questions were also asked and are analysed below.

4.1.17 Type of outsourcing employed by Liquid

Table 4-5:Type of outsourcing employed by Liquid Telecom

Mean Response

(2d.p) Ranking

Staff Augmentation 3.40 3

Out-tasking 4.30 1

Project Based

Outsourcing 3.63 2

Managed Services

Model 2.40 4

The mean response for out-tasking was highest, showing that most of Liquid’s

outsourcing is whereby the company contracts out specific tasks but maintains

control over the strategy and implementation. The second ranked type of

outsourcing was Project-based outsourcing where the outsourcing partner is given

total responsibility for a project (turn key projects). Staff augmentation and Managed

services are not normally employed from the mean responses (3.4 and 2.4

respectively) which are in the rejection region.

According to Manish and Rohini (2007), out-tasking and project based outsourcing

should be employed by companies whose sourcing maturity level is in the medium

region, and are also willing to improve the sourcing maturity.

4.1.18 Outsourcing is supported by

Figure 4-15: Outsourcing is supported by management?

Over 96% of the respondents agreed (agree and strongly agree) that there is

management support for outsourcing. This

continues even though there are serious doubts to whether it’s giving Liquid

Telecom a competitive advantage or not. This finding also points to Liquid Telecom’s

outsourcing maturity being in the medium region. Thi

Manish (2007), in this region;

• There is long term thinking in some selected areas (The fact that

Management supports outsourcing shows that they are focusing on the long

term gains instead of short term tactical focus.

0%

Neutral

Agree

Strongly Agree

5%

104

Outsourcing is supported by management

Outsourcing is supported by management?


management support for outsourcing. This also explains the reason why outsourcing


advantage or not. This finding also points to Liquid Telecom’s

outsourcing maturity being in the medium region. This is because according to

Manish (2007), in this region;

There is long term thinking in some selected areas (The fact that


term gains instead of short term tactical focus.

20%40%

60%80%

100%

5%

70%

26%


also explains the reason why outsourcing


advantage or not. This finding also points to Liquid Telecom’s

s is because according to

There is long term thinking in some selected areas (The fact that


Series1

105

• There is willingness to accept a model that requires initial investment with

returns over a longer horizon. (Management has continued to invest in the

outsourcing arrangement and is probably looking on a longer horizon)

4.1.19 Relationship between Liquid Telecom and Outsourcing

partners

Table 4-6:Relationship between Liquid Telecom and Outsourcing partners

Relationship Measure Disagree Neutral Agree Mean

response


based on trust 35% 23% 42% 3.02


based on contract only 14% 63% 23% 3.09

Liquid Telecom business units are

committed to relationship with

contractors

9% 58% 33% 3.23

Contractors are committed to the

relationship 44% 47% 9% 2.63

Liquid Telecom commits resources

to sustain relationship 12% 58% 31% 3.23

Outsourcing partner commits

resources to sustain relationship 14% 53% 33% 3.19

Overall Mean Response

3.065

106

Forty-two percent (42%) of the respondents agreed that the outsourcing relationship

was based on trust, while 35% of the respondents were disagreeable. As a follow up

question, respondents were asked if relationship was based on contract only, and

63% were non-committal. The other 33% of the respondents felt that Liquid Telecom

is committed to the relationship with contractors. This compares well to the 31% who

agreed that Liquid Telecom commits resources to sustain the relationship. Overally,

there is evidence to support that indeed Liquid Telecom is committed to sustaining

the relationship, although this is contradicted by 86% of the respondents who

indicated that they had not received any formal training on best practices for

managing contractor relationship. Only 9% of the respondents felt that contractors

were committed to the relationship, although 33% felt contractors commits resources

to sustain the relationship. The overall mean response to the relationship questions

shows that the relationship still requires investment from both sides to get to the

strong rating. This confirms the findings to Question 4.2.6.1 that there is no sufficient

evidence to regard the relationship as strong. This again points to a sourcing

maturity level in the medium region.

The findings correlate well with the discussion on sourcing maturity level at Liquid

Telecom. According to Havenick (2012), trust in the relationship is very important as

it allows realistic relationship between both parties and establishes equal

partnerships between the outsourcing client and service providers with the aim of

attaining strategic management outcomes for both parties i.e. a win-win strategy. In

an interview with the former Chief Operations Officer for Liquid Telecom ZImbabwe

(Johan Engelbrecht), one of the issues highlighted was that there should be trust

and intimacy between the outsourcer and the contractor. He gave an equation to

express the basis of this trust as;

Trust = (IntimacyXCredibility)/Risk. Equation 4.1

His argument was that trust allows the contractor and Liquid Telecom to share the

risks. However, this can only grow once there is a good relationship (intimacy) as

well as credibility. This is in agreement with Havenick’s (2012) who conclusion that

integrity and trust should be the basis of the outsourcing relationships. The

outsourcing arrangement would effectively be a failure if the partners involved were

required to stick to the letter of the contract under any circumstances and this means

that trust and professional conduct are the basis for outsourcing relationships.

4.1.20 Corporate culture clashes between contractors and Liquid

Telecom are an ongoing issue

Figure 4-16: Corporate Culture Clashes?

The respondents generally (60%) agreed that there were differences in business

processes between Liquid Telecom and contractors. This is also supported by a

question on corporate culture differences which yielded almost similar results, where

0% 20%

Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

0%

5%

7%

7%

107

. This is in agreement with Havenick’s (2012) who conclusion that

ity and trust should be the basis of the outsourcing relationships. The



nd professional conduct are the basis for outsourcing relationships.

Corporate culture clashes between contractors and Liquid


Corporate Culture Clashes?




20% 40% 60% 80% 100%

16%

30%

49%

7%

14%

19%

53%

7%

Differenet Business processes

between Liquid and contractors

causes disagreements

Corporate culture clashes

between contractors and Liquid


. This is in agreement with Havenick’s (2012) who conclusion that

ity and trust should be the basis of the outsourcing relationships. The



nd professional conduct are the basis for outsourcing relationships.

Corporate culture clashes between contractors and Liquid




Differenet Business processes

between Liquid and contractors

causes disagreements

Corporate culture clashes

between contractors and Liquid


108

(54%) agreed with the statement. This has implications on the success of the

outsourcing strategy as the alignment between business cultures of the outsourcing

partner and the client are critical for success. From organizational behaviour theory,

organizational culture is an important ingredient for attainment of competitive

advantage. Hirschheim, George & Wong (2004) argue that one of the problems with

outsourcing is the organizational culture gap between the business and its service

providers. Thus, it becomes very difficult for Liquid Telecom’s culture, for example to

permeate that of the contractors as they are managed and controlled elsewhere.

Such differences normally lead to failure to gain competitive advantage from the

outsourcing arrangement.

4.1.20.1 Performance Feedback and Service level Agreement

Figure 4-17:Performance feedback measures

Overally, the mean responses indicate that there are no clear systems to measure

contractor performance on a regular basis. There are no proper feedback systems

0

0.5

1

1.5

2

2.5

3

3.5

Contractor

performance is

reviewed on a

regular basis

Feedback is

provided to

contractors

following a review

Problem solving is

a joint exercise

between Liquid

Telecom and

contractor

Contractor

communications

are credible

Contractors

communications

are timely

Performance is

measured against

clearely defined

SLAs

Series1

109

while there is no sufficient evidence from the research to prove collaboration in

solving problems. These results point to a weak relationship between the contractors

and Liquid Telecom as discussed in 4.2.6.1 above. The mean response to whether

performance measures are based on clearly defined SLA targets was 2.7 signifying

that the majority of Liquid employees either do not know about the SLA, or feel there

are no SLA targets for contractors. Additionally, it is clear that contractor

communications are regarded as neither credible nor timely by Liquid Telecom. This

is in harmony with the earlier discussion that the Liquid Telecom sourcing maturity is

in the medium region according to Manish (2007) model.

4.1.21 Outsourcing has improved the quality of work

Figure 4-18:Outsourcing has improved the quality of work

Fifty one 51% of the respondents were non-committal while interestingly none (0%)

of the respondents strongly agreed with the statement. The mean response to this

question also shows that the quality of the contactors is on average not much better

than insourced work. This is in agreement with Haveckin (2012) who hypothesizes

16%

23%

51%

10%

Strongly Disagree Disagree Neutral Agree

that quality may deteriorate when service and su

outsourced.

4.1.22 Choosing wrong contractors has caused ongoing quality

problems

Figure 4-19: Choosing wrong contractors has caused ongoing quali ty

problems.

Forty-seven percent (47%) of the respondents strongly agreed with the statement

that wrong choice of contractors has caused ongoing quality problems at Liquid

telecom. In total 73% of the respondents agreed with this observation.

0%

Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

5%

110

that quality may deteriorate when service and support are transferred and

Choosing wrong contractors has caused ongoing quality

Choosing wrong contractors has caused ongoing quali ty

seven percent (47%) of the respondents strongly agreed with the statement



20% 40% 60% 80% 100%

9%

5%

14%

26%

47%

pport are transferred and

Choosing wrong contractors has caused ongoing quality

Choosing wrong contractors has caused ongoing quali ty

seven percent (47%) of the respondents strongly agreed with the statement



100%

Series1

This supports the finding that

quality of network build. This is in line with the argument that there are no sufficiently

equipped contractors in Zimbabwe to deliver the required standards at Liquid

Telecom at a reasonable cost (spatia

4.1.23 Insourced work (using internal staff) is of better quality than

outsourced work

Figure 4-20:Quality of internal work is higher than outsourced work

This follow up question yielded 53% res

with the statement that insourced work is of better quality than outsourced work. This

was asked as a way of confirming responses to the earlier question on whether

outsourcing had impacted positively on the quality

Telecom.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Strongly

Disagree

2%

111

This supports the finding that in general outsourcing has not helped improved the


contractors in Zimbabwe to deliver the required standards at Liquid

Telecom at a reasonable cost (spatial agglomeration).

Insourced work (using internal staff) is of better quality than

outsourced work

Quality of internal work is higher than outsourced work

This follow up question yielded 53% respondents who indicated that they agreed



outsourcing had impacted positively on the quality of network build at Liquid


Agree

5%

21% 19%

53%

in general outsourcing has not helped improved the


contractors in Zimbabwe to deliver the required standards at Liquid

Insourced work (using internal staff) is of better quality than

Quality of internal work is higher than outsourced work

pondents who indicated that they agreed



of network build at Liquid

Strongly

Agree

53%

Series1

The finding again points to the earlier observation in the

sufficient spatial agglomeration in the Telecommunications Build industry for Liquid

to have access to expertise in this area. The

results obtained in the analysis of the main question on competitive advantage.

4.1.24 Liquid Telecom has more experienced staff who do a better job

than contractors

Figure 4-21:Liquid Telecom has more experienced staff who do a better job

than contractors.

Thirty-seven percent (37%) of the respondent’s strongly agreed with this statement,

while 49% were in agreement. In total 86% agreed that Liquid Telecom has more

experienced staff that does a better job. The mean response (4.19) shows that on

average Liquid Telecom employees believe that they produce better quality work

than contractors. Although there is room for bias in that the employees asked would

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Disagree

5%

112

The finding again points to the earlier observation in the interviews


to expertise in this area. The finding is also in agreement with the


Liquid Telecom has more experienced staff who do a better job

than contractors


37%) of the respondent’s strongly agreed with this statement,


nced staff that does a better job. The mean response (4.19) shows that on



Neutral Agree Strongly Agree

9%

49%

37%

interviews that there is no


finding is also in agreement with the




37%) of the respondent’s strongly agreed with this statement,


nced staff that does a better job. The mean response (4.19) shows that on



Series1

obviously rank their work than that of contractors, the observations consistently

support the view that there is no sufficient evidence to show that outsourcing had

improved the quality of work.

Testing the Hypothesis

4.1.25 Current Outsourcing helped Liquid Telecom to achieve

sustainable competitive advantage (direct hypothesis testing

question)

Figure 4-22: Outsourcing as a source of competitive advantage

Forty percent (40%) of the respondents were neutral, while 35% of the respondents

agreed that outsourcing has increased the

mean response of 3.47 shows that overally; Liquid Telecom employees are not

decided on whether outsourcing has had a positive impact on the competitiveness of

the business or not. Although the mean is slightly on the agreement side, the

35%

113

r work than that of contractors, the observations consistently


improved the quality of work.

Testing the Hypothesis

Current Outsourcing helped Liquid Telecom to achieve


Outsourcing as a source of competitive advantage


agreed that outsourcing has increased the competitiveness of Liquid Telecom. The


r outsourcing has had a positive impact on the competitiveness of


5% 7%

40%

14%

r work than that of contractors, the observations consistently


Current Outsourcing helped Liquid Telecom to achieve


Outsourcing as a source of competitive advantage


of Liquid Telecom. The


r outsourcing has had a positive impact on the competitiveness of


Strongly Disagree

Disagree

Neutral

Agree

Strongly Agree

114

coefficient of variation is 29% (As shown in the response analysis spread sheet

(Appendix A). This gives the range of the mean within (2.4637, 4.511) showing

neither agreement nor disagreement with the statement on outsourcing and

business competitiveness.

Direct Hypothesis Testing: For the purposes of testing the hypothesis, the data is

presented in Figure 4.17 with the responses summarized to give two categories as

shown.

Figure 4-23:Outsurcing as a source of competitive advantage for Liquid

Telecom

The Z-Test Statistical Method: The Z-test statistical method was used to test the

hypothesis as presented in chapter one.

Assumptions:

The test was conducted based on the following assumptions;

• Responses are normally distributed

51%

49%

Strongly Disagree +Disagree+

Not Sure

Strongly Agree+ Agree

115

• Level of significance (L.O.S) =5% (As stated in chapter one)

Null Hypothesis: H0: Current Outsourcing approach is a source of

sustainable competitive advantage for Liquid

Telecom.

Alternative Hypothesis: H1: Current Outsourcing approach is not a source of

competitve advantage for Liquid Telecom

Step 1: Critical Value: The CV is given by equation 4.1 as;

Step 2 : Pr (0≤Z≤Cv) +0.05=0.5 Equation 0-1

Step 3 : The research hypothesis is given as equation 4.2-2 and 4.2-3 as;

H0:µ0≤3 Equation 0-2

H1:µ0>3 Equation 0-3

Step 4 : Decision Rule: Accept H 0 if Z calc ≤1.645

: Reject H 0 if Z calc >1.645

Step 5: Calculating Z calc Zcalc: =√n*(×- µ0)/s Equation 0-4

Where; Zcalc is the calculated Z value

n is the sample size,

x is the mean response

s is the standard deviation.

Using equation 4.2-4 we get ;

Zcalc = √43*(3.47- 3)/0.984

= 3.132109864

116

The calculated value of Zcalc show that Zcalc > 3 , thus showing that according to

Liquid Telecom employees, we reject the hypothesis that the current

outsourcing approach has resulted in sustained comp etitive advantage.

Discussion of The Hypothesis

From the research, at 5% Level of Significance , according to Liquid Telecom

employees, there is no sufficient evidence to support the hypothesis that the current

outsourcing approach is a source of sustainable competitive advantage for Liquid

Telecom Zimbabwe. A deeper analysis of the various respondents groups shows

that most of those that agreed with the statement were either junior staff or first level

supervisors. Interestingly, amongst the senior management and executives, none

was convinced that outsourcing increased the competitiveness of the business.

This major finding is in harmony with the results obtained by Wang (2008) who

concludes that there is limited direct or positive effect of outsourcing IT on company

performance and competitive advantage. Similarly, Hall (2000), in a similar study

fails to find any link between outsourcing and competitive advantage. The research

findings also agree with Bourbeau (2004) who observes that although the trend to

outsource continues to grow, the amount of evidence regarding the effectiveness of

outsourcing is minimal, confusing, and highly subjective. He argues that at best,

outsourcing saves money but at the expense of quality, or at least without improving

it.

On the other hand, research by vendors, for example IBM Global Services, claim

that using ‘robust statistical methods’ they proved that ‘outsourcing IT is a strategic

business decision that is likely to boost a firm’s performance’ (IBM Global Services

p.10 2006). In an interesting outcome, George & Wong (2004) found loss of

competitive advantage as one of the drawbacks of outsourcing. Quin and Hilmer

(1994) introduced the term “strategic outsourcing” which advocated for the

outsourcing of non-core activities for the attainment of strategic goals. In this regard,

117

Willock (1995) argued that the main question on management’s mind should not be

whether to outsource or not, but a more useful question is “how do we use, if at all,

the opportunity that is available on the market, to leverage business advantage?”

Thus the question should be “rightsourcing” rather than outsourcing.

This finding is also in line with the responses to the other questions analysed above.

A summary of all findings is presented herein at a glance.

Findings of the Research Study

It was found out that:

• There was a general belief that the current outsourcing approach has had no

major impact on Liquid Telecommunications’ competitiveness.

• There was a general belief among the senior managers that outsourcing was

aligned to the company’s strategy. The rest of the interviewees expressed

ignorance of the company’s strategy, and hence responses to questionnaires

were non-conclusive.

• The most important reasons for outsourcing were listed as 1) to gain

competitive advantage 2) to free up internal resources 3) to gain access to

expertise.

• Most of the Liquid Telecom employees were not convinced that in-house

performance of currently outsourced activities would lead to lack of strategic

focus. Interviews with strategy making personnel however revealed that this

was the general feeling amongst senior management.

• Outsourcing had not achieved any meaningful cost-reduction

• There was a general agreement that contactors require ongoing supervision

amongst Liquid Telecom employees

• Most of Liquid Telecom employees felt market forces were resulting in

contractors doing better work at the same cost.

118

• Liquid Telecom employees generally disagreed with the notion that

outsourcing had improved service delivery timelines.

• There was general belief that contractors did not have expertise in their area

of work

• The relationship between Liquid Telecom and contractors is weak

• There was general feeling that management support for outsourcing is high

• Liquid Telecom’s sourcing maturity is in the medium region, on the sourcing

maturity curve.

• Outsourcing has not improved the quality of work done

• Most of the Liquid Telecom employees believed that internal work is of better

quality than that of contractors

Chapter Summary

The chapter has presented and analysed the research results. The data revealed

that Liquid Telecom has not gained competitive advantage from its current

outsourcing approach. It also revealed that none of cost reduction, quality

improvement or service delivery improvement had been achieved due to

outsourcing. The analysis of the sourcing maturity and relationship with contractors

revealed that the relationship is weak and the sourcing maturity medium. The

analysis took cognisance of the fact that organisations are complex, with multi-

dimensional variables such as different personnel and groups which have complex

relationships and different agendas and drives. So, while management supports

outsourcing, for example, there seems to be general dismissal of the performance of

the contractors by most of the staff at Liquid Telecom. Such a scenario helps explain

the apparent failure of outsourcing at Liquid Telecom and forms the basis of the

recommendations and conclusions in the next chapter

119

CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS

Introduction

This chapter provides a brief summary of the salient issues of the study and also

draws some conclusions from the analyzed results. Appropriate recommendations

are then given based on the study findings. Areas of possible future research are

also highlighted

Conclusions

Theory has revealed that outsourcing is a powerful tool that can be used by an

organisation to help change the value proposition that it offers its customers if

properly used. In the telecommunications, field which is characterised by high

clockspeed and ultra-dynamic changes, organizations in emerging markets like

Zimbabwe could gain competitive advantage by embracing this strategic tool.

However, if wrongly planned for and executed, outsourcing can be a major drain on

the organisation’s resources.

The conclusions drawn from the analysis of results as highlighted in Chapter 4 are:

120

5.1.1 Liquid Telecommunications is currently not gaining sustainable

competitive advantage from its outsourcing approach. Ability to

manage the outsourcing relationship is low and hence the

organization shows characteristics of an organization in the medium

level of the sourcing maturity level.

5.1.2 The current outsourcing approach has not improved Liquid Telecom

service delivery and this was heavily impacted by the lack of

expertise amongst the crop of contractors engaged by Liquid

Telecom.

5.1.3 The current outsourcing approach at Liquid Telecom is not based on

mutual trust between the outsourcer and the provider. This is

exacerbated by the lack of formal training to manage contractors

within the Liquid Telecom workforce, and a poor understanding of

Telecommunications business processes by the contractors.

5.1.4 There has been no evident cost reduction achieved by using

contractors in Liquid Telecom. The absence of a strong relationship

between Liquid Telecom and its contractors means Liquid Telecom

continues to employ additional supervisory staff to constantly

monitor the contractors.

121

5.1.5 Liquid Telecommunication employees are not happy with quality of

work done by the contractors and are of the feeling that insourced

work is of better quality. Most of the contractors are ill-equipped and

do not have the necessary skills to match the quality of work done by

Liquid Telecom Zimbabwe.

5.1.6 The nature of work outsourced by Liquid Telecom (Network Build) is

not suitable for off-shoring as it requires physical presence. The

current crop of contractors engaged by Liquid Telecom do not have

the specialized equipment and skills for fibre network build since

there was no ready market for such skills in Zimbabwe before.

122

Declaration on Research Hypothesis

From The findings and subsequent statistical calculations, it can be concluded, at

5% Level of Significance, according to Liquid Telecom employees, there is no

sufficient evidence to support the hypothesis that the current outsourcing approach

at Liquid Telecom is a source of sustainable competitive advantage.

Recommendations

It is recommended that:

5.1.7 Liquid Telecommunications employees at all levels be formally trained on

managing outsourcing relationship.

5.1.8 Liquid Telecom adopts a strategic approach to outsourcing by choosing to

move up the sourcing maturity level. This can be achieved by focusing on long term,

enterprise-wide goals and building enterprise-wide awareness of the sourcing

strategies.

5.1.9 Liquid Telecommunications continues to engage the contractors as a way of

not only building their capacity, but also as a way of building long term relationships

that are strategic in nature so as to build capabilities that will not be easily copied by

competitors, hence achieving sustainable competitive advantage.

5.1.10 Adopt a common business processes framework (eTOM) in dealings with

contractors to reduce processes incongruence.

5.1.11 Liquid Telecom (and the contractors) commits resources to sustain the

relationship. Liquid Telecom should not base contractor dealings on contract only,

but should go the extra mile as a way of showing commitment to the relationship.

i

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xiii

APPENDICES

xiv

APPENDIX 1: QUESTIONNAIRE

STRUCTURED QUESTIONNAIRE: Cover Letter.

Dear Respondent,

My name is Stanley Magede. I am an MBA student at the University of Zimbabwe’s Graduate School of Management.

I hereby kindly request you to respond to the statements in the attached questionnaire relating to the research entitled Outsourcing for Competitiveness in the Telecommunications industry in Zimbabwe, The Case of Liquid Telecom. In light of the fact that your accurate and honest responses are pivotal in this research, I urge you to be as truthful and sincere in completing this questionnaire.

There is no right or wrong answer. Please express your personal opinions. You are assured of anonymity and confidentiality and your responses will be treated in strict confidence and will only be used for research purposes. Your participation in this research is voluntary, there is no coercion whatsoever.

Please ensure that your name does not appear anywhere on this document. Your cooperation will be most appreciated.

Thank You

Stanley Magede

…………………..

xv

Liquid Telecom Outsourcing Survey Questionnaire

Please read the following questions and select an appropriate answer by

selecting the most appropriate response to indicate degree of agreement. Approximate answers are welcome.

About Respondent

1.○ Male / ○ Female

2. Age of respondent

○ 20 to 30 years ○ 31 to 40 years ○ 41 to 50 years ○ 51 to 60 years ○ 61 to 70

years

3. Number of Years with Organization

○ Less than 1 year ○ 1 to 2 years ○ greater than 2 years

4. Time in Current position

○ Less than 1 year ○ 1 to 2 years ○ greater than 2 years

5. Were you involved in the decision to outsource? ○Yes / ○No

6. Your involvement with contractor's work? ○Daily / ○Weekly /○Monthly

7. Have you received formal training on managing relationship with contractors?

○Yes / ○No

8. Position within firm

○ Junior Staff ○ First level Supervisor ○ Middle Manager ○ Senior Manager ○ Director

9. Highest Qualification

○ High School ○ Certificate/Diploma ○ Bachelor’s Degree ○ Master’s Degree ○ Doctorate

9. What best describes your area in the organisation

○Planning and Build ○ Engineering ○ Human Resources ○Commercial ○ Operations ○ Accounting/Finance ○Risk/Audit ○ Other (specify)………

…………………………………………

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Assessing the degree to which outsourcing has helped in achieving sustainable competitive advantage for Liquid Telecom.

DIRECTIONS: This section deals with the perceived relationship between Liquid Telecom outsourcing and business strategy. Please show the extent to which you agree with the statements given below. Do this by picking one of the five numbers next to each statement. If you strongly agree with these statements circle

the number 5 and circle 1 if you strongly disagree. Otherwise circle any one of the numbers in the middle. There is no right or wrong answer.

Strongly Disagree Strongly Agree

1 Outsourcing increased the competitiveness of the business

1 2 3 4 5

2 Organization is planning additional outsourcing in the future

1 2 3 4 5

3 Outsourced activities are of high strategic importance.

1 2 3 4 5

4 Organization’s outsourcing is aligned to the company’s business strategy

1 2 3 4 5

5 Organization’s outsourcing is aligned to the company’s technology strategy

1 2 3 4 5

6 In house performance of currently outsourced activities would lead to a. Lack of strategic focus 1 2 3 4 5

b. Lack of rigour 1 2 3 4 5 c. Cost increases 1 2 3 4 5 d. Project timelines increase 1 2 3 4 5 e. Project scope creep 1 2 3 4 5 7 The following could be listed as the reasons for outsourcing at Liquid Telecom a To save costs 1 2 3 4 5 b Organization’s long term strategy 1 2 3 4 5 c Improved service levels 1 2 3 4 5 d Access to technical expertise 1 2 3 4 5 e To free up internal resources 1 2 3 4 5 f Response to industry competitve forces 1 2 3 4 5 g To introduce new technology 1 2 3 4 5 h To provide staff versatility 1 2 3 4 5 i To gain competitive advantage 1 2 3 4 5

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Assessing the impact of Liquid Telecom Outsourcing on Service delivery Please show the extent to which you agree with the possible reasons for outsourcing given below. Do this by picking one of the five numbers next to each possible reason. If you strongly agree with these reasons circle the number 5 and circle 1 if you disagree. Otherwise circle any one of the numbers in the middle. There

is no right or wrong answer.

Strongly Disagree

Strongly Agree

1 Oursourcing has improved service delivery

timelines 1 2 3 4 5

2 Outsourcing has increased business productivity

1 2 3 4 5

3 Cotractors handle Liquid customers with due care

1 2 3 4 5

4 Contractors understand telecommunications business processes better

1 2 3 4 5

5 Contractors have expertise in their area of work 1 2 3 4 5

Establishing the level of cost reduction achieved by using contractors DIRECTIONS: This section deals with the perceived benefits of outsourcing at Liquid Telecom. Please show the extent to which you agree with the possible benefits given below. Do this by picking one of the five numbers next to each statement. If

you strongly agree with these statements circle the number 5 and circle 1 if you disagree. Otherwise circle any one of the numbers in the middle. There is no right or wrong answer and approximate answers are welcome. Disagree Agree 1 Outsourcing has reduced operational costs 1 2 3 4 5 2 Contractors require ongoing supervision 1 2 3 4 5 3 Market demands force contractors to deliver

more at a lower cost 1 2 3 4 5

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The impact of the outsourcing policy, on the quality of Liquid Telecom network

DIRECTIONS: This section deals with the perceived problems of outsourcing at Liquid Telecom. Please show the extent to which you agree with the possible problems given below. Do

this by picking one of the five numbers next to each statement. If you strongly agree with these statements circle the number 5 and circle 1 if you disagree. Otherwise circle any one of the numbers in the middle. There is no right or wrong answer and approximate answers are welcome.

Strongly Disagree Strongly Agree 1 Outsourcing has improved quality of work 1 2 3 4 5 2 Choosing wrong contractors has caused

ongoing quality problems 1 2 3 4 5

3 Insourced work (using internal staff) is of better quality than outsourced work

1 2 3 4 5

4 Liquid has more experienced staff who do a better job

1 2 3 4 5

Quality of documentation has increased due to outsourcing

1 2 3 4 5

Objective 5: To establish the effectiveness and/or maturity of the Liquid Telecom outsourcing policy.

DIRECTIONS: This section deals with the current outsourcing policy at Liquid Telecom. Please show the extent to which you agree with the statements below. Do this by picking one of the five numbers next to each statement. If you strongly agree with the given statement circle the number 5 and circle 1 if you disagree. Otherwise circle any one of the numbers in the middle. There is no right or wrong answer and approximate answers are welcome.

Strongly Disagree Strognly Agree

1 Relationship with contractors is strong 1 2 3 4 5 2 Type of outsourcing employed by Liquid

Telecom is best described as;

a Staff Augmentation (company takes on contract employees to meet temporary or short term increase in demand for products or services)

1 2 3 4 5 5

b Out-tasking (company contracts out specific tasks but maintains control over

the strategy and implementation)

1 2 3 4 5 5

c Project Based Outsourcing (outsourcing partner is given total responsibility for a project)

1 2 3 4 5 5

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d Managed Services model (outsourcing partner establishes, operates and manages day-to-day operations of the network, services and business support system)

1 2 3 4 5 5

3 Outsourcing is supported by management 1 2 3 4 5 4 Relationship with contractors is based on

trust 1 2 3 4 5

5 Relationship with contractors is based on contract only

1 2 3 4 5

6 Liquid Telecom has clear service level agreements with contractors

1 2 3 4 5

7 Contractors are committed to the relationship

1 2 3 4 5

8 Liquid Telecom business units are commited to relationship with contractors

1 2 3 4 5

9 Outsourcing partners commit resources to sustain relationship

1 2 3 4 5

10 Liquid Telecom commits resources to sustain relationship

1 2 3 4 5

11 Corporate culture clashes between contractors and Liquid Telecom are an ongoing issue

1 2 3 4 5

12 Differenet Business processes between Liquid and contractors causes disagreements

1 2 3 4 5

13 Contractor performance is reviewed on a regular basis

1 2 3 4 5

14 Feedback is provided to contractors following a review

1 2 3 4 5

15 Problem solving is a joint exercise between Liquid Telecom and contractor

1 2 3 4 5

16 Contractor communications are credible 1 2 3 4 5 17 Contractors’ communications are timely 1 2 3 4 5 18 Rigorous internal controls between

business and contractors are in place 1 2 3 4 5

Thank you very much for your assistance. Are there any additional insights related to your outsourcing experience that you would like to express, if so please include below……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

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…………………………………………………………………………………………………………………….

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APPENDIX 2: STATISTICAL FORMULAE

AND CALCULATIONS

Arithmetic Meanfor grouped data

�� = ∑ ��∑ ��

Equation 5: Arithmetic Mean

Variance for grouped data, small sample

� = �� − � �∑ �� −�� ∑ ��

Equation 6: Variance for a small sample

Standard Deviationhamber

� = �� = � �� − � �∑ �� −�� ∑ ��

Equation 7: Standard Deviation

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APPENDIX 3: INTERVIEW WITH

SENIOR MANAGEMENT

Interviewees Job Title: Head of Network Planning and Build, Executive Director

Southern Africa, Chief Technical Officer.

What are the major problems currently faced with contractors.

What do you understand by strategic outsourcing?

Have you ever heard of the term sourcing maturity?

In your opinion is top management pursuing strategic outcsourcing?