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Evaluate An Intermediary Based Business Model Information Technology Essay

Location Based Services (LBS) are information or entertainment services delivered to the mobile subscribers through mobile devices leveraging the current location of the user. The current position of the user is accessed utilizing the ability of mobile devices to find the geographical position of the mobile device (Virrantaus, et al., 2001). The idea of location querying using the current position of mobile devices has been introduced by Imielinski and Badrinath in 1992 (Imielinski & Badrinath, 1992) which lead to the need of LBS. The US ruling which required network operators to provide public emergency services to mobile subscribers by locating mobile phone users within 125 meters (Prasad, 2006) and E911 mandate were the principal driver for LBS in the early 2000. Later, proliferation of smartphones, advancements in communication and positioning technologies fueled the imagination of LBS among mobile users (Shukla & Magon, 2010).

Even though, LBS was predicted to become the ‘killer application’ of mobile business, the growth in the LBS market has not been spectacular in the past (Juglas & Watson, 2008).The LBS, after a difficult period finally started taking off now; providers are trying to maximize their revenue, but unproven business model in the LBS market has been one of the major challenges for them. According to the Juniper Report (Juniper, 2010), the global MLBS market is forecasted to propel LBS market revenues through to over $12.7 billion by 2014 (Refer Appendix 2).

According to Mennecke & Strader (2003), LBS is one of the few areas where users would be willing to pay a premium for usage. Location based Personal Navigation Services provided by Tomtom and Garmin which charged user a premium became big hit in consumer market. The selling price for LBS applications is roughly 180% of industry average of mobile applications (marketingchart, 2010). But things have changed with the ‘free’ navigation service offerings by Google and Nokia (cnet, 2010). According to Ankeny (Ankeny, 2010), 81% of the apps downloaded from the Apple’s app store now are for free use. This diverted the focus of most of the developers and app providers from a paid model to ‘free’ mobile LBS services relying on advertising based business model for generating revenue. As per Gartner report (Gartner, 2009), the share of users taking advantage of free services is approximately 10-15 per cent in North America and Western Europe today and is expected to grow to 40-50 per cent in 2013. According to Pinch media (TechcruchKincaid, 2009), “advertising on free applications simply can’t match the payoff from even the least expensive ‘paid’ applications”. But Adwhirl, an advertising platform provider and subsidiary of Google defends this argument by saying that an application which offer value to the consumers earns $400-500 a day (TechcruchKincaid, 2009). Even though this topic is debatable, it is clear that the revenue generation stream for mobile location based services are broadly divided between applications downloads and advertisement. But both these revenue model failed to generate reasonable revenue for most of the startups or individual developers. This stimulated the thought of smart entrepreneurs to look for a more reliable third revenue stream apart from application download and advertisement revenue in order to make their business model profitable and sustainable. m-Commerce, NFC, etc have opened up opportunities for generating a third revenue stream in LBS market.

The search for an extra revenue source resulted in developers to think about building relationship with businesses and the emergence of two sided intermediary business model instead of the traditional one sided business models like B2B and B2C models prevailing in the LBS industry. Most of the incumbent LBS players like Foursquare started diverting their attention by focusing on B2B side of the business for creating a third revenue stream. Of late, companies started getting the pay off from this model by retaining their dominance in the value network by not leaving the interaction with customers. Foursquare’s experiment with a local business dashboard is a sign of this (thenextweb, 2010). Business model of Shopkick, mobile application which rewards and offers mobile users simply for walking into stores (Shopkick, 2010) and Navteq Media Solution’s mobile advertising platform (Navteq, 2010) are examples of increasing business interactions in the consumer LBS market. There is an increasing focus on Business to Business interaction in the LBS market using intermediary model and this report intends to provide an insight on this.

Research Methodology

This report mainly discusses about different aspects of LBS market based on the qualitative research conducted using different techniques. Cresswell (1994) considered qualitative research as the process of inquiring and understanding of a social or human problem, based on building a complex, holistic picture, formed with words, reporting detailed views of informants, and conducted in a natural setting. Myers (2000) stated that the greatest strengths of qualitative research are the richness and depth of explorations and descriptions. Qualitative method produce information based on particular case studies, and provides informative guesses which are then verified using quantitative methods.

In this research, different methods are used for information assembling and both primary and secondary data collection techniques are used in the process. Hair et al., (2003) and Saunders et al. (2000) state that Secondary data are data that have been collected for some other research purpose. These data are considered to be existing data and used as a comparative tool between existing data and new data for the purpose of studying the differences and trends (Stewart and Kamins, 1992). But in this research, secondary data are collected from latest blogs and news articles and provides latest market data instead of providing existing research data. The following are some of the most important methods used in this research

Interviews & Brainstorming sessions: The information especially the concerns of entrepreneurs regarding a third revenue source, about advertising and paid revenue model, etc are consolidated based on the interviews and brainstorming sessions with our internship client Inndie Intelligent Networks owner.

Questionnaires: In order to identify the research problem, the attitude of customers towards paid LBS apps and towards advertising in mobile apps was very important. This information’s were interpreted from the online survey results conducted as a part of the MBA management project.

Market Research Report: The information regarding the market forecast, major revenue streams and their total revenue contributions, etc were collected from the online LBS market research reports published by companies like Juniper Research, Gartner, First Partner, Ptolemus, ABI Research, Research & Markets, etc.

Academic Journals: An understanding of B2B, B2C market, different business models, revenue models, LBS value network, etc was required to perform the qualitative analysis and this information are collected from journal articles and books.

News Articles and Blogs: One of the most important challenges for the research was to collate recent and relevant data. Not many academic articles provide current LBS market insight which was very important to perform this research. This is the major source of data in this research and the interpretations were based opinion collected from different blogs and news articles published after 2008. Blogs and news articles published after 2008 for particular topics were found initially. Then, the authors profile was evaluated in order to authenticate the credibility of data and data from developers, customer reviews, well-known technology news sites like cnet.com, techcrunch.com were preferred over other data sources. Opinion of different authors were collected and interpreted rather than relying more on particular authors. Thousands of blogs and articles were referred and the Appendix 3 shows a list of some of the blogs used for the research.

Case Studies: Different case studies were considered in order to understand the financial performance, operations and business model of successful LBS companies and research basically relied on the information from the company website and other online sources.

Trends in LBS business models

Business model provides a “description of the roles and relationships of a company, its customer, partners and suppliers, as well as the flows of goods, information and money between these parties and the main benefits for those involved, in particular, but not exclusively the customer” (Bouwman et al, 2008). Osterwalder (Osterwalder, Pigneur, & Tucci, 2005) describes a business model using four pillars: Product, Customer Interface, Infrastructure management and financial aspects. Based on these pillars he identified nine building blocks (as shown in the table below) to describe a formal, comprehensive business model: core capabilities, partner network, value configuration, value proposition, customer relationship, distribution channel, target customer, cost structure, and revenue streams based on four pillars of business model.

Table 1: Nine Building blocks of a Business Model

According to David H. Williams, CEO of E911-LBS Consulting, (Williams D. H., 2007) the under estimated performance of the LBS apps in the past has been notably due to the poorly identified business opportunity, inadequate value proposition, inflexible business model and deficient marketing. Even though LBS is considered to be the next big thing, most of existing applications is serving the need of innovator crowd and lacks long term business focus (Mobilein, 2010). Most of the existing business models focus mainly on product and consumer interface of the business model and mainly depend on the revenue from advertisement and application downloads. According to our research, there is an increasing focus on the value proposition using service innovations and distribution channel since most of the business models relies on the volume of users and user engagement of the application in order to maximize their revenue.

Location Based services are growing in popularity among consumers due to the advancements in positioning technology and proliferation of smartphones. Most of the entrepreneurs focus on the service innovation and capturing the LBS market share by bundling different services and offering a unique value proposition for their consumers. Focusing only on product or service innovation cannot provide a sustainable competitive advantage for startup app providers, since incumbent players can easily imitate the value proposition. According to Barney (Barney, 1995), sustainable competitive advantage can only be gained if the resources are valuable, rare and inimitable. Sustainable competitive advantage anticipates a more intimate integration of the organizational and the economic factors.

LBS industry has seen an increasing popularity of the use of distribution channel by partnering with network operators, device manufacturers and app store as shown in the figure below. Business model of Route 66 partnering with Samsung and Where which provided pre-installed apps distributed through a number of US network operators such as AT&T and Sprint are perfect example of increasing focus on distribution channel. In the White label business model (thenextweb, 2010), consumer apps are sold to the enterprise clients. Enterprise’s sells this application to the customers through their customer base. McDonald’s LBS application released in Finland using Navteq solutions which delivered location-relevant mobile ads to users when they were within five miles is an example for this model (NavteqPressrelease, 2010).

Figure 1: LBS consumer interactions

All these business models show an increasing focus on volume of users and creating a community of consumers. This clearly shows a volume based strategy with increasing focus on the consumer side of the business. Most of these services focus on a limited number of sellers, i.e businesses by focusing mainly on a particular mobile ad network. Even though focus on value proposition and consumer interface is very important in consumer LBS, focusing on the demand side of the business is also important to form a sustainable business model. According to Bouwman et al (2008), a sustainable business model should focus on creating value to customers and also to different value network partners by building an ecosystem. Ian Koeppel, Business Development Manager of ESRI (Gomonews, 2010), pointed out that the “navigation and location ecosystem is well suited to partnerships, especially as web-based GIS is emerging as a shared platform which can support new partnerships and business models, including businesses, governments, consumers and academia”. An intermediary model which will allows building a community of buyers and sellers with Any to Any transaction (A2A) would be more viable business model for startups.

Intermediary Model

LBS market players started focusing on both supply and demand side in order to have a sustainable business strategy. The business model and recent developments in the LBS market triggered by Foursquare, Yelp, etc clearly justifies this trend. According to Mahadeva (Mahadevan, 2000) n, these players are called as ‘market makers’ in the internet space and here I call these kind of business model which focus on both supply and demand side of the value chain as an ‘intermediary’ business model. An intermediary provider acts as a middleman between customers and businesses focusing on both sides of the business equally by building a community of buyers and sellers, as shown in the figure below. Intermediaries invariably participate in a variety of ways to facilitate the business transaction that takes place between the buyer and the supplier and endeavors to provide value to suppliers and customers through a system of implicit or explicit guarantee of security and trust in the business transaction (Mahadevan, 2000). The extensive connectivity offered by mobile internet creates value by lowering communication and search costs using Any to Any (A2A) transactions and maintaining long-term relationships with preferred suppliers (Dai & Kauffman, 2001).

Figure 2: Intermediary Model

An intermediary business takes care of three major market functions: matching demand and supply, facilitating transactions and providing institutional infrastructures (Bakos, 1998). As intermediaries, B2B also fulfill the tasks of aggregating product information and discovering price (Bailey and Bakos, 1997), and providing procurement and industry-specific expertise. The function of an intermediary business is shown in the figure below.

Figure 3: Intermediary market Functions

Aggregating function collects and compiles suppliers in order to reduce search cost for the buyers. Matching function provides dynamic pricing and negotiating mechanisms such as exchanges and auctions and Facilitation function include support for logistics and financial payments (Dai & Kauffman, 2001). LBS market has observed an increasing number of businesses using all these functions and the following are some of the intermediary model observed in the consumer LBS market.

Aggregation Model: is a model similar to E-mall business model adopted from Timmer’s eleven e-commerce business models. This business model consists of a collection of suppliers and specializes on a certain market segment (Timmers, 1998). Revenue is generated from the membership fee, advertising and transaction fee. Yipit is a company which uses this kind of a business model by aggregating deals from different stores and providing it to the customers based on location. Yipit aggregates and recommends the best daily deals in user’s city based on their preferences. Yipit collects daily deals from around 130 suppliers including LivingSocial, Scoop St, Tippr (Yipit, 2010). Yipit’s location based services don’t offer mobile apps yet, but the services are currently delivered through website and through foursquare app (nytimes, 2010). Groupon and City Deal are other most promising providers in this space. This LBS provider aggregates offers from different local businesses by offering them volume guarantee. Customers are benefited from the lower search cost and transaction fee.

Matching Model: consists of a collection of E-Shops and specialize on a certain market segment. Revenue is generated from the membership fee, advertising and transaction fee. This model adopted from Timmer’s e-Auction business model which is used by some LBS providers by implementing bidding based on location (Timmers, 1998). Taxipal is an example which makes taxis competes for their business, where the customer can choose between prices versus how quickly the taxi arrives to their location. It is the first multi-language taxi ordering and brokering service, running on all popular device platforms, initially with EU coverage that will change how taxis are ordered (Taxipal, 2010). TaxiPal also includes an extensive database of local businesses, tourist attractions and other Points of Interest (POI) in Europe. Taxipal provides value for the taxi companies to get more clients, be more reachable, improve service quality and provides a low cost marketing channel. Customers are benefitted by saving money on their daily travel especially when they are out of their own city by offering them genuine deal by paying only for the service provided (Taxipal, 2010).

Facilitation Model: This model is used to facilitate the transaction between buyers and sellers in LBS application by providing support to the function other ways conducted in a traditional way. Revenue is generated from membership fee, advertising and transaction fee. Fandango which helps users to find movies, find theaters, and buy tickets is a perfect example of this model. Fandango is connected to around 16,000 screens including Carmike Cinemas, Century Theatres, Hollywood Theatres and entertains and informs consumers with exclusive film clips, trailers, celebrity interviews, fan reviews and news, while offering them the ability to quickly select a film and conveniently buy tickets in advance using paperless ticketing (Fandango, 2010). 2D barcode or QR code is used for paperless ticketing by Fandango. This facilitates the traditional ticketing channel to reduce operating cost by adopting a green solution. With the advancement in Near Field Communication (NFC) technology there is a business opportunity for payment based service by replacing existing paper based system.

In LBS market, an intermediary uses all these market functions and the success of the business model depends on how these functions complement each other. The business model should create value for the partners involved in all these functions in order to be sustainable. Cellfire business model is an interesting case in this respect.

Cellfire Case Study

Cellfire is a US based location based mobile coupon and discount offer service provider that allows customers to access deals from different brand-name merchant through their mobile phone. Cellfire connects brands to shoppers using digital coupons which enable on-the-go shoppers access offers via mobile applications, mobile web, and text messaging (Cellfireinfo, 2010). Cellfire delivers their services to consumers free of cost through mobile network, website and digital TV (from Verizon FiOS TV service).

Consumer manufacturers and retailers across the US uses Cellfire’s distribution network to increase sales and expand shopper engagement (Cellfireinfo, 2010). Cellfire client base includes Hollywood Video, Enterprise Rent A Car, Sears Portrait Studio, McDonald, aco Bueno, Hardee's, Wiener Schnitzel, Extreme Pita, Supercuts, etc (Figure 3 shows Cellfire’s retail partners and coverage in US) (CellfireMediakit, 2010). Fast food giant McDonald's Corp. used mobile coupons in parts of the western United States timed with the launch of its new iced coffee beverage using Cellfire mobile application (qsrmagazine, 2008). Hollywood Video, a business partner of Cellfire reels in 25% more new customers’ through their Cellfire mobile coupon campaign (HollywoodVideoCase, 2010). In 2010 June, Cellfire Inc. launched QMobile Coupons, the first electronic coupon syndication platform for mobile application developers and brands to provide valuable grocery coupon offers to the rapidly expanding mobile audience (Qmobile, 2010).

Figure 4: Cellfire Business partners

Cellfire acts as an intermediary in the couponing system for retailers and other stores by providing them a distribution channel and other services through mobile phone platform. The figure below shows the intermediary role of Cellfire in the mobile couponing

Figure 5: Cellfire Intermediary Model

Cellfire aggregates deals from many retailers, restaurants, etc and provides to the end-users. They also replace the traditional paper couponing with the help of QR code and innovative mobile coupons which delivers coupon to the end-user based on their preference. Cellfire also facilitate the monetization of mobile apps for developers by providing them a mobile couponing based advertising platform. The business model of Cellfire is attractive since they focused on creating value to all the value network players involved in their business ecosystem. The following are the value that Cellfire offers to different partners.

Value for Customers: Cellfire create value to their customers by helping them to find deals and discount offers near to place where they live, store the deal on their mobile phone and save their every day shopping by just displaying the coupon on their mobile phone to the shop keeper (Cellfireinfo, 2010). This helps the customers to save money on their daily shopping by providing them free downloadable apps which can be accessed through apps stores and mobile operators. Users of Cellfire mobile coupon solution can take advantage of multiple redemption options including ‘Click-to-Call’ and ‘Display and Pay’ from different suppliers (Cellfirepaperlessticketing, 2010).

Value for advertisers: Cellfire create value for their business partners by providing them marketing and advertising services through their mobile coupon services. They create value to their partners by helping them through targeted distribution; master the mobile medium, providing totally green solution, completely secure and fast Implementation (Cellfireinfo, 2010). They also offer value added services by providing campaigning report analytics to their partners. The performance-based fee structure of Cellfire also ensures that its retailer partners achieve high returns on investment.

Value for developers: With their QMobile coupon services, Cellfire create additional value to developers by providing them an extra revenue source to monetize their apps.

Value for Carriers: Cellfire create value for the operators by introducing a value added service for their customers, providing extra source of revenue and by promoting the data service usage.

From the analysis, we feel that the following are the major success factor of Cellfire business model which is a typical intermediary model.

Retention of network dominance by interacting directly with clients

Openness of network which allows many sellers to partner with Cellfire

Consumer focus and use of multiple distribution channel including partnership with network operators

Attempt to replace a traditional couponing system

Focus on creating value to the value network

Key Challenges for Intermediary Business Model

From our research, we have identified that the major challenge for an intermediary model would be to identify an opportunity to create value to traditional and online businesses. According to Mahadevan (Mahadevan, 2000), building a community of suppliers and customers would be the major emphasis of intermediary to be sustainable and offers the following value stream to its partners and customers.

Table 2: Intermediary Model Value Streams

Value Stream

Description

Virtual Communities

Bring together people with similar interest and openness to join; introduced high switching cost

Dramatic reduction in transaction costs

Reduced the search cost dramatically for both the buyers and sellers due to network externalities

Gainful exploitation of information asymmetry

Bring the value for money (Price-Quality) to an efficient combination by making information publically available and encouraging healthy competition

Value added market making process

Provide a secured way of exchange between buyers and sellers

Value Creation in B2B: According to Ominique Bonte, analyst and practice director in the Telematics and navigation division of ABI Research, “the business uses for consumer location-based apps have to involve something more than beaming notices of free lattes or discounted items as users drive by a strip shopping center” (ecommercetimes, 2010). Following are some of the major value that a partner will be looking forward in a B2B relationship (IBM B2B 2.0, 2010)

Improving operational management efficiencies by automating and streamlining business processes: A mobile apps intermediary or middlemen can help companies to replace their manual business processing with automated processing in a mobile platform. Barcode scanning, fleet positioning are some of the attractive services available currently. In order to improve operational efficiency of businesses, an LBS provider needs to understand the importance of location for a particular business or industry.

Optimizing sales and marketing effectiveness: Buyer centric marketing and advertising can help companies to target specific users based on their earlier purchase history and improve the conversion rate from advertising. Mobile advertising has got wide reach with most of the users currently using these services using basic, featured or smart phones. This capability of a mobile intermediary with LBS adding the context awareness to it can help businesses to generate more revenue with the same budget.

Strengthening customer satisfaction and relationship: LBS intermediary also has the potential to improve user experience and build customer loyalty and satisfaction by building a sustainable user community. Web 2.O technology enables rich user interaction and can significantly improve the user engagement.

Level of Openness of the Network: indicates the degree to which new business actors can join the value network and are allowed to provide services to customers, according to other partners within the network (Bouwman, De Vos, & Haaker, 2008). Generally, two different organizational arrangements exist: the closed model in which a relatively fixed consortium of partners collaborate, and the walled garden model in which new partners are able to join the value network if they comply to certain rules (Reuver, Bouwman, & Haaker, 2008). An open network may add more value to the consumers, but might result in immense competition between the partners. A closed network may not be able to maximize the value consumers expect. A sustainable business model will not only allow more businesses to join, but also ensure partner retention by delivering quality services. The business model of Shopkick is more sustainable since the hardware solution installed in the stores ensures a longer relationship.

Intermediary network usually has a small number of suppliers and does not function like a pure market. This is because an individual supplier’s benefit decreases when there are more suppliers participating in the network (Riggins, Kriebel and Mukhopadhyay, 1994). Furthermore, as the network size increases, the bargaining power of each individual firm in the network decreases and in turn, individual incentives to make non-contractible investments decrease (Bakos and Brynjolfsson, 1993). According to Mahadevan (Mahadevan, 2000), network openness needs to be designed in order to compliment value creation in both buyer and seller side. Creating value to the customers and the business partners is the major challenge for intermediary. The figure below shows how value is created in the network with more suppliers and customers joining the community.

Figure 6: Network Openness in Intermediary Model

Building relationship and Revenue Model: Attracting businesses to partner and identifying a revenue model that can attract many sellers or business partners is another major success factor of intermediary model. A sponsorship model is increasingly becoming popular nowadays (thenextweb, 2010). In this model, businesses receive basic services for free and premium service which gives them additional features and better reach ability to customers are provided with some additional charge. Google maps use this kind of a service in their local business search by giving priority to sponsored businesses and listing them first in the search result. According to Mahadevan (Mahadevan, 2000), a free service offering based model can be more sustainable by creating more awareness in the market initially and help the company to build a community. Company can then generate revenue from additional revenue stream and through advertisement once the community is established. This model can be used to generate revenue from both the sides, from suppliers and buyers by providing them premium services as shown in the figure,

Figure 7: Sponsorship Model

Conclusion

Mobile is about people and hence mobile based application should focus on improving user experience in order to be successful (Gomonews, 2010). Entrepreneurs are focusing on service innovation and bundling to differentiate and deliver unique value proposition to customers. For a startup to gain competitive advantage in highly competitive and attractive market, they will have to give equal importance to the supply and demand side of the business. An intermediary business model like market place in e-business, is increasingly becoming popular by promoting Any to Any transaction between buyers and sellers. LBS application providers aggregate, match and facilitate the sellers business in different ways. In order to ensure a sustainable revenue stream, startups may have to create value to the traditional businesses by offering services that can reduce their operating cost, improve customer satisfaction or improve their revenue instead of only focusing only on providing marketing and advertising solutions. App providers will also have to determine the optimal openness of their value network in order to provide long term benefit to businesses and to their customers. Use of a sponsorship based revenue model can attract more sellers into the system and would be more sustainable to startups.

Appendices

Appendix 1: Initial Management Project Proposal

TITLE

The proposed title of my MBA management project is “Feasibility study for the technical and financial aspects of implementing a real time multi modal public transport planning and navigation application”. The project revolves around three major areas - consulting in Information Technology especially in cloud computing (IT), project management and building strategy. Having had around 4 years of IT experience in different Information technology domains and technology and in ERP consulting prior to MBA, I developed an interest towards technology based companies and was keen to explore the recent developments in internet based businesses and the vast opportunities offered by web as a platform for businesses. I strongly believe that this MBA management project which is based on developing an internet based services would definitely help me to understand and provide me more opportunity to research on recent advancements in internet and IT like “cloud computing”. I think this project demands for a good understanding of Information technology, consulting experience, a fair understanding of financial analysis and project management skills. My professional experience exposed me to IT consulting and provided me a strong understanding about the importance of IT/IS in any business. I also have experience in project management and got the opportunity to involve in different phases of software development life cycle (SDLC) which will help me to look into the technical aspects of this project. Furthermore, the project would also require the ability to perform market research and find information that best suits the project requirement. MBA course has equipped to attain these skills and also the financial understanding required to complete this project. MBA modules like Business Information System and Management Consulting equipped me with the management skills required for an IT consultant especially in the area of cloud consulting. After MBA, I wanted pursue a career in Cloud consulting helping small and medium sized companies to reduce the cost for the business and improve the efficiency of Information systems.

By this Internship, I wanted to understand the requirements of using cloud architecture for innovative technology based SMEs and I consider this internship as a stepping stone to a cloud consulting career.

INTRODUCTION

There has been an enormous growth in the smart phones and other hand held devices recently. Apart from being connected with other individuals anytime, these mobile devices tend to give the users more flexibility in performing their tasks easily such as web browsing, emails, weather updates, day planning & scheduling. Having all these benefits, there is an expected increase in use of smart phones to 38 percent by 2013 (Diaz, 2009). Location-based services (LBS) were predicted to become the “killer application” of mobile commerce; their dominance has not yet materialized but is predicted to exponentially increase in the near future (Junglas & Watson, 2008). Gartner predicts that advertising-based or ‘free’ LBS (disregarding data charges by mobile carriers) will gain more traction as users adopt it as a way to limit costs. In North America and Western Europe, the share of users taking advantage of these services is approximately 10-15 per cent today and is expected to grow to 40-50 per cent in 2013 (Gartner, 2010). More and more innovative technology based small and medium sized enterprises are now researching on location based mobile applications making use of different web services to release attractive and user friendly applications into the market and generate revenue using different internet based business model. The major challenges of these SMEs are to build an application within a strict financial budget and to manage the implementation collating the existing information in the internet. In order to tackle these changes different companies are seeking the help from expert Information Technology and Cloud Computing consultants. This report aims to provide a brief about the MBA management project undertaken by Jasneet Juneja and Prijith Vijayan providing IT consulting service for a start-up company ‘Inndie Intelligent Networks’ in implementing a real time multi modal public transport planning and navigation application. I will be mainly focusing on the scope of internet based businesses and utilizing a cloud computing platform for the implementation of the application.

INTERNSHIP DESCRIPTION

The project is undertaken for Inndie Intelligent Networks which was founded in early 2010 by two Nottingham University MBA alumni’s. The business, located in the Nottingham Geospatial Building within the Nottingham University Innovation Park, focuses on technology consultancy, brokering, commercialization, and development. The company is currently planning to launch an Internet and mobile-based service for the road transport sector to improve vehicle utilization and scheduling whilst reducing waste and CO2emissions. Inndie Intelligent Network’s LBS application intends to provide users with real time information about public transport services in their locality. The product is planned to launch in East Midlands with the intention to provide revolutionary changes in the way users use public transport services for travel planning and tracking using mobile devices.

The company is currently looking for IT consultants to conduct research on the technical feasibility of the project; cost involved with the implementation of the product and advices on an appropriate business model for maximizing the revenue generated by the product. The internship was being offered to conduct a feasibility study for the technical and financial aspects of implementing this real time multi modal public transport planning and navigation application. The project deals with preparing feasibility study report for the potential stakeholders of the product. The feasibility study will include looking into an appropriate internet based revenue model, identifying the most feasible mobile platform for the application, designing a cloud computing platform for the application which will enable Inndie to scale the capacity as and when required and reduce cost of the application development.

Due to the confidentiality of the information, we have signed a non disclosure agreement (NDA) with the client stating that the output of market research or the information in the feasibility study report will not be shared with any externals. The MBA management project report will primarily contain the research methodology, recommendations and market research reports; but any client specific information will be excluded from the final report.

PROJECT SCOPE

The project deals with preparing feasibility study report for the potential stakeholders of the product and preparing a MBA management project report. The project will involve eight weeks of extensive research in the following areas:

Business strategy: Review the business strategy for the product and suggest changes based on the market research and information gathered from different stakeholders.

Market research for LBS: Conduct extensive market research on the mobile phone usage and location based services in UK market especially in the Midlands. Identify most suitable mobile platform like android, windows, iphone, etc for building the application.

Business model: Analyze the business model for revenue generation and suggest an appropriate revenue model which could be either based on advertisement or service/contract charges

Stakeholder Involvement: Work with Inndie Intelligent Networks management to help in identifying the stakeholders for the project in specific region and gather information and requirements from different stakeholders.

Technical aspects: will include conducting feasibility study to identify appropriate technical architecture which is cost efficient, environmental friendly, scalable, modular and easy to implement.

High level technical architecture: will include identifying an appropriate architecture which could be based on open source web services or by using other services from the internet based on the budget and expectation of the stakeholders.

Financial aspects: will include the expense and revenue forecasting of the entire project.

Development cost analysis: Will include identifying different services and calculating the investment cost for implementing the project which will include the cost of development and other related costs.

Operation cost analysis: will include the analysis of on-going cost including the service charges and maintenance costs. There will be research over many considerations such as how much cloud needs to be used for the volume of traffic and data transfer.

Revenue forecasting: will include a forecast of the expected revenue generation based on the business model.

Implementation project plan: will include a detailed project implementation plan including the time duration and resource requirements for each phase of software life cycle. This would include taking inputs from developers and technological companies regarding the implementation schedule and cost.

ACADEMIC LITERATURE REVIEW

Mobile LBS ‘‘aims to provide specific, targeted information to users based on each specific user’s location at any time’’ (Benson 2001). For identifying an appropriate LBS product strategy, different ways of monetizing location based services need to be analyzed and academic literature on internet based business model and strategies needs to be reviewed for this purpose. Location based advertisement and other areas like m-commerce may be explored in detail depending on the discussion with stakeholders and management.

LBS can only be provided through the integration of wireless communications and computing technologies, with ‘spatial elements’ such as positioning technologies and spatial data sets. Designing a technical architecture will include analyzing mobile communication protocols, geographical positioning and management of special data (Dao et al, 2002). Web services technologies are beginning to emerge as a defacto standard for integrating disparate applications and systems using open, XML-based standards. High level technical architecture will also include looking into the available web service-oriented architecture (SOA) and using cost efficient cloud computing services for platform for the development of the product and infrastructure which are scalable based on the traffic and further requirements. Web Services can be brought together in a consistent manner to provide a higher value service which requires us to look into the academic literature for web service orchestration (Peltz, 2003). We may also have to research on the available open source web services in the market utilizing Web 2.0 based design patterns (Oreilly, 2007).

In order to have a complete business plan and to justify the investment decision, the development cost, the estimated on-going expenses and revenue needs to be forecasted. This would require us to look into the different revenue and cost incurring streams and generate an approximate future cash flow statement.

Improper project management which includes poor planning, unclear requirements, changing objectives, etc are the reason for failure for most of the IT projects (Taimour, 2005) and using an adequate project planning for the implementation of the product is important for the success of this project. Identifying appropriate project management technique and for planning the implementation requires us to dig into the concepts of project management.

RESEARCH METHODOLOGY

The feasibility study will be performed in eight weeks that would cover the areas required to complete the project. The project begins with the general strategy for developing the product that would be based on the market trends and stakeholders expectation. Here, primarily research would be conducted through interviews with stakeholders and market data would be collected using different resources available online which are specific to the location identified. This information would involve market research about the business over the mobiles (M-commerce) and Location Based services (LBS) usage in UK market.

Once the requirement and platform of the application has been finalized, we would be looking into the high level architecture of the project based on the user requirements and allocated budget. Technical architecture information would primarily be collected from academic journals, internet articles and from the interview with technical experts. The elements for the designing of the high level architecture would be based on finding the appropriate providers of the location based services and cloud infrastructure. This would require market research on various web services that are location based information services that would be cost efficient and best suitable for the product and also looking into the feasibility of mashing up these services. This will include both qualitative and quantitative research on different products available in the market which would require us to contact the vendors and service providers that would be useful in providing the information about the positioning and Geographical Information System (GIS) services. We would be conducting interviews with the stakeholders on further assistance for the project. The information gathered from all these sources would be useful in consulting to the client to meet their objectives. Additionally, the information would be based on academic literature to best bind and support the eventual conclusions of the project.

PROPOSED CHAPTERS

The structure of the final report may change based on the changes in the requirement and expectation of the clients. However, the following are the proposed chapters which are intended to be included in the final MBA management thesis.

Abstract: This would be a summary of the management project report.

Chapter 1 – Introduction: This would include background of the location based services and the linked organization i.e Inndie Intelligent Networks, giving a clear aim of what is intended to achieve through the research and the market study.

Chapter 2 – Literature Review: This would include the in depth study of various literatures like Location based services, Internet based business model, Service Oriented Architecture, trends in Cloud Computing, web services orchestration, project management and financial analysis.

Chapter 3 – Research Methodology: In this chapter we would discuss about the methods of data collection, interview processes, differences between qualitative and quantitative research, etc.

Chapter 4 – Recommendations: This would include technical, project management and strategic the recommendations that would be provided as part of the feasibility study report supported by academic literature.

Chapter 5 – Financial Analysis: This would include process followed for the financial analysis performed as part of the feasibility study for the business plan.

Chapter 6 – Conclusion and Limitations: This part would bring our research to a conclusion by highlighting the recommendations and limitations in our findings.

Word Count: 2274

REFERENCES

Benson J (2001), LBS technology delivers information where and when it is needed. Business Geographics [Online] Available at: http://www.geoplace.com/bg/2001/0201/0201lbs.asp [Accessed on 01 February 2001]

Dao Diep, Rizos Chris and Wang Jinling (2002), Location-based services: technical and business issues, School of Surveying and Spatial Information Systems [Online]Available at: http://www.springerlink.com/content/nxvnu4d0b5dbdb4x/fulltext.pdf [Accessed on 21 June 2010]

Diaz, S. (2009), “NYT: Smartphones have become a necessity; more growthexpected” [Online], Available at: http://www.zdnet.com/blog/btl/nyt-smartphones-have-become-a-necessity-more-growth-expected/19541 [Accessed on 19 June 2010]

Gartner (2010), Gartner Says Consumer Location-Based Services Market Will More Than Double in 2009 [Online], Available at: http://www.gartner.com/it/page.jsp?id=1059812 [Accessed on 21 June 2010]

Junglas A Iris and Watson T Richard (2008), 'LOCATION-BASED SERVICES: Evaluating user perceptions of location-tracking and location-awareness services', COMMUNICATIONS OF THE ACM, Vol 51 (3) pp.65-69

Oreilly, Tim (2007), What is Web 2.0: Design Patterns and Business Models for the Next Generation of Software, Communications & Strategies, Vol 1, pp 17.

Peltz, C. (2003), “Web Services Orchestration and Choreography”, Hewlett-Packard, IEEE computer society [Online], Available at:

http://bbs.w3china.org/dragonstar/papers/Peltz_COMP2003Oct.pdf [Accessed on 19th June 2010]

Taimour Al Neimat (2005), Why IT Projects Fail [Online] Available at: http://www.projectperfect.com.au/downloads/Info/info_it_projects_fail.pdf [Accessed on 21 June 2010]

Appendix 2: LBS Market Forecast

Western Europe Location Based Services (LBS) Market Forecast, 2009 - 2013: Western Europe consumer-centric LBS market to rise to $2.97 billion in 2013, a CAGR of 96.4%.

Total LBS service revenues:

Total LBS service revenue in the EU 27+2 was € 214 million in 2008 and Berg Insight forecasts LBS revenues to grow to about € 580 million in 2014. Including location-based tariffs for data and voice calls, total revenues are estimated to exceed € 1,430 million.

Rapid Location Based Services Growth

Strategy Analytics forecasts

Strategy Analytics forecasts prospects for location based services to brighten considerably, with total spending to exceed $7 billion by 2013. Strategy Analytics predicts strong growth in volume of location enhanced download applications from 5 million globally in 2008 to 280 million in 2013.

Location Based Service Revenue by region 2005 and 2010

The European market:

The European market is also poised for strong growth in location-based services. The forecast is that the LBS market, a €108 Million industry in 2004, will grow to over €2 Billion by 2009 [Berg Insight].

EMarketer estimates:

eMarketer estimates that there were 215 million location-based services (LBS) users worldwide in 2010, and expects this number to reach 486 million in 2012:

Appendix 3: News Articles and Blogs List


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