New IT service development for VINPT

TRệễỉNG ẹAẽI HOẽC Mễ TP. HCM UNIVERSITE LIBRE DE BRUXELLES

HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL

MBAVB4


VU TRONG DINH

NEW IT SERVICE DEVELOPMENT FOR VINPT

MASTER PROJECT
MASTER IN BUSINESS ADMINISTRATION
(PART-TIME)


Tutors Name:
Dr. NGUYEN VAN NGAI

Students Name: VU TRONG DINH


Ho Chi Minh City
(2011)
ii


DECLARATION
I hereby declare that this thesis is my own work and effort and that it has not been

submitted anywhere. Where other sources of information have been used, they
have been acknowledged.
iii


ACKNOWLEDGEMENTS
I would like to express my appreciation to my advisor: Dr. Nguyen Van Ngai for his
time, patience and understanding. I wouldn't be performing this work without Dr.
Ngai's continual encouragement.
My gratitude also goes to the ViNPT team, there are not enough words to describe
your excellent work. You made this study happen.
The most special thank go to the professors from Belgium Solvay school and HCM
Open University. During two years program, they gave valuable knowledge not
only for this project but also extremely helpful to my work.
I would like to thank to the program coordinators, Mr. Serge, Ms. Tran and Ms. Ha.
They gave me your unconditional help through all this long process.
I am indebted to my many of my colleagues in MBAVB3 class for their continuous
support and interest in what I do.
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SUPERVISOR COMMENTS

The topic of the study is suitable for the MBA program that student is undertaking.
The paper meet the requirement of the MBA project. The study applied the theory
of development of a product or service in a specific case. The result meets the
requirement of the MBA project. I agree for this paper to be presented for final
evaluation.
9 January 2012
Dr Nguyen Van Ngai

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Table of Contents
Chapter 1:

Introduction 1

1.1

Project rationale 1

1.2

Problem statement 2

1.3

Objectives of the project 2

1.4

Research methodology 2

1.5

Organization of the project 3

Chapter 1:

Introduction 3

Chapter 2:

Literature review 3

Chapter 3:

IT service market and company profile 3

Chapter 4:

New IT service development 3

Chapter 5:

Recommendation & Conclusion 3

Chapter 2:

Literature Review 4

2.1

Normative model of new service development 4

2.2

New service development model 6

2.2.1

Direction 6

2.2.2

Design 7

2.2.3

Testing 9

2.2.4

Introduction 10

2.3

Service blueprinting 10

2.4

Other studies using the same model 13

2.5

Service Development Model for ViNPT 14

Chapter 3:

IT Service Market and ViNPT Company Profile 17

3.1

Di An and Thuan An town 17

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3.1.1

Industrial Parks 17

3.1.2

Service provider 20

3.1.3

Conclusion 20

3.2

IT service market 21

3.2.1

General Data 21

3.2.2

Kind of services 22

3.2.3

IT Expense 23

3.2.4

IT activities 24

3.2.5

Conclusion 25

3.3

The competition 25

3.4

ViNPT company profile 27

3.4.1

Overview 27

3.4.2

Company Value 27

3.4.3

Goals 27

3.5

Company current issues 28

3.6

The opportunity 30

Chapter 4:

New IT service development 31

4.1

New service objectives & strategy 31

4.1.1

New service objectives 31

4.1.2

New Service Strategy 32

4.2

Idea Generation 32

4.3

Idea Screening 34

4.4

Concept Development & Testing 35

4.4.1

Concept Development 35

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4.4.2

Concept Testing 37

4.5

Business Analysis 37

4.5.1

Concept 1 - Assumption 37

4.5.2

Capital investment 39

4.5.3

NPV calculation 40

4.6

Service Design & Testing 41

4.6.1

The Service Model 41

4.6.2

Infrastructure Design 43

4.6.3

Process design 44

4.6.4

Details of processes 45

4.7

Marketing Program Design & Testing 48

4.7.1

Marketing programs 49

4.7.2

Execution Plan 50

Chapter 5:

Recommendation & Conclusion 51

Appendix A – References 53

Books & Magazines 53

MBAVB courses 53

Appendix B –Idea List 54

Appendix C – ViNPT survey 56

Questionaire 56

Instruction 56

1. General Information 56

2. Hardware 56

3. Software 57

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4. IT service 57

5. IT expense 58

Survey Result 59

1. General Information 59

2. Hardware 59

3. Software 60

4. IT service 61

5. IT expense 61

Appendix D – ViNPT Observation 63

Observation Form 63

Observation Result 64

Appendix E – Financial sheets 65

Assumption 65

Fix Assets at Year 1 65

Fix Assets in 5 years 65

P&L projection 66

Balance Sheet projection 66

DCF Calculation 67


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List of Pictures
Figure 2-1 New Service Development 5

Figure 2-2: ViNPT New Service Development Process 15

Figure 3-1 Number of new companies by years 19

Figure 3-2 New investment capital by years 20

Figure 3-3 Chart of General Data 21

Figure 3-4 Statistic of Using Applications 22

Figure 3-5 Kind of IT service 23

Figure 3-6: IT Expense by Categories 24

Figure 3-7: IT activities 25

Figure 4-1 Number of ideas by category 34

Figure 4-2: Overall of IT service 42

Figure 4-3: IT service model 43

Figure 4-4: Infrastructure design 43

Figure 4-5: Re-design process 46

Figure 4-6: Maintenance process 47

Figure 4-7: Support process 48



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List of Table
Table 2-1: Four new service strategy options 7

Table 3-1: The top five industries with number of companies 18

Table 3-2: General Data 21

Table 3-3: Yearly Profitability by Brand - Hardware 28

Table 3-4: Yearly Profitability by Brand - Software Development 29

Table 3-5: Yearly Profitability by Brand – IT Training 29

Table 4-1: Concept 1 assumption 38

Table 4-2: Fixed Asset List at year 1 39

Table 4-3: Profit and loss projection 40

Table 4-4: Concept 1 free cash flows calculation 40

Table 4-5: Free cash flows present value 40

Table 4-6: Marketing and Sales objectives 49

Table 4-7: Execution Plan 50

1

Chapter 1: Introduction
1.1 Project rationale
Service is very important for all economic. In US, revenue of service sector takes
80% of total GDP. For developed countries, service averagely takes 60% of
country GPP. In Vietnam, service sector just takes only 37% (Source:

). According to Ministry of Foreign Affairs, this number
should be increased to 45%.
To develop new physical product and launch it to the market, most companies
have very clear procedure with some steps. New product ideas have to come from
somewhere. Some ideas which are feasible and workable to develop are selected.
The concept is built and test for each idea. Marketing strategy is prepared. The
business analysis stage looks more deeply into the cash flow the product could
generate, what the cost will be, how much market shares the product may achieve
and the expected life of the product. Then product will be testing within a specific
area. If the test marketing stage has been successful then the product will go for
regional or national launch.
But for a service the process is quite simple. The ideas just come from internal
company resource. Then the service is formed after business analysis. After that
the service is launched to the market. There are not many specific models for new
service development.
This thesis will build a new model from new service development process of
Scheuing Eberhard E. and Johnson, Eugene M. The model will be used to develop
an IT service for ViNPT company in Di An, Binh Duong, a company is working in
ICT industry.
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1.2 Problem statement
ViNPT is an ICT company in Binh Duong. Their customers are companies in 9
industrial parks of two wards: Di An and Thuan An.
Now ViNPT is in difficult situation. They have three products: computer hardware,
software development and IT training. All three products are facing with many
issues. Profit of computer hardware is low, software development creates loss.
And IT training has stopped operating for almost one year.
In order to be survived, company decide that IT service will be their main business.
New IT service should be competitive and accept by customers. Then it will be

launched to the current market.
1.3 Objectives of the project
This thesis will follow the new service development model to develop a new IT
service that align with company strategy.
1.4 Research methodology
Desk research was used to get overview of the market. Desk research was also
used to form service objectives and to get some input for business analysis.
Sources of Data came from company internal system, some statistical magazines
and web sites.
A survey was conducted in order to study what customers have. A list of questions
was sent to management boards of customers’ companies. The questions focused
to customer infrastructure, software, IT services, IT people and IT expenses. The
survey result also was useful in business analysis.
Focus meeting was used several times in the projects. One meeting was
organized to screen the ideas from idea generation processes. Other one was
used to develop and test the concepts with customer. Focus meeting was also
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used during the service design phase. Some key users from customers joined the
design team and actively participated as they were in actual processes. Output of
the design must be accepted by both design team and customer users.
1.5 Organization of the project
Chapter 1: Introduction
This chapter identifies the project rationale, the project objectives and
methodology of the project.
Chapter 2: Literature review
This chapter explains the model of Scheuing Eberhard E. and Johnson, Eugene
M., (in 1989). Shostack theory of service blueprinting or service design was
discussed more here. Some other studies using the same model are also
introduced. At the end of the chapter the new IT service model for ViNPT is

described.
Chapter 3: IT service market and company profile
The first part of the chapter briefs the market region of Di An and Thuan An town
then the IT service and the competition in that area is explored. The second part of
the chapter gives readers some information of ViNPT company, the issue that
company is facing and the opportunity that company has chance to take.
Chapter 4: New IT service development
This chapter describes the whole IT development model for ViNPT that includes
seven steps from new service objectives to marketing program design. This
chapter is the core of the final thesis.
Chapter 5: Recommendation & Conclusion
The most important item of this chapter is the conclusion to summary all points of
the project. Then the advantages, the disadvantages are commented by the writer.
Finally some necessary improvements are suggested for future researches and
studies.

4

Chapter 2: Literature Review
2.1 Normative model of new service development
The new service development model of this thesis is based the model of Scheuing
Eberhard E. and Johnson, Eugene M., 1989.
The model of new service development is characterized by a 15-step sequence of
activities. The model highlights key influences during the development process,
both from the company and from its environment.

5

Figure 2-1 New Service Development

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2.2 New service development model
For purpose of explanation, the steps have been grouped into four stages:
direction, design, testing and introduction.
2.2.1 Direction
At the outset of the new service development process, senior management must
chart the course of this effort and give it clear direction. This stage includes three
individual steps: the formulation of new service objectives and strategy, idea
generation, and idea screening.
Step 1: Formulation of new service objectives and strategy
Driven by a sense of urgency and a perceived need for the “quick fix,” many
service firms jump right into idea generation. Doing this is akin to lifting anchor
without first determining the desired destination. The course of the ship then
becomes the result of whim and happenstance.
In contrast, a well-conceived and carefully implemented new service development
process begins with a precise formulation of new service objectives and strategy
governing the effort. It is the outgrowth of the firm’s marketing objectives which, in
turn, are derived from corporate objectives and the basic mission of the business.
As a result, a well-designed new strategy drives and directs the entire service
innovation effort and imbues it with effectiveness and efficiency.
Four major new service strategy options are shown in table below. The first, a
share building strategy, aims to sell more existing services to current buyers. It is
often implemented in the form of a newly found aggressiveness in style, such as
discount pricing, which results, for instance, in “accounting wars” or discount
airfares. Market extension offers existing service to market segments not
previously served by a service firm. Under line extension strategy, a service firm
attempts to market new service to existing buyers. This approach is common in

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mature service industry and involves leveraging a valuable assets, namely the
current customer base.
Table 2-1: Four new service strategy options
Markets

Offerings
Existing buyers New buyers
Existing services Share building Market extension
New services Line extension New business

The final option, a new business strategy, is by far the riskiest alternative because
it involves by entering uncharted territory where the company cannot capitalize on
any existing strength.
Step 2: Idea Generation
While new service Idea Generation can draw on a number of external sources for
inspiration. Suppliers of products or services, agents, competitors and service
buyers are valuable input sources. Internal search, consultation and the
brainstorming can also significantly add to the idea pool.
Step 3: Idea Screening
The “Raw” ideas have to be subject to first, and relatively crude, sorting procedure
that separates the more promising from the less meritorious ideas. Although this
preliminary idea screening tends to be largely judgmental in nature care should be
taken not to reject an idea out of hand because it is unusual. Although Feasibility &
profitability are the key consideration at this point but other factors may play a role,
depending upon the circumstances.
2.2.2 Design
Step 4 to 11 in the model comprise the design stage. They involve designing and
refining a new service as well as its delivery system and marketing program.

8

Step 4: Concept Development
In concept development, the surviving ideas are expanded into full-fledged
concepts with the help of input from prospects and the company’s own customer
contact personnel. The concept is a description of a potential new service. A
typical concept statement would include a description of a problem that a prospect
might experience, the reason why the new service is to be offered, an outline of its
features and benefits, and the rationale for its purchase.
Step 5: Concept Testing
Buyers’ responses to the service concepts are examined during concept testing. A
concept test of a new service is a research technique designed to evaluate
whether a prospective user:
• understands the idea of the proposed service
• reacts favorably to it
• feels it offers benefits that answer unmet needs.
This research steps help eliminate ideas that find little buyer interest while it
simultaneously assists in shaping the features and benefit bundles of attractive
concepts.
Step 6: Business Analysis
Just for few service proposals that have successfully passed prior checkpoint,
business analysis represents a comprehensive scrutiny of the business
implications of each concept. This step encompasses both a complete market
assessment and the drafting of a budget for the development and introduction of
each proposed new service. The purpose is to develop recommendation to top
management concerning with new service ideas should be implemented.
Step 7: Project Authorization
A crucial decision point occurs at this step when top management commits
corporate resources to the implementation of a new service idea.
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Step 8: Service Design and Testing
What follows is the conversion of the new service concept into an operational
entity. This requires first the development of the operational details of the service
itself – an activity should involve both the input of prospective users and the active
cooperation of operations personnel who will ultimately be delivering it.
Step 9: Process and System Design and Testing
Intimately interwoven with the design of service is the design of its delivery
process and system. All of these components have to be developed and test in
concert. The delivery mechanism that is very much part of the nature of the
service itself has to be installed, refined and debugged in order to ensure smooth
delivery upon introduction.
Step 10: Marketing Program Design and Testing
The introductory marketing program has to be formulated and testes in conjunction
with prospective users.
Step 11: Personal Training
All employees have to be familiarized with the nature and operational details of the
new service.
2.2.3 Testing
Step 12: Service Testing and Pilot Run
Service testing is used to determine potential customers’ acceptance of the new
service while Pilot run ensures its smoothly functioning. This step build on
knowledge and insights gained during the concept testing step earlier in the
development process. The goal is to make any necessary refinements to the
service and its marketing mix as a result of customers’ reactions to the service
offer.
Step 13: Test Marketing
Test marketing examines the salability of the new service and field tests its
marketing program in a few branches of the firm or a limited sample of customers.
In addition to testing further the market reaction to a service, test marketing allows

10

management to evaluate alternative marketing mix options. Completion of test
marketing is followed by a review and final changes in the marketing effort
2.2.4 Introduction
Step 14: Full-scale launch
With the delivery system and marketing program in place and thoroughly tested.
The company now initiates the full-scale launch of the new service, introducing it
to its entire market area.
Step 15: Post-Launch Review
This step is aimed at determining whether the new service objectives are being
achieved or whether adjustments are called for. Even after all aspects of the new
service and its marketing mix are carefully testes, market conditions may require
further modification
2.3 Service blueprinting
A special kind of flow-chart is called service blueprint, which also includes the line
of visibility, between customers and service provider. In other words, in service
blueprinting, the line of visibility separates activities of the front office, where
customers obtain tangible evidence of the service, from those of the back office,
which is out of the customers’ view.
The high and low contact parts of the service delivery process are kept physically
separate, but they remain linked by communications. This separation highlights
the need to give special attention to operations above the line of visibility, where
customer perceptions of the service’s effectiveness are formed. Designing an
efficient process is the goal of the back office, but the back office operations have
an indirect effect on the customer because of delays and errors. The blueprinting
exercise also gives managers the opportunity to identify potential fail points and to
design foolproof (Poka-Yoke is the term borrowed from Japan) procedures to
avoid their occurrence, thus ensuring the delivery of high quality service
(Fitzsimmons and Fitzsimmons, 1999).

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A process chart gives a more detailed breakdown of the process into tasks, and it
classifies each activity as being either a processing operation, a movement, an
inspection, a delay, or a storage. All those charts can be based on an existing
process for a redesign or a tentative design for a new process (Martinich, 1997).
Service blueprinting is chosen as the most popular and useful tool for service
operations analysis. This type of analysis not only can lead to the elimination of
tasks, reduction movements, and simplification of work, but it can also help to
identify opportunities to create work cells or to use more efficient flow processing
for some set of activities. This tool also provides an excellent communication
device for visualizing and understanding the service operation. Shostack (1984;
1987) was the one who first suggested service blue printing for service process
analysis. He showed how the service process could be modified by using service
blueprinting for a typical shoe repair service and a discount brokerage service. He
proposed a four steps approach for designing a blueprint as:
1. Identifying processes of service delivery and present them in a
diagrammatic form. The level of details will depend on the complexity and
nature of the service.
2. Identify the fail points. These are stages where things might go wrong. The
actions necessary to correct these must be determined, and systems and
procedures developed to reduce the likelihood of them occurring in the first
instance.
3. Establishing time frame. Set standards against which the performance of
the various steps might be measured. Frequently, this is the time taken.
4. Analyzing the profitability of the service delivered, in terms of the number of
customers served during a period of time.
He also defined a list of benefits about using service blueprinting, while a more
completed list of benefits is given by Martinich (1997) as follows:
1. The visual representation makes it easier to determine which activities are

truly necessary, which can be deleted, and which can be modified.
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2. Customer contact points are clearly identified. This helps to point out
activities that can be performed separately and where opportunities for co
processing of activities exist.
3. Likely service failure points are identified. This is helpful in developing plans
to minimize the chance of a failure and in identifying possible corrective
actions, if failure does occur.
4. The service blueprint is an excellent tool for training workers. They can see
what activities must be performed and how; where failures are most likely to
occur and how to prevent and correct them.
5. The blueprint is useful for identifying the equipment and materials needed
and how the service facilities should be spatially arranged to facilitate the
services.
6. Service blueprints can be reconstructed regularly and used to evaluate and
improve the service system over time, especially as new technologies
become available and the services provided by the system change or
expand.

Lovelock and Van der Merwe (1999) showed the application of service blueprinting
in a hotel visit, a bank service, and a florist service. Their blueprints were not so
completed and only addressed the flow of materials and service packages. Other
researchers like Lovelock and Van der Merwe (1999), Meredith (1992), Noori and
Radford (1995), Melnyk and Denzler (1996), Hope and Muhlemann (1997), Chase
et al.(1998), and Haksever (2000) used service blueprinting in a very simple form
and less useful. More completed forms of service blueprinting applications can be
obtained from Martinich (1997), who described the use of blueprinting in a dry-
cleaning store, and Senior and Akehurst (1990), who developed a new approach,
called ‘perceptual blueprinting technique’. The latter technique was formulated

during a study of service quality in the UK roadside lodge sector using the
principles of ‘soft systems methodology’, ‘service blueprinting’, and ‘perceptual gap
analysis’. Their model involved three stages: (1) Mapping stage, (2) Questionnaire
stage, and (3) Analysis stage.
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Service blueprinting model from Martinich (1997) will be applied in this final thesis.
2.4 Other studies using the same model
Scheuing Eberhard E. and Johnson, Eugene M. service development model has
been using in many studies for many service industries.
Many studies using this model have been done on Financial Industry. One of them
was made by Patrick Vermeulen, Erasmus University, Rotterdam, The
Netherlands in 2004. His study used this model to develop a new cash transfer
service for some financial firms. The new cash transfer service must be faster and
more convenient for customers. Other study was made by Larry J. Menora and
Aleda V. Rothb, The University of Western Ontario, Canada in 2004. Their study
used this model to develop new loan service for retail banks. This loan service
should help the bank to get more customers.
In 2005, Patrik Gottfridsson, PhD in Business Administration Service Research
Center, Karlstad University of Sweden used this model to develop Public
Transport services in Sweden. The purpose of the study was to make public
transport more easily available for different group of travelers, including elderly
and disabled citizens.
In 2008, Munoz, Jairo, Carleton University, Canada, used this model to develop
new telecom service. The new telecom service must have some characteristic:
sales performance, cost performance, competitive performance, time to market
and development culture.
In 2010, Fredrick Nyongesa Oduori in University of Stellenbosch Business School,
South Africa used this model to develop some hospital services for some hospitals
in Kenya. The purpose of the study is to create standardized services aligned with

strategies of hospitals.
In 2010, Raija Komppula from University of Joensuu, Finland made a study on a
tourist company. The model was used to develop a special and competitive tourist
14

service for foreigners. The new service should be helped the company to gain
more visitors from other neighbor countries.
The studies showed that the model needed to improve. Depend on each industry
the model should be adapted to be aligned with natures of that industry. Some
steps may be skipped or should be more detailed. In the cases of a service is a
part of physical product then only one model should be applied. Some
organizations did not have clear strategy so forming objectives were difficult. In
that case the model could be changed a little. Timing was another factor that
cause impacted to the whole process. In order to do all steps one after one, the
team needed a lot of time but the company management could not wait. One of
proposed solutions was that two or more steps can do concurrently. However all
studies showed that with this new service development, the developed services
were more efficiency, effective and profitability.
2.5 Service Development Model for ViNPT
In order to modify a new model of IT service for ViNPT, some steps which are not
really relating to this study will be skipped while some steps are grouped based on
their similar characteristics. Below is a simple Service Development Model for
ViNPT with only seven steps.
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Figure 2-2: ViNPT New Service Development Process

In this model Concept Development and Concept Testing are grouped into one
step because they are two interactive activities in one process and will be done by
the same group of people. Project authorization will not be in this study because it

is just the administrative step. Service Design and Process Design are merged
into one step because they should be interactive each other. Changing in one
service component may lead to a change of some processes and on the contrary,
changing in one process will require other service components.