Evaluation of Value Creation in IT Service Platforms

Abstract

IT service platforms allow users to build, discover, purchase and utilize services offered. As these platforms grow in their number of users and variety of services, it raises the question of whether this phenomenon continues to benefit all participants in this service ecosystem. Aside from striving to gain more customers, IT service platform providers need to maintain their existing users and services as active sources of value. This is because it is vital that all stakeholders can generate sufficient value to sustain their participation in the market. For this research, we consider platform providers, service developers and users as the main stakeholders in the ecosystem of IT service platforms. The question to be addressed in this study is the nature and dynamics of value generated by these stakeholders. For this purpose, an interacting value creation model is constructed. The basis for the description of the values and their interrelationship is the identification of parameters. Based on these parameters, a model has been developed to help in inferring the relative impact of these parameters on the evolution of the IT service platform stakeholder values. Then, the model is evaluated using system dynamics simulation software. The results confirm the existence of a two-sided network effect. However in a maturing market, a larger participation of developers mainly benefits the service platform provider. Therefore, we can state that a large fraction of the value from two-sided network effects goes to the platform provider, although all stakeholders of a service platform benefit from a growing installed base of application users. This implies that users are the common source of value for all three stakeholders. Therefore, we investigate further the value model for IT service platform users. Based on a literature review, the investigation of the users value model identifies system usability, service variety and connectivity over the service platform to be the major determinants that contribute to the value offered to users. A structural equation model (SEM) is constructed from six observed constructs reflecting the three determinants and value of the user. Relationships among constructs in the model are hypothesized based on the technology acceptance model, network externalities and utility theory. Co-variance based structural equation analysis using AMOS has been conducted based on survey data of 210 mobile service platform users. The results show positive correlations between all constructs confirming the hypothesized model and 49% of the variance in the value obtained by users has been explained collectively. Relatively, the individual determinants contributions to explaining the value obtained is indicated as: services used (52%), connectivity (23%) and system usability (16%). The evaluations of both the simulation and structural equation models show that users benefit the most from an increase in the number of services that they can use and the increase in connectivity to other users enabled by the service platform. Overall, this study contributed to research in the area of value creation and IT services. It also infers implications that can support service platform managers.