1  October  2013

Cloud  Compu)ng  SIG:    Components  and  Percep)ons  of  Service  Value  in  B2B  Cloud  Compu)ngPresented  by:  Roland  Padilla

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Cloud computing SIG: Components and perceptions of

service value in B2B cloud computing

Roland Padilla

01 October 2013

Hallatt, A. 2013, Arctic Circle, accessed 03 September, 2013, from <http://www.thecomicstrips.com/store/add.php?iid=32573>.

Presentation Outline

1. Context2. Gap3. Purpose4. Research questions5. Research design6. Components of SV in B2B cloud computing7. Structural and measurement model8. Discussion9. Managerial implications

Context

• KPMG shows increased adoption of cloud services across the Australian economy would grow GDP by $3.3B by 2020.

• EU predicts a 1% GDP growth and create 2.5M jobs by 2020.

• IDC estimates 14M jobs and US$1.1trillion a year in new business ventures by 2015.

• Forrester projected cloud services of $14.7B in 2010 will grow to $94.1B by 2015.

• Australia’s National Cloud Computing strategy

1)European Commission (2012) Unleashing the Potential of Cloud Computing in Europe, http://ec.europa.eu/information_society/activities/cloudcomputing/docs/com/com_cloud.pdf. 2)KPMG (2012) Modelling the Economic Impact of Cloud Computing, www.kpmg.com/au/en/issuesandinsights/ articlespublications/pages/modelling-economic-impact-cloud-computing.aspx, 3)IDC (2012) Quantitative Estimates of the Demand for Cloud Computing in Europe and the Likely Barriers to Up-take, http://ec.europa.eu/information_society/activities/cloudcomputing/docs/quantitative_estimates.pdf4)Journal of International Commerce and Economics (2012) Policy challenges of cross border cloud computing www.usitc.gov/journals/policy_challenges_of_cross-border_cloud_computing.pdf.5)DBCDE (2013) The National Cloud Computing Strategy, accessed from http://www.communications.gov.au/digital_economy/cloud_computing.

DefinitionCloud computing - a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service provider interaction.

Business-to-Business - 'B2B' is defined as a commercial transaction between businesses, such as between a cloud computing service provider and another organization. In contrast, business-to-consumer or 'B2C' relates to transactions existing between a provider and a single person, purchasing goods and services for personal consumption

Service Value -“The term service value describes the focus on the role of various service components in shaping customers’ perceptions of value, which is an overall assessment of the utility of a product based on perceptions of what is given and what is received.

1) Mell, P., & Grance, T. (2011). The NIST definition of cloud computing (draft).NIST special publication, 800(145), 7.2)Lucking-Reiley, D., & Spulber, D. F. (2001). Business-to-business electronic commerce. The Journal of Economic Perspectives, 15(1), 55-68.3)Ruiz, D. M., Gremler, D. D., Washburn, J. H., & Carrión, G. C. (2008). Service value revisited: specifying a higher-order, formative measure. Journal of Business Research, 61(12), 1278-1291.

Little is known about the measurement of service value in B2B cloud computing services from a customer perspective.

Gap

Purpose

The aim of the research project is to measure service value for customers of B2B cloud computing services, and then to test a model explaining how service value relates to both customer satisfaction and the intention of the customer to repurchase the service.

Research Questions

RQ1: What are the components of service value in B2B cloud computing?

RQ2: How do we measure the components of service value?

1) Service quality measures customer perceptions of the quality of service delivered by the company providing the service.

2) Service equity concerns the image or brand equity as perceived by the customer. Brand image can engender a strong feeling of “proximity, affection and trust” (Ruiz et al., 2008, p. 1281) in the brand purchased. Brand equity, built up through customers sharing experiences of services delivered, is also important in the overall equity of the service

3) Confidence benefits concerns customers “having belief, trust, or faith in an organization, its staff and services” (Flanagan et al., 2005, p. 374) and is often built by a company going beyond the core service delivered.

4) Perceived sacrifice measures customer perceptions of the costs, monetary and non-monetary (e.g., time, effort), they face by purchasing a service.

Components of the established service value model

Ruiz, DM, Gremler, Dwayne D., Washburn, JH & Carrión, GC 2008, ‘Service value revisited: specifying a higher-order, formative measure’, Journal of Business Research, vol. 61, no. 12, pp. 1278–1291.

Established Model Augmented Model

Note: The established model based on Ruiz, DM, Gremler, Dwayne D., Washburn, JH & Carrión, GC 2008, ‘Service value revisited: specifying a higher-order, formative measure’, Journal of Business Research, vol. 61, no. 12, pp. 1278–1291.

Service Value Model

Qualitative à-21 managers-30mins average-156-page transcript-tested components-additional theme -Australia only

Quantitative-328 participants-nearly 10% of total -PLS-SEM-SmartPLS software

Instrument à-30-item measure-7-pt Likert scale-Strongly disagree to strongly agree-Australia, US, Europe and Asia-Survey Monkey

Research Design

Creswell, J. W., & Clark, V. L. P. (2007). Designing and conducting mixed methods research. Sage publications. Thousand Oaks, CA.

ParticipantsPosition Industry Cloud Service

1) CIO Research IaaS

2) IT Director Legal IaaS

3) Director IT IaaS

4) Executive Director

Education IaaS

5) Director Logistics IaaS

6) GM Hospitality SaaS & PaaS

7) GM Transportation SaaS

8) IT Manager

Not-for-profit IaaS

9) Managing Director

Recruitment IaaS & SaaS

10) Director Accounting SaaS

Position Industry Cloud Service

11)Investor Startup IaaS12) Director Education IaaS

13) CTO IT IaaS

14) Solutions Architect

Financial IaaS

15) Founder Startup IaaS & PaaS

16) IT Director Transport IaaS & PaaS

17) Manager IT IaaS, SaaS & PaaS

18) Partner Accounting IaaS & PaaS

19) IT Manager IT IaaS & PaaS

20) Solution Adviser

IT IaaS & SaaS

21) Executive Director

IT IaaS & PaaS

IaaS – Infrastructure-as-a-ServicePaaS – Platform-as-a-ServiceSaaS – Software-as-a-Service

Components of Service Value in B2B Cloud Computing

1) Service Quality (i.e., reliability, consistency, accessibility and monitoring)

2) Service Equity (i.e., reputation and preferences)

3) Confidence Benefits (i.e., trustworthinesss, less anxiety and increased confidence)

4) Perceived Sacrifices (i.e., cost and time)

5) Cloud Service Governance (i.e., data migration, security, sovereignty and service levels)

Indicators of the Measurement Models (1/2)Service Quality (SQ)

SQ1 This cloud provider’s service is reliable.SQ2 This cloud provider’s service is consistent.SQ3 When I need the cloud service, I can always access it.SQ4 My experiences of having a cloud service monitoring tool are always excellent.SQ5 Overall, I can rely on my cloud provider to deliver the expected services.

Service Equity (SE)SE1 Even if another cloud provider offers the same type of cloud service, I would still prefer this cloud provider.SE2 If another provider offers cloud computing services as good as my provider, I would still prefer my current provider. SE3 If another provider is not different from my current cloud provider in any way, it is still smarter to purchase my existing provider’s services.

Confidence Benefits (CB) CB1 I have less anxiety when I receive alert notifications whenever there is a service outage.CB2 I have less anxiety when I use the services of this cloud provider.CB3 Even if something goes wrong, I still have confidence in dealing with the current cloud provider.

Perceived Sacrifices (PS)PS1 The total cost of securing this cloud service is high.PS2 The time required to use my cloud provider’s services is high.

Cloud Service Governance (SG)SG1 Even if my existing cloud provider’s service levels drop, I would still prefer my current provider.SG2 I can trust my data with this cloud provider.SG3 It is easy to migrate my data to another cloud provider.

Indicators of the Measurement Models (2/2) Service Value (SV)

SV1 The value I receive from this cloud provider’s service is worth my time. SV2 The value I receive from this cloud provider’s service is worth my effort.SV3 The value I receive from this cloud provider’s service is worth my money.SV4 My cloud provider’s services are competitively priced.SV5 My cloud provider offers good value for the price I pay.SV6 My cloud provider understands my business needs.

Customer Satisfaction (CS)CS1 I am satisfied with my cloud provider’s services.CS2 Overall, I am pleased when I purchase this cloud provider’s services.CS3 Using this cloud provider’s services has been a satisfying experience.CS4 I am satisfied with my cloud provider.CS5 I chose well in determining this cloud provider to deliver my business needs.CS6 Having this cloud service has made my job easier.

Repurchase Intentions (RP) RP1 I intend to continue doing business with this cloud provider in the future.RP2 As long as the present service continues, I doubt that I would switch cloud providers.

Reflective à•Bootstrapping diagram•Composite Reliability•Outer Loadings•Average variance extracted (AVE)•Cross Loadings•Fornell-Larcker Criterion•Results Summary for Reflective Measurement Model

Structural

PLS-SEM Procedure

Formative à

1) Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2013). A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM). Sage. Thousand Oaks, CA.2) Ringle, C., Sarstedt, M., & Straub, D. (2012). Editor’s Comments: A Critical Look at the Use of PLS-SEM in MIS Quarterly. MIS Quarterly (MISQ), vol. 36, no. 1, pp. iii-xiv.

• Outer Weights• t Value• p Value• Significance level

• R2

• f2

• Stone-Geisser’s Q2 and q2 using blindfolding

• Path coefficients using bootstrapping method

• Significance testing of the structural path

Partial Least Squares Structural Equation Model

Ringle, C.M., & Alexander, S.W. (2005). SmartPLS (2.0 beta) [software]. Hamburg, Germany: SmartPLS retrieved from http://www.smartpls.de.

Discussion1) We found broad support for the extended service value model in a B2B

cloud computing context.

2) We found empirical support for the extra component called “cloud service governance (SG)”. Further research will explore whether SG applies to general B2B services.

3) We did not find support for the component called “service equity (SE)” . This may be because of the lack of maturity in the cloud computing service market. As the market matures, re-testing may find this component also applies. However, it may also be that SE is not as important in B2B services compared with B2C services. Both require future research.

4) Advances the literature by extending the established B2C service value model to the B2B context of cloud computing. Knowing this will enable customers to better understand the components of service value. Vendors will be able to measure how well their services are leading to value and satisfaction for their customers.

Managerial implications1) Why should managers care? There may be over-emphasis on the relative

contribution of a certain component (e.g., service equity) to service value and ignoring other aspects (e.g., service quality). In the end, the use of weak service value measurement results in poor decision-making.

2) Also, the formative model enables a cloud customer to ascertain which components are the most significant in forming service value perceptions. Customers are sacrifice conscious. For standardised cloud services, providers should consider customer perceptions of the price and time needed to use the cloud service, because sacrifices are weighed against the benefits received.

3) Cloud providers can achieve competitive advantage by focusing on the measures of service value. By improving on one or more of the significant components, managers can positively affect service value, and, ultimately, increase customer satisfaction and their intention to repurchase additional cloud services.

Questions and Suggestions

Hallatt, A. 2013, Arctic Circle, accessed 03 September, 2013, from <http://www.thecomicstrips.com/store/add.php?iid=85534>.