Tracking Trends: The PDQ Model

With the publication of The Complexity Avalanche by J.B. Wood and Bridging the Services Chasm, TSIA is getting more requests to comment on the “trends” that will be impacting the technology industry. Instead of joining the swollen ranks of organizations and individuals that provide insights on hot trends, emerging trends, meta-trends, etc., I thought it would be helpful to present the model TSIA will use to track and discuss critical industry trends impacting the technology industry.

Trend Categories

First of all, it would be helpful to categorize the types of industry trends TSIA is in a position to track:

Performance Trends: These are trends related to the metrics and results TSIA tracks for the technology services industry. Examples of performance trends TSIA tracks include:

  •  Billable rates
  • Project margins
  • Discounting rates for specific service offerings
  • Attach rates of services
  • Product/service mix of product companies
  • Operating income of technology product companies
  • Technology service growth rates

 Practice Trends: These are trends related to the business practices employed by technology service organizations to optimize their businesses. Examples of practice trends TSIA tracks include:

  • Presence of specialized services sales staff to augment account managers
  • Percentage of services delivery activities sub-contracted
  • Use of offshore resources to deliver service offerings
  • Presence of a Global Services Executive
  • The percentage of time dedicated to professional development for service employees
  • Use of specific technologies to deliver service offerings (EX: Knowledge Management Systems)

 Preference Trends: Finally, TSIA can track trends related to buying preferences of customers consuming technology services. Examples of preference trends TSIA is positioned to track include:

  • Growth rates for specific service lines
  • Preferred pricing models
  • Preferred service attributes

There may be other trend categories TSIA can track, but these are the main areas related to technology services the association can readily track and analyze.

Trend Maturity

 TSIA can track trends related to the performance of the technology services industry, the business practices implemented by technology service organizations, and the buying preferences of customers consuming technology services. But what does it mean to “track” a trend? Research houses, consulting firms, and business gurus love to discuss “top trends”, “killer trends”, “meta trends”, etc. To put a finer point on the concept of trends, TSIA will classify trends by both category and maturity. By maturity, I mean how well defined and understood the trend has become to the industry. The maturity of trends can be classified in one of three ways:

Level 1: Prediction: A trend is being predicted to emerge and impact the industry. For example, I am predicting cloud computing will have a significant impact on the product-service mix of many hardware companies. This is a trend that is predicted to impact performance, practices, and buying preferences in the technology industry. A second example is Value added services. J.B. Wood is predicting product companies will need to offer a new class of services designed to help customers consume the technology they have purchased.

Level 2: Detection: A trend moves from prediction to detection when there are clear examples of the trend being exhibited in the industry. For example, we predicted in Q1 of this year that the global downturn would result in more revenues and margin dollars coming from services as opposed to products for companies in The Service 50. For the past three quarters, that trend has been detected in multiple product companies such as HP, EMC, etc. One year ago, we predicted technology companies would begin seeking synergies between their various service organizations and perhaps look for opportunities to merge service lines. We call this “services convergence.” This is a practice trend. We now know from our 2009 survey on organizational structure that 52% of product companies in the survey have a global services executive in place. This executive is responsible for all service lines. This is a detection of the convergence trend.

Level 3: Quantification: Finally, a trend reaches its final stage of maturity when it is not only detected but the impact of the trend can be quantified. For example, four years ago I predicted that both hardware and software companies would experience a permanent shift in their revenue mix with more revenues coming from services as technology markets matured. Now, in 2009, we know that hardware companies (on average) receive 15% more of their revenue from services than they did in 1999 and software companies receive 37% more of their revenues from services than they did in 1999. Not only has the predicted trend actually occurred, but we can now model the impact this trend has had on performance factors such as revenue and margin dollars.

So, this is the PDQ model TSIA can use to track critical industry trends: Predict, Detect, Quantify. We inventory predictions being made about the technology services industry. We look for real world examples and detect if and when the trends are truly occurring. Finally, we create models to quantify the impact realized trends are having on technology service organizations.

Leveraging Trend Data

So, we now have a way to classify both the types of trends we are tracking and how mature a trend has become. Why does this topic matter so much? Because trends in performance, practices, and buying preferences can impact the success of a services organization. They can impact your caree! Understanding trends can be the difference between success and failure. Decision Strategies International (DSI) is a firm we partnered with a few years ago to develop potential scenarios that could unfold in the world of support services. DSI has a thorough methodology for predicting, detecting, and quantifying the impact of business trends on a company. I love their motto: Anticipate, Adapt, Win. Their services personify the value of understanding trends.

Because trends matter so much, and because TSIA is uniquely positioned to track many of  trends that will be critical in the technology services industry, I will spend more time on this topic in my blog. Below is a table that captures some of the key trends discussed in this entry and places them in the appropriate category.

Trend Categories

In my next entry, I will ask for your thoughts on the trends you predict will have the greatest impact on the technology services industry. Until then, take a moment to think about the trends currently impacting your services business. And be ready to share.

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3 Responses to “Tracking Trends: The PDQ Model”

  1. Trending Key PS Metrics: Margins, Rates and Utilization « Says:

    […] trending the data has become so central to what we do that Thomas Lah, on his blog, just yesterday introduced a new framework for organizing our thinking on the very task.  In this spirit, herewith a new blog entry looking […]

  2. Nine Key Trend in Technology Services « Service Visions Says:

    […] Service Visions Framing Technology Professional Services « Tracking Trends: The PDQ Model […]

  3. Cindy Harrison Says:

    This was pretty interesting. I’m glad I found this.

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