Market Predictions

Technology Professional Services organizations are human capital intensive endeavors. This means it takes time to both scale up and scale down delivery capacity. Global resourcing models have made this challenge a little easier. However, the profitability of PS organizations is still very susceptible to swings in market demand.  Right now, there are three data streams PS organizations can access to better understand the direction of the TPS marketplace.

Understanding the directions of any marketplace can be spliced into three time frames. First of all, there is the distant future of predicting what will happen over the upcoming year. For this splice, TPS organizations can reference the market predictions made by firms such as IDC and Gartner.  These reports discuss the general demand in various services markets and provide a sense of general direction—is the market predicted to grow, shrink, or remain flat this coming year?  This splice is helpful when creating the annual hiring plan.   However, there can be a great deal of variance regarding the accuracy of these market predictions. Markets can grow or shrink faster than predicted. This reality is shown in the image below:

Annual Market Size Predictions

Annual Market Size Predictions

On the opposite end of the spectrum, there is the recent past. How have list rates held up over the past year?  How much are firms discounting?   For this insight, companies can access an annual market rate study that collects both list and realized market rates by position, by country. TPSA conducts a market rate study every year to provide this splice. This data is very helpful when setting current list rates. This viewpoint is very accurate because it is based on real data—but it reflects the recent past. Mapping the first view point with the second viewpoint, we can draw the graph below:

Annual Market Rate Study

Annual Market Rate Study

But what about that middle ground? Somewhere between where the market finished up last year and where the market is predicted to trend over the upcoming year is the here and now. To help companies better understand this awkward middle ground, TPSA takes quarterly snapshots from two data sources. First of all, we look at the recent financial results of publicly traded companies. We aggregate that data in our quarterly Service 50 webcast. This snapshot allows us to understand how overall service margins and revenues are trending. Simultaneously, we take a quarterly snapshot on how seven key TPS metrics are trending:

  1. TPS Revenues
  2. TPS Bookings
  3. TPS Backlog
  4. TPS Billable Utilization
  5. TPS Realized Rates
  6. TPS Project margins
  7. TPS Hiring

This data is aggregated be geographic regions for participating companies. A sample snapshot of how these metrics were trending three months ago for North America is shown below:

TPS Tracker Data

TPS Tracker Data

Now, combining all three tactics of annual market sizing reports, annual market rate studies, and quarterly performance snapshots, a company can anchor market predictions from -180 days to +365 days. The complete picture is shown below:

Three Data Sources for Tracking the TPS Market

Three Data Sources for Tracking the TPS Market

Pricing and hiring decisions in TPS will never be based on perfect data. However, by combining all three data streams, the TPS organization has a much greater chance of making sound business decisions regarding the direction of the marketplace. To participate in TPSA’s Q2 2009 PS Tracker, please visit:

 http://www.tpsaonline.com/member_surveys.asp

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