MIS Organisational Buyer Behaviour Godfrey Supka Dijon 9

MIS Organisational Buyer Behaviour Godfrey Supka – Dijon 9 September 2016

MIS Organisational Buyer Behaviour • • What are we measuring? Why is it important? Start-point – literature review Methodology Questions Results Implications Recommendations

The Question – Why do MFIs buy a new MIS? Not • Why do they think of buying a new MIS? • Why do they need a new MIS? • Why do they select a particular MIS? But In what circumstances do they actually buy a new MIS? As opposed to… • Staying with what they have • Cancelling the selection process • Looking forever

Why is it important? • MIS vendors • Identify potential clients, not time-wasters • MFIs • Understand the likely progress and dynamics of the replacement process • Investors, regulators and other stakeholders • Anticipate what MFIs are likely to do • All • Don’t waste time, effort and money

Start Point – Literary Review • Davis, F. D. (1989), "Perceived usefulness, perceived ease of use, and user acceptance of information technology", MIS Quarterly 13(3): 319– 340 • Dimaggio, P. J. and Powell, W. W. (1983) The iron cage revisited - institutional isomorphism and collective rationality in organizational fields, "American Sociological Review", Vol. 48, No. 2, pp 147160. • Kotler, P. & Armstrong G. (2010) Principles of marketing. 13 th edition. Pearson Prentice Hall, New Jersey • Rogers, E. M. (1995) Diffusion of innovations, Fourth Edition ed. , New York, Free Press. • Scott, W. R. and Christensen, S. (1995) The institutional construction of organizations: International and longitudinal studies Thousand Oaks, CA, Sage Publications. • Tornatzky, L. and Fleischer, M. (1990) The process of technology innovation, Lexington, MA, Lexington Books. • Webster, F. , & Wind, Y. (1972). A General Model for Understanding Organisational Buying Behaviour. The Journal of Marketing

Influences Kotler, P. & Armstrong G. (2010)

Influences Environmental: The wider business environment and trends Organisational: The structure, scale, culture, mission, priorities and resources of the buying organisation Interpersonal: The dynamics of the relationships in the decision making unit Individual: The personality, preconceptions, status and culture of each individual in the unit Kotler, P. & Armstrong G. (2010)

Process Kotler, P. & Armstrong G. (2010)

Process Webster and Wind (1972) - “Decision Making Unit” (DMU) – comprising users, buyers, influencers, deciders and gatekeepers Kotler and Armstrong (2010) – focus on interpersonal issues within the buying centre, between the centre and the vendor. Kotler, P. & Armstrong G. (2010)

Influences – Environmental - Competition Banco. Sol Interest Rate Reductions 1998 -2005 (Rhyne & Otero, 2006) Banco. Sol Product Diversifications 1997 -2006 (Rhyne & Otero, 2006)

Influences – Environmental - Competition Banco. Sol Interest Rate Reductions 1998 -2005 (Rhyne & Otero, 2006) Banco. Sol Product Diversifications 1997 -2006 (Rhyne & Otero, 2006) In some countries that are either very mature markets (Bangladesh, most of Latin America) or very stable (Uganda) or both, poor borrowers now have competing potential lenders, where 20 years ago there were none. This had the effect of driving down interest rates, putting pressure on margins and increasing the range and choice of services.

Influences – Environmental – Commercial Entry

Influences – Environmental – Commercial Entry Such consolidation in microfinance would increase the number of MFIs with the critical mass for significant MIS investment, and provide them with a need either to combine or replace existing systems. Some form of MIS project would be unavoidable.

Influences – Environmental - Technology

Influences – Environmental - Technology “Breakthroughs in the use of technology require that microfinance institutions have already incorporated technology thoroughly into their operations. . . that is, primarily on the back end. . . (to) produce timely and transparent financial reports, and report on their operations as otherwise needed. These attributes will be sine qua non for future microfinance institutions. ” (Rhyne & Otero, 2006). Most discussion focussed on front-end technologies such as mobile or branchless banking, but robust MIS is the essential foundation for innovation in delivery channels.

Influences – Environmental – Policy Framework Not only does deposit taking require an increase in function beyond what may have been available in a lending system, but the regulators may require more robust MIS systems as a condition of granting a licence.

Influences – Organisational Organisation type NGOs, credit unions and cooperatives • Semi-formal • Owned by members • Governed by trustees • Supported by donors, government, etc Banks - State, agricultural development, rural, savings, postal, commercial, non-bank financial institutions. • Formal • State- or privately-owned • Shareholders for-profit, social mission or both (Helms, 2007)

Influences – Organisational Organisation type Culture & Customs NGOs, credit unions and cooperatives • Semi-formal • Owned by members • Governed by trustees • Supported by donors, government, etc • • • Collaborative Consensual Non-profit Banks - State, agricultural development, rural, savings, postal, commercial, non-bank financial institutions. • Formal • State- or privately-owned • Shareholders for-profit, social mission or both • • • Professional Hierarchical, authoritarian Commercial (Helms, 2007)

Methodology Survey of practitioners – Vendors, MFIs, Experts Interpretive and inductive • Investigate issues in general • Drill down to specific issues Responses coded and grouped No attempt to weight responses

Methodology - Survey Confidential interviews with 20 people • MFI management (9), • Vendor sales staff (8, representing 5 vendors) • MIS industry experts (3). • 20 different MIS purchase events over a five year period Interviews • Telephone/Skype, • 1 -2 hours, average 75 minutes, • Semi-structured, open-ended questions

Methodology - Survey Confidential interviews with 20 people • MFI management (9), • Vendor sales staff (8, representing 5 vendors) • MIS industry experts (3). • 20 different MIS purchase events over a five year period Interviews • Telephone/Skype, • 1 -2 hours, average 75 minutes, • Semi-structured, open-ended questions In some cases a respondent had information or opinions on more than one MIS purchase case studied, in which case responses were aggregated by response type.

Methodology - Questions Example questions: 1. What were the key environmental trends that determined a need to change MIS system? 2. What were the key business needs that MIS investment was designed to address? 3. What effect did technological changes such as e-channels and improved internet have on decisions? 4. How did the organisational aspects of the MFI affect its purchasing process? 5. How did changes in resource availability affect purchase events? 6. How influential were external stakeholders in decisions, and in what way?

Results The survey revealed purchasing drivers that could be grouped into three groups • External Drivers • Internal Drivers • Event Drivers Each containing five drivers.

Results – External Drivers

Results – External Drivers • • • Competition (sudden, aggressive) Funding (new money, new funder) Economy (growth – take advantage of opportunity) Regulation (significant change – permission, reporting) Technology (new opportunity, available connection)

Results – External Drivers Increased competition, Sometimes driven by policy changes “South Africa is mandating microfinance to commercial banks” “Governments in Latin America are pressuring access to credit” “Major banks are moving into microfinance, on a for-profit basis” “Big banks see a captive market for mobilising deposits” Or by new market entry “There is a blurring of lines between banks, phone companies and merchants” “We foresee Telcos and supermarkets acquiring banking licences. ” Need to gain scale, for cost saving or capital requirements. “We anticipate consolidation based on economies of scale, e. g. MFIs with 200, 000+ clients, with others being driven out of business”

Results – External Drivers Influence of funders “Major stakeholders, e. g. investors, lenders, networks, may want to influence technology decisions. In general the message is ‘you need to get yourself a good system’ rather than being specific. ” Networks are more specific “With those who are wholly-owned or majority-owned, especially if they have a board seat, we can ask a potential partner MFI ‘Are you running on my standard system? ’”.

Results – Internal Drivers

Results – Internal Drivers • • • Growth (consensus at all levels for large scale-up) Deposits (new features, robustness for deposit taking) Standardisation (generally across large networks) Channels (desire to increase outreach, connect to available channels) Centralisation (mainly to reduce risk – deposits, timely reporting)

Results – Internal Drivers Growth is No 1, but can be false factor – why grow? “It is a chicken and egg problem, how to justify investment without scale, how to cope with scale without investment. ” Can be in response to other driver, e. g. new resources Economies of scale “Drive up scale through consolidation, with a faster ramp up time”. Electronic channels “GSM-enabled point of sale (POS) handheld devices and biometrics for client acquisition, loan origination, payments, funds transfer to increase outreach and offer new services. ” “There is a need to bring to the developing world the cashless technologies and methods of the developed world. It is dangerous for banks to have cash – for both employees and clients”

Results – Internal Drivers Growth is No 1, but can be false factor – why grow? “It is a chicken and egg problem, how to justify investment without scale, how to cope with scale without investment. ” Can be in response to other driver, e. g. new resources Economies of scale “Drive up scale through consolidation, with a faster ramp up time”. Electronic channels “GSM-enabled point of sale (POS) handheld devices and biometrics for client acquisition, loan origination, payments, funds transfer to increase outreach and offer new services. ” “There is a need to bring to the developing world the cashless technologies and methods of the developed world. It is dangerous for banks to have cash – for both employees and clients” “Channels don’t work without strong MIS. Often MFIs don’t have a good core system at the back end. ”

Results - Events

Results - Events 17 out 20 had a compelling event (some had more than one) Closely aligned with drivers External Close competitor purchased a major MIS Internal Availability of bank licence to gain access to deposits

Conclusions Summary of likely drivers to MIS purchase • External • Competition (sudden, aggressive) • Funding (new money, new funder) • Economy (growth – take advantage of opportunity) • Regulation (significant change – permission, reporting) • Technology (new opportunity, available connection) • Internal • Growth (consensus at all levels for large scale-up) • Deposits (new features, robustness for deposit taking) • Standardisation (generally across large networks) • Channels (desire to increase outreach, connect to available channels) • Centralisation (mainly to reduce risk – deposits, timely reporting)

Conclusions Summary of likely drivers to MIS purchase • External • Events • Competition (sudden, aggressive) • Arrival of new resources (money, MIS) • Funding (new money, new funder) • Grant of banking licence • Economy (growth – take advantage of opportunity) • Arrival of new management • Regulation (significant change – permission, reporting) • Major system failure • Technology (new opportunity, available connection) • New entity (“green field”) • Internal • Growth (consensus at all levels for large scale-up) • Deposits (new features, robustness for deposit taking) • Standardisation (generally across large networks) • Channels (desire to increase outreach, connect to available channels) • Centralisation (mainly to reduce risk – deposits, timely reporting)

Implications • • • Evidence of likely drivers to MIS purchase – “compelling reason” Clear importance of “compelling event” Some clarity of methods of qualification for vendors Framework for evaluation of purchase process for MFIs, stakeholders Add drivers and events to business case

Recommendations • • • Feed drivers and events into questionnaire Larger survey group Wider range of MIS vendors Objective evidence of existence of drivers, and their influence. Include failed/cancelled purchase projects – test negative correlation Test drivers against level of investment $

Thank you – Questions? Godfrey Supka – Dijon 9 September 2016