Thomas Lah
Executive Director,
TPSA

Greg Burnett
Program Manager,
TPSA

To date, professional services executives have been extremely handicapped in their ability to understand the performance of other technology professional services organizations. Data to measure the performance of the technology professional services industry for benchmarking purposes is difficult to obtain, or worse non-existent. This leads to pressure and unrealistic expectations to manage professional services organizations based on some dangerous half-truths. In a growing services economy, beliefs such as “anybody can sell services,” “pure service companies get great services margins,” and the classic 40/20 myth are all examples of these unrealistic expectations. Whether they come from internal or external sources, if not mitigated, these beliefs can be annoying or even debilitating to managing a professional services business.

When the Technology Professional Services Association (TPSA) was founded in September 2005, we set the aggregation of industry data for benchmarking as one of our primary objectives. There is great value in capturing and tracking this financial data and presenting this data in aggregate to our members. By taking a more comprehensive snapshot and archiving the data, TPSA can save members staff effort. Also, by analyzing the data, TPSA can provide insights on industry trends. To take a step forward in the realm of industry data, TPSA identifies, on a quarterly basis, fifty of the largest providers of technology professional services that report financial data on their service businesses. In April of 2006, TPSA took its third official snapshot of the publicly reported financial data for The Service 50. TPSA then hosted a public Webcast, on April 27 th, to review The Service 50 and discuss key metrics TPSA tracks and trends from this public financial data.

This article provides an overview of our criteria, methodology, and a listing of The Service 50 for Q1 2006.

Selection Criteria

TPSA begins the process of assembling The Service 50 each quarter by searching for the largest providers of technology professional services. These are companies that provide the types of professional services that TPSA was founded to improve. Figure 1: Technology Professional Services highlights these technology professional services.

In order to report publicly on The Service 50, the data needs to be readily available and verifiable. To this end, several selection filters are imposed to make The Service 50 a list of companies that TPSA can trend over time:

• The company must be public. Private companies have no obligation to report revenues, profits, etc. For this reason, it would be extremely difficult to track them as part of The Service 50.
• The company must post a 10- Q . For this exercise, TPSA requires a readily available and consistent data source. Also, without a public record to refer to, it would be difficult for TPSA to defend any analysis performed on the data to the general public. For this reason, The Service 50 is based on data available in public 10-Qs or 10-Ks.
• The company must report service revenues. To be meaningful in this dataset, a company must report service revenues. Unfortunately, several significant technology companies do not currently report service revenues (e.g., Microsoft).
• The company cannot be a subsidiary. Several technology providers such as Hitachi Data Systems and NEC Americas have technology service organizations. However, the revenues for those organizations are embedded in overall corporate revenues. This lack of visibility, once again, prevents these organizations from appearing on The Service 50.
• The company is primarily focused on commercial markets. Service providers focused on long-term government contracts have a very different business model. For this reason, companies such as Perot Systems and SAIC are excluded from The Service 50.

Table 1: The Service 50 Selection Criteria provides a summary of these selection filters and lists some example companies excluded because of the criteria.

Companies Reviewed

To arrive at the final list of fifty companies, TPSA reviewed the financial data of over eighty-five technology companies. In this process, thirty-six companies were eliminated because they did not meet the selection criteria outlined in the previous section, or their service revenues did not rank them into the top 50. Below is the list of companies reviewed but not included in The Service 50 this quarter:

The Service 50, Q1 2006

The third snapshot of The Service 50 was based on the most recent 10-Q data that was available as of March, 2006. The top ten companies in The Service 50 are as follows:

The remaining forty companies are listed below.

Moving Forward

TPSA will be publishing a refreshed dataset for The Service 50 on a quarterly basis. The current schedule for The Service 50-related activities is shown in Table 3: The Service 50 Calendar.

Table 3: The Service 50 Calendar

* Open to the general public.

** For TPSA members only.

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About TPSA
The Technology Professional Services Association (TPSA) is the first and only organization for executives who create, produce, deliver, manage, measure, and optimize technology services in the world’s leading corporations. Member companies represent a diverse group of market segments including hardware and software products, systems integration, on-demand hosted applications, and value-added solutions. Through membership collaboration and management expertise, TPSA provides the information, concepts, models, and best practices required for success in the critical professional services component of the technology enterprise. More information on TPSA can be found at www.tpsaonline.com.

Comments? Suggestions? We would like to hear from you. Please email the editor at sspanews@thesspa.com.

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