Blown Away by Analytics

Back in 2005, I started an industry tracker titled “The Service 50.” Since then, TSIA has been publishing a quarterly snapshot of 50 of the largest publicly traded hardware, software, and pure-play services companies in the world. We have been examining several key financial performance indicators:

  • Overall revenue growth.
  • Product and service revenue growth.
  • Product–service revenue mix.
  • Product margins.
  • Services margins.

Part of the reason for doing this quarterly analysis is to provide the industry with a single, comprehensive repository of these indicators.  This index has provided clear evidence of the following technology industry trends:

  • Strong overall growth. Since 2005, at least, the technology services industry has been steadily growing. In fact, the total technology revenue of the Service 50 has grown from $99 billion in Q3 2005 to almost $240 billion in Q2 2012, more than doubling in about seven years.
  • Strong services growth. In the same time frame, the total Service 50 also more than doubled, increasing from $48 billion in Q3 2005 to over $100 billion in Q2 2012.
  • Average services revenue share increasing for product companies. While gross product revenue growth has kept pace with total gross services revenue growth, the average revenue share of services within mixed-revenue companies, i.e., those companies with a combination of product and services revenue, has steadily increased, from a little over 40% of revenue to over 50% of total revenue.

So the technology industry has seen steady growth in recent years. And while the growth slowed considerably during the 2007–2009 downturn, it is clear that the services revenue stream has become increasingly important for technology product companies.

Of course, the $64,000 question is: What is the relationship between services performance and the overall financial performance of a technology company? Especially as a technology grows and matures.

The answer to this question lies within the raw data points of the TSIA Service 50 and analytical techniques to model the influence of services on the overall business model performance. Well, fortunately, TSIA has access to both of these items. In June, we hired a PhD who has been specializing in data analytics. Jeremy DalleTezze now serves as the Director of Analytics for TSIA. As part of the TSIA research team, he has two key charters:

  • Apply new analytical techniques to existing TSIA datasets.
    • TSIA believes there are entire new level of service business insights waiting to be unlocked from existing TSIA research datasets by developing and applying new analytical models.

 

  • Develop Frameworks for Consumption Analytics
    • TSIA believes data analytics will be a critical capability for service organizations as they mine customer usage data to develop impactful service offerings.  Jeremy is collaborating with TSIA researchers, TSIA members and TSIA partners to develop a framework technology companies can follow as they stand up and mature consumption analytic capabilities.

So, to get a taste of the power of analytics, TSIA members can read Jeremy’s analysis of the TSIA Service 50 data as he worked to answer that $64,000 question: What is the relationship between services performance and the overall financial performance of a technology company? To get the answer, download the paper: http://www.tsia.com/documents/The_Return_on_Services

If you have questions about the modeling, contact Jeremy directly: jeremy.dalletezze@tsia.com

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