Research Methodology - Research Findings of Etisalat Telecorporation - Dissertation Example

? Research Methodology - Research Findings of Etisalat Telecorporation and the result Contents Contents 2 Research Methodology 3 Qualitative tool - survey by using questionnaires or interviews 5 Quantitative tool - Based on Financial Statement  13 Research Findings 18 References 25 Research Methodology Emirates Telecommunications Corporation – Etisalat is one of the largest telecommunications company and one of the leading operators in the Middle-East and based out of UAE. Emirates Telecommunications Corporation – Etisalat has adopted as a strategy of outsourcing information technology in order to gain competitive edged in the telecommunications market in UAE and the Middle-East. A research study has been carried out to find the relationship of outsourcing of IT adopted as a strategic initiative and the profitability and sustainability of Emirates Telecommunications Corporation – Etisalatm (Henry, 2008, p.17). The research methodology has been discussed below. The aim of the research is to find the role of IT outsourcing in enhancing the profitability, growth and sustainability of Etisalat. The research has been undertaken with the help of qualitative tools and quantitative tools. Qualitative tool used in this research includes design of questionnaires keeping the objective of research into consideration and then undertaking surveys with target group of people. The target groups for carrying out the surveys are selected in such a way that the responses obtained are reliable and not random. Firstly the questionnaire is designed such that it contains a comprehensive set of questions. The questions prepared addresses the validity of the strategy of IT outsourcing adopted by Etisalat, whether outsourcing of IT could be considered as a key asset to the business of Etisalat, whether IT outsourcing has helped to reduce the cost of operations of Etisalat, whether improvement of services occurred as a result of outsourcing, whether effects on profitability and sustainability of business have taken place. Responses to the questionnaire were obtained in a “Yes” or “No” or “Don’t know”. The survey using the questionnaire has been carried out in two phases. In the first phase, the questionnaire was used to undertake a survey through responses from the responsible employees of Etisalat. The senior managers, sales managers and the operations managers were surveyed with the fixed set of questions. Responses obtained from the senior and middle management of Etisalat were considered to be reliable as they could readily understand the differences in daily operations of Etislat, the convertibility of the sale pitch and service responses of the clients and customers (Burgemeister, 2003, p.11). The senior manager would certainly have the feedbacks and reports on the implementation of strategic outsourcing of IT by Etisalat. A sample of the responses received was taken into consideration and a second phase of survey was conducted with the help of the same questionnaire. This time the questionnaire was used to undertake a survey among the clients, customers and representative of Etisalat in UAE in order to justify the responses of the selected sample with the responses of the beneficiaries of Etisalat. The two clients of Etisalat who were surveyed using the questionnaire are American University of Sharjah and Sharjah Islamic Bank. The same set of questions was asked to the customers, clients and representative of Etisalat. The respondents answered the questions in specific categorical responses which were based on their experience of services of Etisalat and any notable changes felt in the services and operations due to IT outsourcing by Etisalat. The representative responded to the survey based on the feedback available from various stakeholders of Etisalat. The findings of the survey were then matched with the findings of a quantitative analysis (Kolb, 2008, p.16). The quantitative findings were obtained by the use of a quantitative tool based on the financial statements of Etisalat. Considering the fact that the outsourcing of IT has started since past few years, a quantitative analysis of the financial statements of Etisalat has been carried out to see whether the responses obtained in the survey is reflected in the financial statements of Etisalat. An analysis of the profitability and sustainability of Etisalat has been carried out from 2006 to 2012 to observe the growth in profitability and symbols of sustainability in the business of Etisalat as a result of outsourcing. The profitability over the years have been measured using the performance results like gross profit margin, earnings before interest tax depreciation and amortization, operating profits, net profits and net revenues earned. Using these performance figures from 2006 to 2012, the profitability tools and sustainability tools were compared to indicate the trend of performance of Etisalat. The gross profit margin, pre (EBITDA) profit margin, operating profit margin and net profit margin were compared over the period of 2006 to 2012 and a possible trend was found in the performance of Etisalat as a result of IT outsourcing. The sustainability measures were determined by undertaking a trend analysis by comparing every year’s performance as compared to that of previous year for parameters like gross profit, EBITDA, operating profit and net profit. A compounded annual growth rate of the above parameters was also calculated for the period of 2006 to 2012 in order to understand the sustainability of business of Etisalat as a result of IT outsourcing (Brown, 2009, p21). Qualitative tool - survey by using questionnaires or interviews The qualitative tool for undertaking the research was used with the help of conduct of surveys. A survey using questionnaires or interviews was carried out in two phases. In the first phase, the questions were asked to the senior managers, operation managers and sales managers. The responses were received in designated categories of “Yes”, “No” and “Don’t’ know”. The second phase of survey as a part of the qualitative tool used was conducted with the two clients of Etisalat namely American University of Sharjah and the Sharjah Islamic Bank, the customers of Etisalat and the representative of Etisalat in UAE. Before designing the questionnaire and conducting the survey, several hypotheses were formed in order to determine the effectiveness of the strategic decision taken by the management in outsourcing of its IT operations and the role of IT outsourcing on the profitability and sustainability of business of Etisalat (Frank, 1964, p.12). The survey was aimed to find a relationship between IT outsourcing and profitability of Etisalat and to find whether the strategic decision of IT outsourcing by Etisalat has helped to gain competitive edge in the telecommunication market in the Middle East. The questionnaire used to conduct the survey as a qualitative tool for the specified research is given below. Questionnaire 1st Phase 2nd Phase Yes - Y, No - N, Don't Know - DN Operations Manager Sales Manager Senior Manager Client 1 Client 2 Cust. 1 Cust. 2 Cust. 3 Rep. in UAE Has the management of Etisalat adopted the right strategy by outsourcing IT Y Y Y Y DN Y Y DN Y Can IT outsourcing be considered a key asset in the business of Etisalat Y Y Y DN DN Y Y Y Y Has IT outsourcing been able to reduce costs for Etisalat Y Y Y DN Y DN Y Y Y Has Outsourcing of IT reduced profitability in business of Etisalat N N N N DN N N DN N Has IT Outsourcing contributed to growth of Etisalat Y Y Y Y Y Y DN Y Y Has the services of Etisalat improved due to IT outsourcing Y Y Y Y Y Y Y Y Y Has Etisalat gained competitive market advantage due to IT outsourcing Y Y Y Y Y DN DN Y Y Has the business of Etisalat lost sustainability due to IT outsourcing N N N N N N N DN N The above table gives the responses obtained from the survey conducted in two phases. The responses are considered to be reliable and correctly depict the changes in the performance of trend of Etisalat as a result of Information Technology outsourcing. The employees of the Etisalat were included in the survey as they are aware of the dailt changes in operation and sales as a result of outsourced IT operations. Responses of the senior management would be based on the feddbacks of policy implementation and updated performance reports of Etisalat. The overall response to the question whether the strategic decision by Etisalat to outsource IT was appropriate or not not has been represented by the pie-diagram given below (Nargundkar, 2010, p.19). 77.78% of the respondents felt that strategic decision of outsourcing of IT by Etisalat was correct while a meagre 22.22% of the respondents were indiffrenet to the changes due to outsourcing of IT. The overall reponse obtained from the survey on the question whether IT outsourcing can be considered as a key asset in the business of Etisalat is given below. Majority 77.78% of the respondents felt that IT outsourcing is a key asset in the business of Etisalat while a minor segment of 22.22% responded in the survey that they are unaware of the effects of IT outsourcing. The overall response from the survey against the question whether IT outsourcing has been able to reduce costs for Etisalat is given in the following pie diagram. A whopping 77.78% of the respondents believe that the cost control and reduction through IT outsourcing has been possible to acchieve for Etisalat while a minor 22.22% are unaware of the fact. The overall response to the question on whether IT outsourcing has reduced the profitability in the business of Etisalat has been represented through a pie diagram. A majority of 77.78% of the respondents of the survey did not agree that the profitability of the business has decreased. Instead they felt that profiatbility has increases over the years as an effect of IT outsoucing. Again a minor part of the respondents were not aware of the proceedings. Responses obtained from the survey also reflected the opinion of majority feeling that outsourcing has contributed to the growth of Etisalat as given in the pie-diagram below: The survey also indicated that all the respondents felt the improvement in services of Etisalat as a result of IT outsourcing. The competitive advanatge gained by Etisalat in the telecommunications market as a result of IT outsourcing was felt by 77.78% of the respondents while 22.22% of the respondents were not able to distinguish the difference. A major part of the respondents representing 88.89% felt that the business of Etisalat has attained sustainability as a result of IT outsourced decisions by the management. A minor 11.11% were unaware of the effects on sustainability of business of Etisalat. Quantitative tool - Based on Financial Statement  The next step of the research was undertaken with the help of a quantitative tool. This includes a quantitative analysis of the financial parameters of Etisalat based on the financial statements over the period of 2006 to 2012. The quantitative analysis would help us to understand the effect of IT outsourcing in the performance of Etisalat over the years (Etisalat, 2013, p.1). The findings of the analysis would be compared to the responses obtained from the respondents of the survey in order to justify that the actual changes in performance as depicted in the financial statements of the company was felt by the respondents through their daily experiences as well as report and feedbacks obtained on the strategic implementation. The quantitative tool used in the research includes measurement of profitability and sustainability of Etisalat. The below table show the financial performance indicators of Etisalat. Measures – Profitability Parameters (AED’000) 2006 2007 2008 2009 2010 2011 2012 Gross Profit 12,902,858 16,205,604 17,924,570 19,931,029 21,711,958 22,496,833 23,768,661 Net Sales 16,290,257 21,339,852 26,119,134 29,310,336 32,285,440 35,041,796 37,022,836 Gross Profit Margin 79.21% 75.94% 68.63% 68.00% 67.25% 64.20% 64.20%                 EBITDA 12,514,643 15,561,288 17,257,082 19,138,594 20,848,716 21,602,385 22,823,647 Net Sales 16,290,257 21,339,852 26,119,134 29,310,336 32,285,440 35,041,796 37,022,836 Pre(ITDA) Profit Margin 76.82% 72.92% 66.07% 65.30% 64.58% 61.65% 61.65%                 Operating Profit 11,117,565 13,599,350 14,739,510 16,258,768 17,717,833 18,195,986 19,135,427 Net Sales 16,290,257 21,339,852 26,119,134 29,310,336 32,285,440 35,041,796 37,022,836 Operating Profit Margin 68.25% 63.73% 56.43% 55.47% 54.88% 51.93% 51.69%                 Net Income 5,859,747 7,296,644 8,664,984 8,546,432 9,125,768 9,648,185 9,966,473 Net Sales 16,290,257 21,339,852 26,119,134 29,310,336 32,285,440 35,041,796 37,022,836 Net profit Margin 35.97% 34.19% 33.17% 29.16% 28.27% 27.53% 26.92% The profitability trend of Etisalat over the years has been observed with the help of Gross profit margin, Pre (ITDA) Margin, Operating margin and Net profit margin. The profit margins of Etisalat have been found by find the percentage of profits at different stages of operation with respect to the total revenues earned. The profitability analysis shows that Etisalat has maintained high profit margins from 2006 to 2012 as a result of IT outsourcing (Singh, 2010, p.28). The gross profit margin which is a ratio of gross profit to net sales is observed to be more than 64% over the period of 2006 to 2012. The pre (ITDA) profit margin which is a ratio of EBITDA to the net sales have been observed to be over 60% over the period of 2006 to 2012. The operating profits margin which represents the operating profits earned from the net sales has been observed to be above 50% from 2006 to 2012. The net profit margin which shows the percentage of net profits earned from the total sales of Etisalat has been above 25% in the period of 2006 to 2012. Thus the quantitative assessment showed that the company Etisalat has maintained steady profitability levels over the period of 2006 to 2012 (Dey, 2009, p.18). The sustainability measure has been found out with the help of quantitative tool as depicted in the table below. The sustainability of the business of Etisalat has been observed with the help of trend analysis and calculation of compounded annual growth rates of net sales, gross profit, EBITDA, Operating profit, net income. Measures - Sustainability CAGR Parameters (AED’000) 2006 2007 2008 2009 2010 2011 2012   Net Sales 16,290,257 21,339,852 26,119,134 29,310,336 32,285,440 35,041,796 37,022,836 14.66% Trend 100.00% 131.00% 160.34% 179.93% 198.19% 215.11% 227.27%   Gross Profit 12,902,858 16,205,604 17,924,570 19,931,029 21,711,958 22,496,833 23,768,661 10.72% Trend 100.00% 125.60% 138.92% 154.47% 168.27% 174.36% 184.21%   EBITDA 12,514,643 15,561,288 17,257,082 19,138,594 20,848,716 21,602,385 22,823,647 10.53% Trend 100.00% 124.34% 137.90% 152.93% 166.59% 172.62% 182.38%   Operating Profit 11,117,565 13,599,350 14,739,510 16,258,768 17,717,833 18,195,986 19,135,427 9.47% Trend 100.00% 122.32% 132.58% 146.24% 159.37% 163.67% 172.12%   Net Income 5,859,747 7,296,644 8,664,984 8,546,432 9,125,768 9,648,185 9,966,473 9.26% Trend 100.00% 124.52% 147.87% 145.85% 155.74% 164.65% 170.08%   As analyzed in the above table, the net sales of Etisalat has been observed to increase over the years from 2006 to 2012 and showed a compounded annual growth rate of 14.66%. The sustainability in net sales of Etisalat has been depicted in the graph as given. The gross profit of Etisalat has been found to increase on sustainable basis over the years from 2006 to 2012 and also showed a compounded annual growth rate of 10.72%. The sustainable growth in gross profits of etisalat has been shown in the graphical presentation as follows. The earnings before interest, tax, depreciation and amortization of Etisalat has been found to increase continously over the years from 2006 to 2012 and also showed a compounded annual growth rate of 10.53%. The sustainable growth in earnings before interest, tax, depreciation and amortization of etisalat has been shown in the graph below: The operating profit of Etisalat has shown continous increase from 2006 to 2012. The compounded annual growth rate of operating profits over the period has been calculated as 9.47%. The sustainable nature of operating profits is shown in the below diagram. The net income has also grown at a compounded annual growth rate of 9.26%. Etisalat has maintained a sustainable net income over the years which could be observed from the graph given below. Research Findings The research undertaken with the help of a qualitative tool using survey and a quantitative tool using analysis based on financial statements. The results of the survey conducted indicate a strong relationship of the outsourcing of IT by Etisalat and the increase in profitability of the telecommunications company. The employees of the telecommunication giant felt that the strategic policy of IT outsourcing by Etisalat was a correct decision looking at the future growth of the company. The customers and clients as well as the representative of Etisalat also felt on the same line that the strategy adopted by Etisalat for IT outsourcing was correct decision to attain a competitive edge in the scenario of increasing demand in the telecommunications market. Majority of the respondents of the survey also felt that the outsourcing of IT has helped to reduce the costs of Etisalat and contributed to the profitability of the company by providing improved services. Thus to a large percentage of respondents, outsourcing in IT was considered to be a key assets for Etisalat. The findings of the survey were considered to be reliable as this was justified with the help of a quantitative tool that includes an analysis of financial statements of Etisalat. The quantitative analysis depicted that as a result of the outsourcing of IT, the net sales of Etisalat has increased at a compounded annual growth rate of 14.66% with registering increases in sales value year after year from 2006 to 2012. This has been achieved with the help of improved services as a result of IT outsourcing which was indicated by respondents in the survey. The gross profits, EBITDA, operating profits and net income has also registered compounded annual growth rates of around 10% over the years 2006 to 2012 with increase in sales year after years. This justified the response from survey that indicated majority opinion towards positive effect of IT outsourcing on the sustainability of business of Etisalat (Khan, 2011, p.10). The increase in revenue earnings of Etisalat showed that the company has been able to acquire more market share over the years and thus have been able to gain competitive edge in the market. The profitability measures were calculated with the help of gross profit margin, pre (ITDA) profit margin, operating profit margin and net profit margin. The net profit margin found over the years is less as compared to the gross profit margin due to expenditures on regulatory payments, depreciation expenses, amortization expenses, interest payments, tax payments. The net profit margin on the revenues earned by Etisalat has been found to be over 25% for all the years from 2006 to 2012. This justifies the response of the majority from the survey that the outsourced IT operations have contributed to increase the profitability of Etisalat. The research questions framed before conducting the research with corresponding hypothesis have been answered as follows: Q1. Does Etisalat adopt the IT outsourcing strategy in its corporate and why the corporate has taken this decision? A1. The hypothesis framed to answer this question was - H1: If Etisalat has applied outsourcing as a strategic tool, then the decision was to improve operational performance. The correctness of the strategic decision of Etisalat could be explained from the evaluation of the operational performance. The qualitative research depicts that 77.78% of the respondents believe that IT outsourcing strategy was rightly adopted by Etisalat for which the operational performance increased over the years. This is shown from the graphical representation as given below. The quantitative research showed that the operating profit resulting out of its operational performance has increased over the years as a result of IT outsourcing. This is represented from the below graph. Thus the research findings follow the hypothesis designed for the research. Q2. What is the relationship between outsourcing and profitability in Etisalat corporate? A2. The hypothesis framed to answer this question was – H1: If IT outsourcing is related with Etisalat profitability growth, then adopt IT outsourcing will lead to implicitly maximizing the profit. The findings from the qualitative research depicted that 77.78% of the respondents believe that IT outsourcing has been able to increase the profitability of Etisalat. This is shown from the pie-diagram as given below. The quantitative research showed that the net profit of Etisalat has increased over the years as a result of IT outsourcing. This is represented from the below graph. Thus the research findings follow the hypothesis designed for the research. Q3. How can IT outsourcing enhance the sustainability in Etisalat corporate? A3. The hypothesis framed to answer this question was – H1: If there is a relationship between outsourcing and sustainability, then more IT outsources service towards effective sustainability and more responsible competitiveness for Etisalat. The findings from the qualitative research depicted that 88.89% of the respondents believe that IT outsourcing has contributed to sustainability and competitive edge for Etisalat. This is shown from the pie-diagram as given below. It was also found during the research that Etisalat has collaborated with leading clouding companies for cloud computing. Cloud computing could help in achieving reduction in energy consumption also helped to achieve economies of scales by creating a green environment through IT outsourcing. This was taken in good spirits by the society and environment. This helped in maintaining sustainability of Etislat. The quantitative analysis showed growth in reveune of Etisalat over the years thus resulting in increased market shares and helping Etisalat to gain competitive edge. Thus the research findings follow the hypothesis designed for the research. Quantitative Analysis CAGR Parameters (AED’000) 2006 2007 2008 2009 2010 2011 2012   Net Sales 16,290,257 21,339,852 26,119,134 29,310,336 32,285,440 35,041,796 37,022,836 14.66% Trend 100.00% 131.00% 160.34% 179.93% 198.19% 215.11% 227.27%   Net Income 5,859,747 7,296,644 8,664,984 8,546,432 9,125,768 9,648,185 9,966,473 9.26% Trend 100.00% 124.52% 147.87% 145.85% 155.74% 164.65% 170.08%   Q4. Does the sustainability in business can contribute significantly to the achievement of a differentiation advantage in the marketplace? A4. The hypothesis framed to answer this question was – H1: If the sustainability has a positive impact on Etisalat Corporate differentiation in marketplace, then more sustainable business action will achieve for Etisalat a competitive advantage in the market. The findings from the qualitative research depicted that 77.78% of the respondents believe that the sustainability in business due to IT outsourcing has helped Etisalat to gain competitive edge. This is shown from the pie-diagram as given below. This could be established from the findings as given below. The table compares the growth rates of Etislat with that of its peer group. Thus the findings follow the hypothesis designed for the research. References Etisalat. 2013. Annual Reports. [Online]. Available at: http://www.etisalat.com/html/ir/annual-reports.html. [Accessed on 19 April, 2013]. 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