NACE / ISIC 62 Computer programming, Consultancy And related activities Updated Sector Paper

27th Voorburg Group MeetingOctober 1-5, 2012Warsaw, Poland

Ruth Vizner, CBS Israel

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Topics

• Introduction• Industry Overview• Classification• Turnover Statistics• SPPI• Summary and Main Conclusion

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IntroductionHistory For Computer • During the 1990's studies from UK, Canada,

New Zealand and Czechoslovakia • 2002, 2003 Mini Presentation on SPPI and

output from INSEE, UK, Sweden, Australia and Canada

• 2007, 2008 papers from France, Sweden, Netherland and the United States, results with a Sector Paper on Computer Programming, Consultancy and Related Activities by the BLS.

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Results of Survey among NSOs

ISIC/NACE 62 SPPI TURNOVER

6201 Computer Programming Activities

15 21

6202 Computer Consultancy and Computer Facilities Activities

16 21

6209 Other Information Technology Services

10 21

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Industry Overview

• The industry is growing in the last years• The market is dynamic, providing different

service products • companies rapidly change the structure and

content of services provided • unique, bundled services • Secondary activities • subcontracting, off-shoring • providing services in-house

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Industry Overview

Revenues in 2010 Germany - 80.8 billion euro Japan - 11.4 trillion yen Canada - 33.2 billion dollar Spain - 21.8 billion euro Korea - 23.9 billion dollar

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Size of industry Distribution of revenues among groups ISIC 62

ISIC Austria Sweden Norway Estonia Hungary Slovakia

6201 46.4 46 19.9 56 33 31

6202 42.8 40 79.7 24 28 24

6209 10.8 14 0.4 20 39 45

ISIC Germany

Croatia Singapore Czech Korea Slovenia

6201 45.5 67,5 48 45.7 70.7 33

6202 35.3 17.1 44.4 40.3 29.3 47

6209 19.2 15.4 7.6 4 - 20

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Classification - Industry

ISIC 4 NACE 26201 Computer Programming

Activities 62.01 Computer Programming Activities

6202 Computer Consultancy and Computer Facilities Activities

62.02 Information Technology Consultancy Activities 62.03 Computer Facilities Management Activities

6209 Other Information Technology Services

62.09 Other Information Technology Service Activities

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Classification - IndustryNACE 2 / ISIC 4 NAICS US/Canada6201 Computer Programming

Activities 541511 Custom Computer Programming Services 541512 Computer System Design Services

6202 Computer Consultancy and Computer Facilities Activities

541513-Computer Facilities Management Services

6209 Other Information Technology Services

541519 Other Computer Related Services

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Classification - Industry

all three classification systems are similar. NACE and NAICS specify Computer Facilities

Management Services as a separate industry. ISIC combines this business activity with Computer

Consultancy.

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Classification – ProductsCPC vs. NAPCS

CPC NAPCS

83131 IT technical consulting services 35000 IT technical consulting services

83132 IT technical support services 35501 Software related technical support services 35502 Hardware related technical support services 35503 Combined hardware and software support services 35504 Auditing and assessing computer operations 35505 Data recovery services 35506 Disaster recovery services, business continuity services 35507 Other IT support services

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Classification – Products CPC vs NAPCS

CPC NAPCS83141 IT design and development services for applications

35050 Custom computer application design and Development services 35051 Web site design and development services 35052 Database design and development services 35053 Customization and integration of cross-industry application software 35054 Customization and integration of vertical market application software 35056 Other custom application design and development services

83142 IT design and development for networks and systems

35101 Computer network security design and development services 35102 Computer network design and

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Classification - ProductsCPA vs ISIC

ISIC Rev. 4

CPA 2008

Computer Programming, Consultancy and related Services

6201 62.01 Computer Programming Services 62.01.11 IT design and development for application62.01.12 IT design and development for network62.01.21 Computer game’s software original62.01.29 Other software original

6202 62.02 Computer Consultancy Services 62.02.10 Hardware consultancy services62.02.20 System and software consultancy services

62.03 Computer facilities management services

62.02.30 IT technical support services62.03.11 Network management services62.03.12 Computer systems management services

6209 62.09 Other information technology and computer services

62.09.10 Installation services of computer and peripheral equipment62.09.20 Other information technology and computer services i.e.

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Turnover Statistics progress

All countries collect and publish turnover data Most countries collect turnover data at the product

level and publish at the industry level All counties moved to the new classification European counties use NACE v. 2 and CPA 2008. North America countries use NAICS and NAPCS Australia use ANZIC Some countries use a local version based on ISIC

Rev.4 (Japan uses JSIC, Korea KSIC, Singapore SSIC)

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Turnover Statistics data collection

Most countries use survey The frame is the Business Register Method for selection of companies is stratified sampling according to size of turnover / number of employee / combination. Some use combination of survey and administrative data Few countries use census. detailed data of industry and product level are available on SBS statistics

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Turnover StatisticsChallangesChallenges stem from the dynamic nature of the industry and the change in classification Finding a predominate activity according to the new

classification Merger and acquisitions and new products and

services Outsourcing Companies have a lot of secondary activities Confidentiality issues for multinationals companies

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Recommended Approach Category Data Source Level of Detail disadvantage

s advantages

Best Survey/Census Industry turnover detailed and product turnover detail

-Most expensive- response burden

detailed information on a timely manner

Good Survey/Census or combination

Industry detail only

Expensive -Industry detail not sufficient

-less response burden

Minimum Administrative (tax data, industry association data etc.,)

Industry detail only

-Least expensive-Little or no respondent burden

- Imperfect Estimates- Not timely

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SPPI

• 16 of 21 countries have SPPI • 10 of 16 countries cover all 3 groups • 16 countries cover 6201 and 6202• 6 countries don’t cover 6209• 12 of 16 countries collect prices and

publish on a quarterly basis• 3 countries, Czech, Japan and Korea,

collect prices monthly and in Canada the index is Annual.

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Pricing method

The most dominant is charge out rate Characteristics of workers: professions, skill

level, experience Characteristics of service: kind of service, type of

software, project and clients All countries uses time based method for group

6201 computer programming services. For the other groups other pricing methods are used: contract pricing, direct use of prices of repeated services

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Pricing method

Pricing method Example Sub-group

Time-based Hourly charge-out rates for chief programmer for analysis

6201

Direct use of prices for repeated services

Security services for network 6209

Percentage fees Percentage of software licenses 6202

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Main pricing issues

subcontracting or outsourcing - charge out rates might not be good estimates of real price change when part of the job outsourced, especially when the subcontractor is an off-shore establishment. The solution is to take in account the off shoring effect and to reflect the change in labor composition in the charge out rates.

internal prices - companies that offer IT services in-house. Company-internal prices are in general difficult to handle for index calculation because the price development isn’t always comparable to the development of market prices.

Changes in the labor productivity - are to be excluded from the charge out rates.

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Recommended Approach Category Pricing method Data type in the

survey and frequency Advantage Disadvantages

Best Prices for repeated services,

- Time-based methods

Real transaction prices,

The price for the time spent on the service is used as a proxy for the real price

The information is available, specification allow comparison over time.response burden is moderate

Not possible for unique services(costume software) May not reflect productivity changes Specification must be defined to Keep

Good Model pricing

Contract pricing

Price based on expert estimates. By using a fictitious service or a real service as a model

Holding constant quality

High response burden Need to be updated frequentlyThe contract must specify the service

Minimum Unit value Revenue and amount sold / time spend

Least expensive lowest response burden

Services must be sufficient homogeneous Price changes can be highly volatile

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Summary Much progress has been done in the last years, since the last

Sector Paper on Computer Services, both in SPPI and Turnover data

All counties moved to the new industry classification The most dominant pricing method is charge out rates It is recommended that charge out rates will be based on

detailed specification that identifies both the workers qualifications and the service definition

Constant quality SPPI present a challenge for computer services.

Future improvements include effort to improve company’s cooperation

Thank You Very Much!

RUTH VIZNERMAIL: VIZNER@CBS.GOV.IL