Two New IDC Studies Provide Performance Metrics for Vendors Competing in the SI and Consulting Services Industries
FRAMINGHAM, MA – FEBRUARY 5, 2003 – As the systems integration (SI) services and the consulting services industries continue to undergo changes in their competitive landscape, delivery models, and market drivers, so too have the performance metrics that indicate the industries' health and viability changed. While these metrics reflect the difficult times SIs and consulting services vendors had in 2001 and 2002, they also demonstrate how clients' needs have changed over the past few years and provide insight into the industries' future direction.
Two new reports published by IDC that provide industry averages for key performance metrics for the systems integration and business and IT consulting industries reveal the following interesting trends:
Utilization rates have dropped over the past few years as the weak economy, tight IT budgets, and a cautious approach toward new IT investments led to a decreased number of new projects or cancellation of existing projects. As a result, services firms find themselves with overcapacity for the first time in years.
Hourly billing rates and overall contract values have dropped as the downturn in the economy, fierce competition, and availability of offshore resources have placed downward pressure on services firms to lower their billing rates.
The average length of the sales cycle is 5 months for business consulting and 3.5 months for IT consulting, down significantly from the late 1990s and 2000. This trend reflects the economic downturn as well as changes in how consulting services are being purchased.
The average SI project length is six months, down dramatically from the late 1990s and 2000. This trend may also reflect the desire by clients to break projects into smaller, more manageable phases.
"It is a business imperative for consulting services and SI vendors to carefully monitor, measure, and analyze their key performance metrics in order to proactively address any changes in their competitive positioning and industry dynamics that metrics can reveal," said Anna Danilenko, program manager for IDC's Consulting Services research program. "It will be important to separate those metrics that are within the jurisdiction of a services firm to influence – such as hourly billing rates – and those that may be more affected by outside factors – such as the length of the sales cycle. Prioritizing measurements in such a way may make it more manageable for services firms to swiftly implement initiatives in order to improve lagging metrics."
IDC believes that effective and dynamic systems for measurement, tracking, and analysis of financial and non-financial metrics would facilitate services firms' cultural, operational, and financial transitions to the public structure. It would also help their clients and prospects as well as the financial community and industry watchers to gain a better understanding of these newly public firms and their businesses.
IDC's two new studies, Performance Metrics Study: Benchmarking the Business and IT Consulting Services Markets (IDC #28739) and Performance Metrics Study: Benchmarking the Systems Integration Services Market (IDC #28729) provide industry averages for key performance metrics for the SI and business and IT consulting industries. The documents analyze three major types of metrics – project, revenue, and expense metrics. Project metrics include average project duration, average billing hours per project, and average consultants per project. Revenue metrics include revenue per consultant, hourly billing rate, and capacity utilization rate. Expense metrics evaluate the percentage an IT services firm spends on different areas of its business, such as training, research and development, human resources, and others. The documents provide insight into the differences in these metrics by industry and technology product (where applicable) and offer recommendations to services firms on how to use these metrics to effectively manage their business.
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