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000U57 



FEBRUARY 1991 



THE WESTERN EUROPEAN 

MARKET FOR 
PROFESSIONAL SERVICES 

1990-1995 




Piccadilly House, 33/37 Regent Street, London SWIY 4NF 



INPUT 



01-493-9335 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Researched by 
INPUT 

Piccadilly House 
33/37 Regent Street, 
London SW1Y4NF 
England 

Published by 
INPUT 

1280 Villa Street 

Mountain View, CA 94041-1194 

U.S.A. 



Market Analysis Programme--Europe 

The Western European Market for 
Professional Services, 1990-1995 

Copyright ©1991 by INPUT. All rights reserved. 
Printed in the United States of America. 
No part of this publication may be reproduced or 
distributed in any form or by any means, or stored 
in a data base or retrieval system, without the prior 
written permission of the publisher. 



MERGE -567 • 1990 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Abstract 



Professional services account for nearly one third of the total software 
and services market in Western Europe. The high growth rates of this 
sector are encouraging many vendors to invest in growing their market 
share. The recent downturn in overall market growth for information 
systems is also causing many hardware vendors to seek a greater profit 
contribution from this sector. 

This report analyses the market for professional services throughout 
Western Europe. It identifies the major trends, issues and opportunities 
for vendors, especially in the areas of custom software development and 
software maintenance. Forecasts are provided for all the major countries 
in Europe for 1990 through 1995. Categories of professional services 
separately idendfied and quantified are information systems consultancy, 
custom software, and educadon and training. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



Table of Contents 



Introduction 1 

A. Objectives 1 

B. Scope 1 

C. Methodology 4 

D. Report Structure ^ 4 

E. Related INPUT Reports 5 



n Executive Overview 7 

A. Summary and Conclusions 7 

B. Changing Demand for Professional Services 9 

C. Growth Market for Professional Services 1 1 

D. Positive and Negative Market Forces 14 

E. Competitive Analysis 15 

F. Winning Strategies 16 



ni| Market Overview 19 

A. Industry Structure 19 

B. Forecast Assumptions 21 

C. Western European Market 21 

1. Information Systems Consultancy 22 

2. Custom Software Development 24 

3. Education and Training 26 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES. 1990-1995 INPUT 



Table of Contents (Continued) 



V^UUllLiy iVlall\.CLo 




A. France 




15. vjeiiiiany 


3 J 


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3o 


U. Italy 


3<5 


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2. Denmark 


43 


3. Norway 


43 


4. Finland 


44 


5. The Netherlands 


44 


6. Belgium 


46 


7. Switzerland 


48 


8. Austria 


48 


9. Spain 


49 


10. Rest of Europe 


49 



V I Vendor Issues 51 

A. Software Maintenance 5 1 

B. Vendor Approaches to Software Maintenance 53 

C. Professional Services Market Trends 57 

D. Strategic Directions 61 



Appendixes A. Definition of Terms 63 

A. Overall Definitions and Analytical Framework 63 

B. Industry Structure and Delivery Modes 66 

1. Service Categories 66 

2. Software Products 67 

3. Turnkey Systems 68 

4. Processing Services 69 

5. Systems Operations 69 

6. Systems Integradon (SI) 70 

7. Professional Services 71 

8. Network Services 71 

C. Vendor Revenue and User Expenditure Conversion 73 

B. Vendor Questionnaire 75 

C. Detailed Country Forecast Database, Local Currency 81 

D. Detailed Country Forecast Database, ECUs 89 

E. Inflation and Exchange Rates, Western Europe 97 

F. Forecast Reconciliation, 1989-1990 99 



ii ©1991 by INPUT. Reproduction Prohibited. MEROE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Exhibits 



•1 Information Services Industry Structure 



n 



•1 Professional Services Market Opportunities 10 

■2 Professional Services Market — Western Europe 1 1 

-3 Professional Services Market Segments — Western Europe, 12 
1990-1995 

-4 Professional Services Forecast — Western Europe, ' 13 

1990-1995 

•5 Professional Services Market Forces 14 

■6 Leading Professional Services Vendors — Western Europe, 15 
1989 

•7 Vendor Growth Strategies 16 



ni 



-1 Professional Services Market Structure 20 
-2 Professional Services Market Segments — Western Europe 22 
1990-1995 

-3 Professional Services Market Forecast, 1990-1995 — 24 
Western Europe 

-4 Professional Services Comparative Country Markets — 27 

Western Europe, 1990-1995 
-5 Professional Services Market, Western Europe — 28 

Distribution by Major Region, 1990 
-6 Professional Services — Market Forces 29 
■7 Leading Vendors of Professional Services — 30 

Western Europe, 1989 
-8 Leading Vendors' Professional Services Revenues by 31 

Company Nationality 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES. 1990-1995 INPUT 



Exhibits (Continued) 



IV| -1 Professional Services Market Forecast, 1990-1995 — France 33 

-2 Leading Vendors, 1989 Professional Services — France 34 
-3 Professional Services Market Forecast, 1990-1995 — 35 
Germany 

-4 Leading Vendors, 1989 Professional Services — Germany 36 
-5 Professional Services Market Forecast, 1990-1995 — 37 
United Kingdom 

-6 Leading Vendors, 1989 Professional Services — 38 
United Kingdom 

-7 Professional Services Market Forecast, 1990-1995 — Italy 39 
-8 Leading Vendors, 1989 Professional Services — Italy 40 
-9 Professional Services Market Forecast, 1990-1995 — 41 
Sweden 

-10 Leading Vendors, 1989 Professional Services — Sweden 42 
-11 Professional Services Market Forecast, 1990-1995 — 43 
Denmark 

-12 Professional Services Market Forecast, 1990-1995 — 43 
Norway 

-13 Professional Services Market Forecast, 1990-1995 — 44 
Finland 

-14 Professional Services Market Forecast, 1990-1995 — 44 
The Netherlands 

-15 Leading Vendors, 1989 Professional Services — 45 
The Netherlands 

-16 Professional Services Market Forecast, 1990-1995 — 46 
Belgium 

-17 Leading Vendors, 1989 Professional Services — Belgium 47 
-18 Professional Services Market Forecast, 1990-1995 — 48 
Switzerland 

-19 Professional Services Market Forecast, 1990-1995 — 48 
Austria 

-20 Professional Services Market Forecast, 1990-1995 — Spain 49 
-21 Professional Services Market Forecast, 1990-1995 — 49 
Rest of Europe 



V 



-1 Software Maintenance — The Problems 51 

-2 Software Maintenance — The Opportunities 52 

-3 Vendor Organisation Preferences for Software Maintenance 54 
Services 

-4 Vendor Selling Preferences for Software Maintenance 55 
Services 

-5 Vendor Opinions on Profitability of Software Maintenance 56 
Services 

-6 Professional Services Vendor Opinions — Growth Drivers 58 

-7 Professional Services Vendor Opinions — Growth Inhibitors 60 

-8 Vendor Growth Strategies 61 



IV 



© 1991 by INPUT. Reproduction Prohibited. 



MERGE 




Introduction 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



WKWWK'Xw:-:-:*:':*:-:*?:*:*: 

L 



B 



Introduction 



Objectives The purpose of this report is to identify opportunities within the profes- 

sional services market and indicate in broad terms how this market is 
likely to develop over the next five years. In particular the report will: 



• Give estimates of the size and structure of the professional services 
market for Western Europe and its growth potential to 1995. 

• Identify the major forces at work in the market, especially: 

- The impact of new software products and development tools on the 
demand for custom software development and support. 

- The response of professional services vendors to their chents' heavy 
software maintenance workload. 

• Assess possible major new opportunity areas for professional services 
vendors arising out of this changing structure of the user market. 

• Recommend possible strategies for the 1990s for vendors in the profes- 
sional services sector. 



Scope This report reviews the professional services market for Western Europe 

for the period 1990 to 1995. 

The report analyses the following country markets: 

• France 

• Germany 

• The United Kingdom 

• Italy 

• The Netherlands 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



• Benelux 

• Spain 

• Switzerland 

• Austria 

• Sweden 

• Denmark 

• Norway 

• Finland 

• Rest of Europe 

Exhibit I-l illustrates the structure of INPUT'S representation of the 
professional services market. Detailed definitions of the terms used by 
INPUT are given in Appendix A. 

Omitted from the analyses of professional services are user expenditures 
on: 

• Professional services supplied as part of major systems integration 
contracts. 

• Professional services bundled into a turnkey systems bid along with 
hardware and software products. 

• Professional services supplied as part of a systems operations contract 
such as facilities management. 



© 1991 by INPUT. Reproduction Prohibited. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT 1-1 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES. 1990-1995 INPUT 



c 

Methodology This report is based principally on research activities conducted by 

INPUT during 1990: 

• A vendor research programme with more than 300 interviews of 
software and services vendors across Europe. Approximately 60% of 
those interviewed were active in the professional services sector. 

• A further 200 vendor and user interviews across all European market 
sectors to determine trends and opinions. 

• input's continuous analysis of all the delivery modes comprising the 
computer software and services market. 

input's extensive library and data base of information relating to the 
software and services industry was also utilised. 

In addition, 20 leading vendors across Western Europe that specialise in 
the professional services sector were specifically consulted, using the 
questionnaire in Appendix B. 



Report Structure This report examines the professional services sector of the software and 

services industry as follows: 

Chapter n is an Executive Overview, which provides a management 
summary of the essential points of the entire report, including 
conclusions and strategic recommendations. 

Chapter HI sets out INPUT'S estimates and forecasts of user expenditures 
on professional services and the relevant revenues of leading vendors 
across Europe as a whole. 

Chapter IV is a country market analysis identifying market size and 
forecast, local issues, and leading vendor market shares country by 
country. 

Chapter V presents the issues and trends identified during the study and 
includes analysis of strategic directions among professional services 
vendors. 

Appendix A contains a detailed definition of the terms used by INPUT in 
the analysis of market sectors. 

Appendix B is the vendor questionnaire used in this research. 

Appendix C is the forecast database of user expenditure in local 
currency, country by country, on which the report is based. 



4 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



Appendix D is the forecast database of user expenditure in ECUs, country 
by country. 

Appendix E lists the exchange rate and inflation assumptions used for 
market analysis. 

Appendix F shows the reconciliation between the 1989 report and the 
1990 forecasts. 

E ' 

Related INPUT Readers may fmd it useful to refer to other INPUT reports which relate to 

Reports the findings of this report: 

• Overall Western European market reviews 

- The Western European Market for Computer Software and Services, 
Forecast and Analysis, 1990-1995 (January 1991) 

- The Challenge of the Single European Market — 1992 and Beyond 
(December 1989) 

• Industry sector reviews 

- European Software and Services Market, 
Finance Sector 

- European Software and Services Market, 
Sector 

- European Software and Services Market, 
Manufacturing Sector 

- European Software and Services Market, 
Manufacturing Sector 

- European Software and Services Market, 
Sector 

• Vendor analysis programme 

- Over 300 profiles of prominent software and services vendors across 
Europe, which includes regular updates and new profiles. 



1990-1995, Banking and 
1990-1995, Insurance 
1990-1995, Discrete 
1990-1995, Process 
1990-1995, Distribution 



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INPUT 



© 1991 by INPUT. Reproduction Prohibited. MEROE 



1 












L 




j. 




Mf 


1 



Executive Overview 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 




Executive Overview 



The professional services market is the largest sector of the computer 
software and services business in Europe. It accounted for over 30% of 
the total Western European market in 1990, valued by INPUT at $19 
billion, and approximately $1.5 billion more than the applications and 
systems software products sectors combined. 

A 

Summary and The European professional services market is highly fragmented. The 

Conclusions market leader, IBM, holds only a 5% market share. Acquisitions and 

partnerships abound, but only a few companies can yet boast a pan- 
European presence, and most of those are either French or American. 
The continued rapid growth of the market is stimulating fiercer competi- 
tion, resulting in new business strategies among both traditional suppliers 
and the newer entries. Three different strands of strategy are visible: 
early exploitation of new software technologies, standards and proce- 
dures to increase productivity; the broadening of existing client services 
to increase revenues; and new services aimed at gaining better access to 
board rooms and business decision makers in order to win new clients. 



The Western European professional services market is forecast to grow at 
an average rate of 20% per year in user expenditures, from $19 billion in 
1990 to $46 billion by 1995. The market includes activities such as 
information systems consultancy, custom software development and 
maintenance, and education and training. It excludes services that are 
provided specifically to other software and services market segments 
such as processing and network services, software products, turnkey 
systems and systems integration or operations. 



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©1991 by INPUT. Reproduction Prohibited. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES. 1990-1995 INPUT 



The market supports service companies from many different origins. 
The greatest threats to traditional vendors, who usually specialise in 
developing software solutions for niche industry markets, come from: 

• Management consultants or auditors who are responding to ever 
stronger cHent demand for information systems advice often linked 
directly to related business issues 

• International equipment vendors who are seeking to replace lost 
hardware profit margins and retain account control, but are heavily 
dependent on partnership with the traditional vendors 

The bulk of the professional services market has always been the devel- 
opment of software solutions to individual client requirements. How- 
ever, the fastest growing subsegments are the activities that precede and 
follow the actual specification, writing, testing and installation of soft- 
ware — that is, the initial consulting services helping the client assess and 
choose options; and the education and training of managers, users and IS 
staff essential to the success of any project. Both these areas are pre- 
dicted to grow at an average of 22% per year over the five-year period. 
This implies a gradual re-assignment of many professional services 
programming staff as the software development workload decreases 
relative to the increase in other services. 

France is by far the largest European market for professional services. 
Equal to the combined value of the market in Germany and the United 
Kingdom, the French market is home to many of Europe's leading 
vendors, most notably Cap Gemini Sogeti. Cap Gemini Sogeti has 
secured a commanding lead over its independent competitors with a very 
active strategy of acquiring major software and services companies. The 
French have also established themselves well in Italy and the U.K. In 
contrast, the German market has always shown a strong preference for 
packaged software solutions and tumkey systems. 

Pressure for improvements in productivity and quahty has led most 
vendors to rapidly adopt technical strategies encompassing the latest 
software tools and methodologies such as relational databases, 4GLs, 
CASE tools and project management procedures. With some clients 
cutting budgets and more competitors crowding into the market, vendors 
have become more cost conscious. They are looking to new software 
technology not only to help them win business, but also to restore higher 
profit margins. 

Software maintenance — revising and fixing software that is" already in 
use — is a very minor part of the service offered by most professional 
services vendors. Yet there are reports that clients in IS departments are 
spending between 50% and 70% of their total budget on software main- 
tenance. As competition increases for attractive new development 



8 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



projects (the mainstay of most professional services business), more 
vendors are now turning their attention to this untapped opportunity. It is 
clear from those already engaged in profitable software maintenance that 
the precise nature of the service has to be tailored to the individual needs 
of each client. 

The link between business success and IS investment is still very tenuous. 
But there is no doubt of the steady improvement in awareness of the 
critical need to link IS strategy very closely to business strategy. Profes- 
sional services vendors who can already demonstrate their ability to 
bridge the gap and offer independent advice on both topics have a clear 
competitive advantage in Europe's board rooms. This is causing many 
vendors to try to extend their traditionally strong IS consulting capability 
into the business management arena — a more difficult task it would 
seem, than for a management consultancy extending its activities further 
into IS. 



Changing Demand for Demand for professional services has never been stronger and continues 
Professional Services to grow in spite of recessionary pressures looming over Europe. Exhibit 

II- 1 lists the opportunities being offered to professional services vendors. 

The industry is seeing the benefit of many client organisations turning 
away from their in-house corporate services and contracting out projects 
of high complexity or requiring scarce skills. This trend seems to be part 
of the general swing towards decentralisation of business management. It 
is matched by user concern to focus management attention back onto the 
problems of running and developing the business, rather than becoming 
expert in the field of complex computer systems. 

The difficulties of recruiting IS experts persist, though some of the latest 
PC and workstation applications offer users some very powerful business 
tools without needing to resort to complex systems experts. Looking 
outside for an ever wider array of skills is becoming an accepted business 
practice — to the lasting benefit of those professional services vendors 
who can establish and keep a high-quality reputation for delivering 
results on time and within budget. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES. 1990-1995 



INPUT 



Professional Services 


Market Opportunities 




• Outsourcing still growing 






• Scarce skills sought outside 






• Consultancy demand high 






• Productive new technology 






• Software maintenance untapped 







One of the most sought-after skills is that of the strategic consultant. The 
expert who can bridge the gap between business needs and user IS 
requirements has become recognised as the architect of successful IS 
strategies and projects. Considered by some to be a hybrid manager — 
with both business and IS skills — an adequate supply of this type of IS 
architect is clearly essential to vendors and clients alike. After all, there 
are few signs that business organisations and information systems are 
going to become simpler in the future. 

The fast flow of new software technology and software engineering 
methodologies continues to force rapid change on users and vendors 
alike. Many leading software and services vendors have introduced 
application architectures for the 1990s to guide developers and keep 
them loyal. The batdeground for vendor preference has clearly shifted 
away from hardware platforms and towards software platforms. Profes- 
sional services vendors who invest strongly in keeping up with the state 
of the art can offer an attractive service to users who have limited or out- 
of-date in-house IS expertise. 

Software maintenance is a heavy load on any long-established IS depart- 
ment — it requires updating applications and systems software written 
years ago in an effort to keep pace with changing business needs. Some 
reports estimate that between 60% and 70% of IS budgets are consumed 
in this activity alone. This is a major opportunity for both service and 
product vendors, but remains largely untapped as a market. INPUT 
expects vendors to seek a larger share of user budgets through new 
ventures in this area. Users will be able to free up internal resources, 
allowing them to dedicate in-house staff to more technically innovative 
and attractive new projects. 



© 1991 by INPUT. Reproduction Prohibited. 



MERGE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



Growth Market for 
Professional Services 



EXHIBIT 11-2 



Professional Services Market 
Western Europe 



60 



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§ _ 40 

LLI O 

gi 

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03 
CD 
d. 
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111 



20 



0 



45.7 




1989 



1990 CAGR 1995 
20% 



As shown in Exhibit II-2, INPUT expects the Western European profes- 
sional services market to reach more than $45 billion by 1995, 
maintaining an average compound annual growth rate (CAGR) of 20%. 

The market is expected to become increasingly competitive, as such 
healthy growth attracts new entrants, and companies already in the 
market work to increase their presence. U.S. equipment vendors such as 
IBM, Unisys and Digital are aggressively moving into professional 
services in their search for profit growth and account control as hardware 
profit margins fall. Software vendors such as Computer Associates, 
Oracle and Microsoft have also set their sights on professional services as 
an essential part of their product mix. Consultancy companies, tradition- 
ally strong in the IS side of management consultancy, continue to extend 
their capabilities very successfully into full IS project management and 
implementation. 

Acquisition strategies are still well in evidence in the professional ser- 
vices market. Cap Gemini Sogeti, in acquiring a controlling interest in 
the U.K.'s Hoskyns, has now established itself as commanding leader of 
the independent vendors in all the major European markets. 



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© 1991 by INPUT. Reproduction Prohibited. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT 11-3 



Professional Services Market Segments 
Western Europe, 1990-1995 



Education 
and Training 



Custom Software 
Development 




Information Systems ^ 
Consultancy 



2.0 



5.4 



2.4 




6.6 



CAGR 
(Percent) 

22 




33.6 



^ 1990 
□ 1995 



0 5 10 15 20 25 30 35 
User Expenditures ($ Billions) 



19 



22 



INPUT divides the professional services market into three subsegments. 
Exhibit n-3 shows the forecast for 1990-1995 for each segment: 

• Information systems consultancy is benefiting from the growing 
awareness, especially among business managers at board level in user 
organisations, of the critical impact of IS strategy on the success of 
their business strategy. A growing number of companies are seeking 
outside advice in this area. The success of Andersen Consulting in 
Europe indicates that its chent "partnership" and "one-stop-shop" 
approaches — offering a full set of professional services which lead on 
from its consulting activity — are highly attractive to clients. Of all the 
skills required for business success in IS consultancy, undoubtedly 
good project management still sits at the top of the list. 

• Custom software development and maintenance is the largest 
subsegment in the software and services market, representing over 23% 
of the European total. This segment covers all the activities related to 
custom software projects, from defining requirements through to 
testing and modification, except client training. The major segment 
trends are: 



12 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



- Adoption of blueprint or kernel application packages to form a 
consistent basis for custom developments; 

- Widespread use of modem software platforms such as relational 
databases, 4GLs and structured design tools; 

- Improved quality and project control through use of CASE tools, 
standards and structured methodologies; 

- Function-rich application packages are replacing wholly custom built 
software. 

The result is a change of emphasis for custom software development, as 
project content moves away from custom programming towards custom 
data definition and custom implementation of standard packages. 

• Education and training, while perceived as a top priority by users, still 
receives less budget allocation than is necessary, though this position is 
expected to improve slowly, with market growth averaging 22% per 
year. Product training in the latest technologies and methodologies is 
the fundamental business. The re-training and career development of 
users following a successful system implementation is an area still 
under-exploited by education and training vendors. 



EXHIBIT 11-4 



Professional Services Forecast 
Western Europe, 1990-1995 





Market Forecast 
($ Millions) 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


1,990 


2,420 


2,970 


22 


6,640 


Custom Software 
Development 


12,060 


14,250 


16,930 


19 


33,640 


Education and 
Training 


1,640 


1,990 


2,450 


22 


5,400 


Total 


15,690 


18,660 


22,350 


20 


45,680 



Note: Systems Operations is reported as a separate category from 1990. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



D 

Positive and Negative 
Market Forces 



Professional Services Market Forces 



Growth Drivers 


Inhibitors 


Board Awareness 
Project Complexity 
Technology 
Staff Shortages 


Lower Budgets 
Poor Quality 
Software Packages 
Staff Training 



Chapter V of this report analyses vendor opinions of the factors speeding 
or slowing growth of the professional services market. Exhibit II-5 
summarises the key factors. 

The main growth drivers are: 

• Growing awareness of the critical role of IS in the success of busi- 
nesses today; 

• Ever-increasing complexity of IS systems and the projects to imple- 
ment them; 

• Availability of powerful, easy to use, high-quality new software tools 
and skill; 

• Continued difficulty of recruiting, training and retaining in-house IS 
specialists. 

The main obstacles to growth in professional services are: 

• Evidence of users delaying projects and reducing budgets in the light 
of economic uncertainty and unacceptable financial justifications; 

• Vendors' concern that quality improvements are taking too long to 
implement; 



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• Some vendors' concern that demand for programming skills will 
decrease as users switch to packaged solutions rather than custom- 
written software. 

• Vendors being faced with the same staff training and retention problem 
as users. 

E 

Competitive Analysis IBM's low, but leading, market share of 5%, as shown in the leading 

vendor table in Exhibit II-6, illustrates quite clearly the fragmented nature 
of the professional services market in Europe. Cap Gemini Sogeti comes 
a close second, its revenues not yet showing the contribution from 
Hoskyns. There is still considerable scope for consolidation in the 
industry, with Finsiel having the smallest pan-European presence of the 
top five. 

Looking at the top 30 vendors reveals that 33% of revenues are from 
French companies and 29% are U.S. in origin, followed by 12% from 
Italy. 

EXHIBIT 11-6 

Leading Professional Services Vendors 
Western Europe, 1989 



Rank 


Vendor 


County 
of Origin 


Estimated 
Revenues 
($ Millions) 


Market 
Share 
(Percent) 


1 


IBM 


U.S. 


785 


5.0 


2 


Cap Gemini Sogeti 


France 


715 


4.6 


3 


Finsiel 


Italy 


285 


1.8 


4 


Sema 


France 


250 


1.6 


5 


Andersen Consulting 


U.S. 


240 


1.5 


6 


Bull 


France 


240 


1.5 


7 


Olivetti 


Italy 


220 


1.4 


8 


Unisys 


U.S. 


190 


1.2 


9 


Digital 


U.S. 


160 


1.0 


10 


Volmac 


Netherlands 


155 


1.0 




Others 




12,450 


79.3 




Total 




15,690 


100.0 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



F 

Winning Strategies 



As competition between professional services vendors increases and real 
growth rates slow, it becomes more important for vendors to have a clear 
position in the market. The threats to traditional professional services 
vendors from management consultancies, the major equipment manufac- 
turers and the larger software product vendors require reaction and 
change. The implications of new platform technologies, methodologies 
and the resulting powerful applications software portfolios must be 
carefully considered. 



Assuming that there is already a strong industry sector orientation to a 
vendor's professional services business, there are four natural elements 
of business growth strategy to consider, as listed in Exhibit II-7. 



EXHIBIT 11-7 



Vendor Growth Strategies 




• New Technology, Old Services 






• New Services, Old Clients 






• Old Services, New Clients 






• New Services, New Clients 







The first element of development strategy should address the problem of 
how to remain competitive — improving productivity and performance. 
Vendors need to maximise the use of new tools in order to remain com- 
petitive in professional services in terms of quality, costs and completion 
timescales. This requires imposition of software standards and proce- 
dures for both development and management of projects, a heavy con- 
tinuous training programme for staff, and full management attention 
given to customers and the service they require. 

The second element of strategy must be to consider how to win more 
business from existing client accounts, taking a larger share of their 
budget — for example, considering what software maintenance services 
could be packaged on a customer-by-customer basis. Careful assessment 
should be made of the types of new service clients would value, which 
should be the subject of test-marketing. 

Thirdly, and requiring higher investment and higher risk, any strategy 
must consider how to better position the company to win more new name 
business, but using existing resources and familiar services. In many 
cases this will be best managed within industry sector or geographic 



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INPUT 



groupings, since past experience and a demonstrably deep understanding 
of niche markets are the most significant Iceys to success in winning new 
account business. 

Finally, the strategy should assess the opportunities for building entirely 
new business. Inevitably, such a strategy requires high investment and 
poses the highest risk. The risk might be lowered by an acquisition 
strategy or a partnership strategy. There are many successful examples of 
both strategies in Europe, as well as no small number of failures. Moving 
up-market, gaining entry through a management consultancy to the board 
rooms of potential new clients, is one of the most attractive options. 
However it appears that a move in the opposite direction — diversifying 
down the demand chain from consultancy to software development and 
implementation — is the more successful manoeuvre at present. 

Whatever the final strategic mix of business moves, the industry can look 
forward to continuing consolidations, take-overs and partnerships in the 
fight for maximum profit and market share. Fuelled by the unchanged 
trend to outsource more and more IS activities, the fight looks worth 
winning. 

In the background there is a groundswell of self-sufficient IS users who 
may be starting to counter the slow demise of the large IS departments 
and the related good fortunes of the professional services vendors. 



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INPUT 



© 1991 by INPUT. Reproduction Prohibited. MEROE 




Market Overview 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT j 

i 



Crt *- f < 




Market Overview 



A ^ 

Industry Structure INPUT divides the software and services industry into eight delivery 

modes. These delivery modes are: 

• Processing services 

• Turnkey systems 

• Applications software products 

• Systems software products 

• Professional services 

• Network services 

• Systems integration 

• Systems operations 

INPUT divides the professional services market into three segments, the 
constituent parts of which are shown in Exhibit III-l: 

• Information systems consulting 

• Custom software development and maintenance 

• Education and training 

All three categories represent types of service offered in support of 
information systems. For example, education and training includes 
services like training in computer operations and management and video 
instruction related to computer usage, but it excludes training of most 
computer users in their normal job functions or discipline. 

Similarly, consulting services exclude conventional management 
consultancy outside of the sphere of information systems, although it is 
clear that commercial information systems strategy cannot in practice be 
treated as separate from organisational or staff issues and business 
strategy. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES. 1990-1995 INPUT 



EXHIBIT III-1 



Professional Services Market Structure 



Custom Software 
Development and 
Maintenance 



" User Requirements 
Definition 

— Systems Design 

• System Conversion 

— Programming 

— Testing 

— System 
Modification 

— Documentation/ 
Technical Writing 

■ Network 
Development 

■ Contract Staff 

• Other 



Information 
Systems 
Consulting 



-IS Strategy 

■ Installation 
Planning 

• Information 
Systems Audit 

• Security Audit 

■ Systems Evaluation 

■ Personnel Planning 

• Systems Analysis 

■ Policies and 
Procedures 
Development (other 
than related to 
software 
development) 

— Project Management 

Contractual 
Negotiation Advice 

Other 



IS Education 
and 
Training 



Computer Operations 
Training 

Management Training 

Analyst/Programmer 
Training 

Systems Use 
Training 

Video Instruction 
(related to computer 
topics) 

Other 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



B 

Forecast Assumptions The market forecasts provided in this report cover the period 1990-1995 

and include assessments for the base year of 1989. The forecasts have 
been formulated in local currency and converted into U.S. dollars for 
aggregation and comparative purposes. The U.S. dollar exchange rates 
used are listed in Appendix E. 

The forecasts have been expressed in actual monetary terms and they 
therefore include an allowance for inflation. The general inflation as- 
sumptions made by INPUT in formulating these forecasts are also listed 
in Appendix E. 

Exhibit F-1 in Appendix F shows the changes made in this year's forecast 
in comparison to that of the previous year. The principal reasons for 
these changes are: 

• The general rise of European currencies against the U.S. dollar, which 
accounts for some 3.3% of the increase; 

• A re-evaluation of the market size resulting from the research carried 
out for this report. 

• The fact that the current indications of recession in Europe are assumed 
to be relatively short term, rather than applying to the whole five-year 
forecast. 

• The growth in the popularity of outsourcing (contracting out any or all 
of the whole range of IT activities), which is assumed will continue as a 
reaction to recessionary pressures among user organisations and to the 
growing complexity of system solutions. 

• The fact that leading computer manufacturers are expected to increas- 
ingly focus the market's attention on their software and services as they 
try to compensate for falHng hardware margins with new revenue 
streams. 

c 

Western European The professional services market continues to grow, as illustrated in 
Market Exhibits in-2 and 111-3, from a 1989 user expenditure level of $15.7 

billion to a 1990 level of $18.7 billion, representing an annual growth of 
19%. Over the five-year forecast period professional services will grow 
at a 20% compound annual growth rate (CAGR), reaching user 
expenditures of $45.7 billion in 1995. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT 1II-2 



Professional Services Market Segments 
Western Europe, 1990-1995 



Education 
and Training 



Custom Software 
Development 



Information Systems 
Consultancy 




CAGR 
(Percent) 

22 



33.6 



19 



22 



0 5 10 15 20 25 30 35 
User Expenditures ($ Billions) 



INPUT previously forecast the same 20% five-year growth rate; how- 
ever, this year's forecast hides a fall in real growth rates, as inflation has 
risen around 2% across Europe as whole during the year. (See Appendix 
E for detailed assumptions of inflation and exchange rates.) 

The continued high growth rates for professional services (as compared 
to many equipment markets, which have fallen into single-figure growth 
rates) result from ongoing demand for information systems, which will 
provide competitive edge and keep operating costs down. It also reflects 
the growing complexity of systems, which results in many user 
organisations having to seek outside specialist knowledge and skills. 
This is just one of the factors generating the thrust to outsource, or 
contract out, more and more IS-related activity. The main perceived 
benefit is that outsourcing leaves clients to concentrate their attention on 
developing their business skills rather than their computer systems skills. 

1. Information Systems Consultancy 

The consultancy segment of the professional services market is set to 
grow at an average of 22% per year between 1990 and 1995, as shown in 
Exhibits III-2 and 111-3. Among management consultants, IS 
consultancy is the fastest growing sector, reflecting the competitive and 



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economic pressure on users to maximise the benefit of the IS invest- 
ments, either in the traditional area of cost control, or in the less tangible 
area of competitive advantage. 

Competition between vendors is increasing as more and more board-level 
clients accept that their information systems strategy is a critical element 
of their overall business strategy on which they need to take expert 
advice. 

For many years such independent advice has been sought primarily from 
management consultants and auditing firms. Andersen Consulting is the 
most obvious example of an auditing company that has been highly 
successful in bridging the gap for clients between business and informa- 
tion systems advice and implementation. Andersen's success has encour- 
aged both consultancies and software vendors to bridge the same gap, but 
not always with the same results. 

Software vendors tend to employ a highly technically skilled work force, 
used to implementing application solutions at the client's request. This 
can be a far cry from the more "holistic" view of the client's business 
problem, which might result in proposals to change the way they do 
business and an information systems to support that new way. A differ- 
ent skill set is required from the vendor — this is common among 
management consultancies, but less common within software companies. 

In a few cases the need to offer clients full service has led to acquisitions 
among consultancies and software vendors. An alternative must be the 
forging of strong partnerships between the two types of vendors in order 
to offer clients a coherent bridge between business and IS needs for 
consulting services. 

All the elements of IS consulting listed in Exhibit III-l are expected to 
grow at a similar pace. However, project management is likely to receive 
the most attention. As last year's report revealed, better management is 
needed to maintain profitable business growth in the face of threats such 
as: 

• Increasing complexity of software and system solutions, which leads to 
increased staff specialisation and the need for larger teams to tackle 
projects. 

• Financial pressures, which generate demand for: 

- Continuous increases in staff productivity 

- More emphasis on project progress and stage payments 

- More fixed-price contracts and penalty clauses 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES. 1990-1995 



INPUT 



- Quicker return on IS investment by demanding early deliverables and 
shorter timescales. 

• Customer awareness of poor quality, which can damage vendor 
reputation in the long term. 

• Poor progress reporting, change controls and conflict management, 
which can result in unnecessary project failure or delay. 

Of all the skills required for business success among vendors, 
undoubtedly good project management is at the top of the list. 



EXHIBIT III-3 



Professional Services Market Forecast, 1990-1995 

Western Europe 





Market Forecast 
($ Millions) 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


1.990 


2,420 


2,970 


22 


6,640 


Custom Software 
Development 


12,060 


14,250 


16,930 


19 


33,640 


Education and 
Training 


1,640 


1,990 


2,450 


22 


5,400 


Total 


15,690 


18,660 


22,350 


20 


45,680 



Note: Systems Operations is reported as a separate category from 1990. 



2. Custom Software Development 

Custom software development is the most important software and ser- 
vices delivery mode in Europe, representing over 23% of the total soft- 
ware and services market. It is expected that as the Single European Act 
takes effect, the relative importance of custom software will slowly 
decrease, with a corresponding increase in the importance of application 
software products and turnkey systems. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



As Exhibit III-l illustrates, the custom software segment includes both 
the development and maintenance of software to specific client 
requirements. See also Exhibit 111-3. 

The major trends in custom software are: 

• Adoption or development of applications software packages to act as 
the core for custom software development, rather than starting from 
scratch or modifying existing one-off custom software. The major 
benefit is that the core package(s) have been produced to the quality 
standards needed for replication, whereas most custom software is 
traditionally suitable for use by one client only. This offers improve- 
ments in both quality and speed of development for the final custom 
solution. 

• Use of standard software platforms, such as relational databases, 4GLs, 
and structured design tools, on which to develop custom software. This 
offers benefits in terms of common skill profiles and much easier 
integration of applications. The popularity of Oracle, for example, can 
be seen to be moving systems away from a proprietary hardware plat- 
form and onto a proprietary software platform that runs on a wide 
(open) range of different hardware platforms, including UNIX systems. 

• CASE tools and structured methodologies have also become part of the 
standard toolset for custom software developers in their hunt for better 
quality software and higher productivity. Further experience is re- 
quired before such benefits can be proven in practical, measured, 
quality and productivity improvements. 

• Quality improvement is now widely seen as mandatory for the software 
industry. The growing complexity of custom software projects has 
resulted in some spectacular financial disasters recently as systems have 
failed to meet their original specifications. Software developers and 
maintainers are often perceived as "licensed to write bugs" — with some 
justification, if there are few stringent controls on testing and proving 
new or modified software. 

• Many user organisations are now finding that commissioning custom 
software is just too expensive, and additionally there is some require- 
ment to change the working practices in their business. The pace of 
change in many business or industry sectors is just as fast as it is in the 
software and services industry. Instead of customising software to 
match their organisation,they are prepared to customise their 
organisation to match an existing application package, or reach some 
middle-ground compromise between these two extremes. As such full- 
featured application packages become available they will result in less 
demand for custom software. 



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INPUT 



Further discussion of the impact of these trends on vendors is provided in 
Chapter V. 

3. Education and Training 

Education and training, though perceived as a top priority by users, still 
receives a relatively low budget allocation, though this position is ex- 
pected to improve slowly. The market segment is expected to grow by 
an average of 22% per year for the next five years, as shown in Exhibit 

in-3. 

Equipment suppliers have always been strong in education and training, 
particularly for the use and exploitation of their own products. The same 
applies to software product vendors. But the emphasis within the soft- 
ware and services industry is on IS training, with IS education left on the 
whole to colleges, schools and discipHnes other than IS (e.g., manufac- 
turing management). Training relates to understanding a product or 
service (e.g., how to read the manual), while education relates to under- 
standing a topic or subject. 

Of all the areas listed in Exhibit III-l under IS education and training, 
user training is the most neglected. Although users are carefully trained 
at the time of initial system implementation, there is commonly a general 
neglect of: 

• User development training to maximise the IS use within their job 
function and enhance their job prospects 

• Formal new/replacement user training when there is staff tumover or 
expansion of a function 

This neglect results, in many cases, in a slow deterioration in use of the 
application, and a poorer return on investment than was originally pre- 
dicted. Neglect of user training is itself often a result of lack of manage- 
ment attention. Too little thought is given by user management to 
maximising the benefit from past investment in the application solution. 
This is a lost opportunity for education and training vendors who could 
attract more repeat business. 



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EXHIBIT III-4 



Professional Services Comparative Country 
Markets— Western Europe, 1990-1995 





Market Forecast 
($ Millions) 


Subsector 


■i n on 

1 yoy 


1990 


H no ^ 

1 yyi 


1990- 
1995 
CAGR 
(Percent) 


1 990 


France 


4,850 


5,800 


6,950 


20 


14,500 


Germany 


2,200 


2,650 


3,150 


18 


6,100 


United Kingdom 


2,750 


3,200 


3,800 


19 


7,800 


Italy 


1,850 


2,250 


2,700 


20 


5,600 


Sweden 


475 


555 


665 


19 


1,350 


Denmark 


325 


385 


455 


18 


885 


Norway 


255 


295 


345 


17 


660 


Finland 


260 


310 


370 


20 


760 


Netherlands 


1,050 


1,250 


1,450 


19 


2,900 


Belgium 


510 


610 


735 


19 


1,500 


Switzerland 


400 


465 


565 


20 


1,150 


Austria 


195 


230 


270 


19 


535 


Spain 


445 


545 


675 


24 


1,600 


Rest of Europe 


125 


155 


190 


21 


410 


Total (rounded) 


15,700 


18,700 


22,300 


20 


45,700 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Professional Services Market, Western Europe 
Distribution by Major Region, 1990 




1990 Total Western European Market = $18.7 Billion 



The professional services market varies significantly from country to 
country around Europe. Exhibit III-5 shows the split between the major 
geographic areas. 

The market in France is equivalent to that of Germany and the United 
Kingdom combined. France has had the benefit of nearly two decades of 
very strong professional services development. Many companies which 
were originally spin-off DP departments from large commercial or 
industrial groups have established their total independence over the 
years. In contrast, this trend has been more limited in the U.K. and is 
only now being considered more seriously by large companies in Ger- 
many. 



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EXHIBIT III-6 



Professional Services — Market Forces 



fnrnwth Driv/prQ 


rnrnvA/th InhihitnrQ 

VJiVJVVlll 1 1 1 1 1 1 Ul IVJ 1 O 


• Rising board-level awareness 

• Growing project size/complexity 

• improved quality and standards 

• New software technologies 

• Client's staff shortages 


• Lower client budgets 

• Need for quality improvements 

• High staff training costs 

• Growing popularity of packages 



Exhibit III-6 lists the major driving forces in the professional services 
market in 1990. These are quantified in Chapter V. Overall the growth 
drivers identified by vendors match well the factors offered by users. 

When INPUT researched user opinions on professional services, the top 
four reasons given by users for contracting out to professional services 
vendors were: 

• More efficient use of resources 

• The use of specialists unavailable in-house 

• Greater flexibility in managing a varying workload 

• Access to new technology 

The same users identified their selection criteria for choosing a profes- 
sional services vendor. Their criteria, in order of priority, were: 

• Meeting original specifications and performance guarantees 

• Demonstrable track record and reputation for similar projects 

• Technological capabihty matching the client's requirements 

• Competitive price offering value for money 

• Financial stabihty and customer base 



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INPUT 



EXHIBIT III-7 



Leading Vendors of Professional Services 
Western Europe, 1989 











iVIcll i\U I 






Countv 


Revenues 


Share 


Rank 


Vendor 


of Origin 


($ Millions) 


(Percent) 


1 


IBM 


U.S. 


785 


5.0 


2 


Cap Gemini Sogeti 


France 


. 715 


4.6 


3 


Finsiel 


Italy 


285 


1.8 


4 


Sema 


France 


250 


1.6 


5 


Andersen Consulting 


U.S. 


240 


1.5 


6 


Bull 


France 


240 


1.5 


7 


Olivetti 


Italy 


220 


1.4 


8 


Unisys 


U.S. 


190 


1.2 


9 


Digital 


U.S. 


160 


1.0 


10 


Volmac 


Netherlands 


155 


1.0 


11 


CISI 


France 


145 


0.9 


12= 


ICL 


U.K. 


140 


0.9 


12= 


Tietotehdas 


Finland 


140 


0.9 


12= 


SD-Scicon 


U.K. 


140 


0.9 


15 


AB Programator 


Sweden 


130 


0.8 


16 


Gentronix 


Netherlands 


100 


0.6 


17 


Siemens 


Germany 


95 


0.6 


18 


Raet 


Netherlands 


90 


0.6 


19 


Sligos 


France 


85 


0.5 


20 


Logica 


U.K. 


80 


0.5 


21 = 


Database Informatica 


Italy 


75 


0.5 


21 = 


Sopra 


France 


75 


0.5 




uracie 


U.o. 


/U 


U.4 


23= 


Computer Associates 


U.S. 


70 


0.4 


23= 


Concept 


France 


70 


0.4 


26= 


CMG (Computer Mgt) 


U.K. 


65 


0.4 


26= 


Dataid 


France 


65 


0.4 


26= 


Datev 


Netherlands 


65 


0.4 


26= 


Reuters 


U.K. 


65 


0.4 


30 


NCR 


U.S. 


60 


0.4 




Others 




10,625 


67.7 




Total 




15,690 


100.0 



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EXHIBIT III-8 



Leading Vendors' Professional Services Revenues 
by Company Nationality 

Germany 



Scandinavia i 




Total = $5.0 billion in 1989 



The leading 30 professional services vendors, accounting for $5.0 billion 
in revenues in 1989, are analysed by country of origin in Exhibit III-8. 

Exhibits III-7 and III-8 show clearly the commanding position of the 
French professional services companies in Europe with one-third of the 
Top 30 vendors originating in France. Cap Gemini Sogeti is the leading 
independent vendor by far, and its acquisition of 65% of Hoskyns has 
given it its first major share of the U.K. market. 

U.S. vendors also have a large share. As in most software and services 
markets, IBM is leader, not only through sheer size, but also because it 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



has made strenuous efforts to develop its professional services business 
and unbundle it from pre-sales support (systems engineering) and main- 
tenance activities (customer engineering). Similarly, the other major 
equipment vendors appear to be following IBM's lead. Andersen Con- 
sulting, which grew 42% last year in Europe, has also had its attributable 
revenues revised upward by INPUT and reached the number five slot. 



© 1991 by INPUT. Reproduction Prohibrted. 



MERGE 



Country Markets 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Country Markets 



A 

France France, at 25% of the whole, has always been the largest market in 

Europe for software and services. The long history of strong professional 
services business means, in turn, that its professional services sector is by 
far the largest, with 38% of the total French software and services market 
and 31% of the total European professional services sector. INPUT 
estimates its size in 1990 was FF36 billion ($5.8 billion) and forecasts it 
will grow to FF89 billion ($14.5 billion) by 1995. The forecast for each 
segment of the professional services market in France is summarised in 
Exhibit IV- 1 and shown in full in Appendixes C and D in full, which also 
contain forecasts for all the other countries. 



EXHIBIT IV-1 



Professional Services Market Forecast, 1990-1995 

France 





FF Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


3,295 


3,950 


4,780 


20 


9,850 


Custom Software 
Development 


24,020 


28,800 


34,400 


20 


71,400 


Education and 
Training 


2,475 


3,000 


3,700 


22 


8,150 


Total 


29,790 


35,750 


42,880 


20 


89,400 



MERGE 



© 1991 by INPUT. Reproduction Prohibited. 



33 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



Strong demand from the defence, telecommunications and finance sectors 
in particular has encouraged the growth of many substantial 
professional services companies in France. This strength is reflected also 
in the list of leading vendors in Exhibit IV-2. In fact, 12 of the top 20 
vendors are French. France has a higher proportion of leading vendors 
than any other European country. The top 10 vendors represent some 
24% of the professional services market in France. 

French vendors are also strong in most other European countries. Cap 
Gemini Sogeti has corrected its past minor presence in the U.K. market 
by taking a majority share in Hoskyns. It has also increased its 
shareholding in Sema, though denying any predatory ambitions. Con- 
cept and Sligos have also been particularly active in strengthening their 
positions both outside and within France with further acquisitions. 



Leading Vendors, 1989 Professional Services 

France 



Rank 


Vendor 


Market 
Share 
(Percent) 


Estimated 
Revenues 
(FF Millions) 


1 


Cap Gemini Sogeti 


8.1 


2,400 


2 


IBM 


2.9 


870 


3 


Bull 


2.6 


760 


4 


CIS! 


2.2 


650 


5 


Sema 


1.8 


550 


6 


Sligos 


1.7 


510 


7 


Sopra 


1.5 


450 


8 


Dataid 


1.3 


400 


9 


SG2 


1.0 


290 


10 


Andersen Consulting 


0.9 


260 




Others 


76.0 


22,650 




Total 


100.0 


29,790 



©1991 by INPUT. Reproduction Prohibited. 



MEROE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



B 

Germany Germany is unusual in Europe as a country where packaged software and 

services is more important than custom software (Switzerland, Austria, 
Norway and Denmark are similar, but smaller). This culture favours 
turnkey systems and applications software products much more than 
professional services. INPUT estimates the size of the German profes- 
sional services market in 1990 was DM4.8 billion ($2.6 billion) and 
forecasts it will grow to DM1 1.0 billion ($6.1 billion) by 1995. The 
forecast for each segment of the professional services market in Germany 
is summarised in Exhibit IV-3. 



EXHIBIT IV-3 



Professional Services Market Forecast, 1990-1995 

Germany 





DM Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


495 


590 


715 


19 


1,400 


Custom Software 
Development 


2,820 


3,330 


4,000 


18 


7,600 


Education and 
Training 


705 


840 


1,020 


19 


2,000 


Total 


4,020 


4,760 


5,735 


18 


11,000 



Germany is very fragmented as a market. It has few large and many 
small professional services companies. In-house development of custom 
software is much more prevalent than elsewhere in Europe. The leading 
vendors listed in Exhibit IV -4 together hold a 23% market share. Only 
six of the top 20 vendors are of German origin. 

Siemens' absorption of Nixdorf will give SNI greater market penetration, 
but overall its professional services revenues are expected to take second 
place to turnkey business based on new generations of software products. 
SAP is experiencing high revenue growth — mainly outside its home 
market — with its professional services revenues, resulting primarily from 
packaged software sales rather than large custom development projects. 
SD-Scicon sold its loss-making German subsidiary to Cap Gemini Sogeti 
in 1990. 



MERGE 



© 1991 by INPUT. Reproduction Prohibited. 



35 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Leading Vendors, 1989 Professional Services 

Germany 



Hank 


Vendor 


Market 
Share 
(Percent) 


Estimated 
Revenues 
(UM Millions) 


1 


IBM 


7.7 


310 


2 


Siemens 


3.2 


130 


3 


EDV Studio Pioenzke 


2.6 


105 


4 


Cap Gemini Sogeti 


2.1 


85 


5 


SAP 


1.7 


70 


6 


Softlab 


1.4 


55 


7 


SD-Scicon 


1.2 


50 


8 


Digital 


1.1 


45 


9 


Unisys 


1.0 


40 


10 


Andersen Consulting 


0.9 


35 




Others 


77.0 


3,095 




Total 


100.0 


4,020 



c 

United Kingdom The U.K. is the second largest professional services market in Europe, 

though considerably smaller than France. The U.K. is especially strong 
in training and consultancy. INPUT estimates the size of the U.K. 
professional services market in 1990 was £2.0 billion ($3.2 billion) and 
forecasts it will grow to £4.9 billion ($7.8 billion) by 1995. The forecast 
for each subsector of the professional services market in the U.K. is 
summarised in Exhibit IV-5. 



36 



©1991 by INPUT. Reproduction Prohibited. 



MERGE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES. 1990-1995 INPUT 



EXHIBIT IV-5 



Professional Services Market Forecast, 1990-1995 

United Kingdom 





£ Millions 




1989 


1990 


1991 


1990- 
1995 

1 w w "v-/ 

CAGR 
(Percent) 


1995 


IS Consultancy 


245 


300 


370 


24 


890 


Custom Software 
Development 


1,310 


1.510 


1,750 


18 


3,390 


Education and 
Training 


180 


220 


270 


23 


630 


Total 


1,735 


2,030 


2,390 


19 


4,910 



The ten leading vendors listed in Exhibit IV-6 hold a 27% market share 
and eight out of the top 20 vendors are of U.K. nationality. Andersen 
Consulting has experienced strong growth both in the U.K. and else- 
where in Europe at the same time as some of its competitors are begin- 
ning to struggle. The consulting and accounting companies have 
achieved a comparatively strong position in the U.K.'s professional 
services sector. 

The market in the U.K. is suffering from recessionary pressures as clients 
delay decisions on IS expenditures. Removing the expected inflation rate 
of 7% reveals a real growth forecast for 1990 to 1991 of just over 10% 
per annum. With many companies looking for productivity improve- 
ments in excess of this figure, there are signs that in the short term, at 
least, many vendors will continue to shed staff. 



MEROE 



© 1991 by INPUT. Reproduction Prohibiled. 



37 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT IV-6 



D 



Leading Vendors, 1989 Professional Services 
United Kingdom 



Rank 


Vendor 


Market 
Share 
(Percent) 


Estimated 
Revenues 
(£ Millions) 


1 


IdM 


4.6 


80 


2 


ICL 


4.3 


75 


o 
o 


Serna 


4.U 


/ U 


A 

4 


ou-ocicon 


O £J 


4o 


5 


Andersen Consulting 


2.3 


40 


6 


Logica 


2.0 


35 


7- 


AT&T htpl 


1 7 




7= 


Computer People 


1.7 


30 


7= 


Coopers & Lybrand 


1.7 


30 


7= 


Digital 


1.7 


30 




Others 


73.2 


1,270 




Total 


100.0 


1,735 



Italy 



Italy is an important market for custom software. The state dominates 
many large companies both in the client and vendor bases. If there is a 
major liberalisation of the Italian market, there could be a reduction in 
patronage and public procurement of public companies. A trend to 
turnkey and software products is likely to follow as foreign vendors 
import their solutions. INPUT estimates the size of the Italian profes- 
sional services market in 1990 was Lira 3,000 biUion ($2.2 billion) and 
forecasts it will grow to Lira 7,500 billion ($5.6 billion) by 1995. The 
forecast for each subsector in Italy is summarised in Exhibit IV-7. 

The list of leading vendors in Exhibit IV-8 shows clearly that many 
French vendors have built up their share of the Italian market. These top 
10 represent some 45% of the market. Six Italian vendors make the top 
20 in professional services in Italy, but generally the list is a good mix of 
European and U.S. companies. 



38 



©1991 by INPUT. Reproduction Prohibited. 



MEROE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Finsiel is the main group created by the state through a spate of acquisi- 
tions over the past few years. Olivetti has given a lot of attention to 
building its software and services business, establishing separate subsid- 
iaries for the purpose, but this build-up has not been enough to compen- 
sate for the losses in Olivetti's PC and minicomputer sales. 

EXHIBIT IV-7 



Professional Services Market Forecast, 1990-1995 

Italy 





Lira Billions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


345 


430 


535 


25 


1,310 


Custom Software 
Development 


1,955 


2,330 


2,795 


19 


5,490 


Education and 
Training 


185 


230 


290 


25 


700 


Total 


2,485 


2,990 


3,620 


20 


7,500 



MERGE 



© 1991 by INPUT. Reproduction Prohibited. 



39 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Leading Vendors, 1989 
Professional Services 
Italy 



Rank 


Vendor 


Market 
Share 
(Percent) 


Estimated 
Revenues 
(Lira Billions) 


1 


Finsiel 


15.3 


380 


2 


Olivetti 


8.0 


200 


3 


IBM 


6.8 


170 


4 


Database Informatica 


4.0 


100 


5 


Cap Gemini Sogeti 


2.4 


60 


6 


Concept 


2.2 


55 


7 


Bull 


2.0 


50 


8 


Cerved 


1.8 


45 


9 


Andersen Consulting 


1.6 


40 


10 


Sipe 


1.4 


35 




Others 


54.3 


1,350 




Total 


100.0 


2,485 



© 1991 by INPUT. Reproduction Prohibited. 



MERGE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



E ^ 

Other European The remaining European country forecasts are provided in Exhibits IV-9 

Countries toIV-21. Leading vendor market shares are given for Sweden, the 

Netherlands and Belgium. 

1. Sweden 



EXHIBIT IV-9 



Professional Services Market Forecast, 1990-1995 

Sweden 





SeK Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


390 


470 


575 


22 


1,280 


Custom Software 
Development 


2,200 


2,570 


3,050 


18 


5,890 


Education and 
Training 


435 


520 


630 


21 


1,350 


Total 


3,025 


3.560 


4,255 


19 


8,520 



MEROE 



© 1991 by INPUT. Reproduction Prohibited. 



41 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Leading Vendors, 1989 Professional Services 

Sweden 



Rank 


Vendor 


Market 
Share 
(Percent) 


Estimated 
Revenues 
(SeK Millions) 


1 


AB Programator 


27.1 


820 


2 


Cap Gemini Sogeti 


10.6 


320 


3 


IBM 


6.6 


200 


4 


Tietotehdas 


4.6 


140 


5 


Kommunedata 


4.3 


130 


6= 


Conor Information 


3.0 


90 


6= 


Edebe Promotion 


3.0 


90 


8 


Unisys 


1.8 


55 


9 


Digital 


1.7 


50 


10 


Oracle 


1.3 


40 




Others 


36.0 


1,090 




Total 


100.0 


3,025 



© 1991 by INPUT. Reproduction Prohibited. 



MEROE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



2. Denmark 

EXHIBIT IV-11 



Professional Services Market Forecast, 1990-1995 

Denmark 





DK Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


325 


405 


495 


23 


1,140 


Custom Software 
Development 


1,855 


2.190 


2,560 


17 


4,800 


Education and 
Training 


95 


115 


140 


21 


300 


Total 


2,275 


2,710 


3,195 


18 


6,240 



EXHIBIT IV-1 2 ^' Norway 



Professional Services Market Forecast, 1990-1995 

Norway 





NK Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


250 


295 


350 


19 


705 


Custom Software 
Development 


1,400 


1,620 


1,900 


17 


3,550 


Education and 
Training 


90 


105 


125 


19 


255 


Total 


1,740 


2,020 


2,375 


17 


4,510 



MEROE 



© 1991 by INPUT. Reprodudion Prohibited. 



43 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



4. Finland 

EXHIBIT IV-13 



Professional Services Market Forecast, 1990-1995 

Finland 





FM Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


160 


200 


240 


22 


530 


Custom Software 
Development 


875 


1,040 


1,240 


19 


2,490 


Education and 
Training 


60 


70 


80 


21 


180 


Total 


1,095 


1,310 


1,560 


20 


3,200 



5. The Netherlands 

EXHIBIT IV-14 



Professional Services Market Forecast, 1990-1995 

The Netherlands 





Dfl Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


275 


340 


420 


24 


990 


Custom Software 
Development 


1,650 


1,900 


2,220 


17 


4,190 


Education and 
Training 


235 


290 


350 


23 


800 


Total 


2,160 


2,530 


2,990 


19 


5,980 



44 



© 1991 by INPUT. Reproduction Prohibited. 



MERGE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Leading Vendors, 1989 Professional Services 
The Netherlands 



nariK 


venaor 


Market 
Share 
(rercenij 


Estimated 
Revenues 
(UTI Millions) 


1 


Volmac 


13.0 


280 


2= 


Cap Gemini Sogeti 


9.3 


200 


2= 


Centronix 


9.3 


200 


4 


Raet 


8.3 


180 


5 


Datev 


6.0 


130 


6 


IBM 


3 7 


80 


7 


CMG (Comouter 
Management Group) 


3 0 


65 


8 


SD-Scicon 


2.1 


45 


9 


Unisys 


1.6 


35 


10 


Computer Centrum 
Nederland 


1.4 


30 




Others 


42.4 


915 




Total 


100.0 


2,160 



©1991 by INPUT. Reproduction Prohibited. 



45 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



6. Belgium 

EXHIBIT IV-1 6 



Professional Services Market Forecast, 1990-1995 

Belgium 





BF Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 

(Percent) 


1995 


IS Consultancy 


2,690 


3,340 


4,150 


25 


10,000 


Custom Software 
Development 


15,260 


18,000 


21,500 


18 


41,000 


Education and 
Training 


1,540 


1,900 


2,300 


22 


5,200 


Total 


19,490 


23,240 


27,950 


19 


56,200 



46 



©1991 by INPUT. Reproduaion Prohibited. 



MERGE 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Leading Vendors, 1989 Professional Services 

Belgium 



Rank 


Vendor 


% M 1 J. 

Market 
Share 
(Percent) 


Estimated 
Revenues 
(BF Millions) 


1 


Cap Gemini Sogeti 


5.2 


1,020 


2 


IBM 


3.8 


750 


3 


CSC 


2.9 


570 


4 


Sema 


2.8 


540 


5 


Volmac 


2.4 


460 


6= 


Andersen Consulting 


1.7 


330 


6= 


Unisys 


1.7 


330 


8 


Bull 


1.5 


290 


9 


Reuters 


1.0 


200 


10 


Digital 


0.9 


180 




Others 


76.0 


14,820 




Total 


100.0 


19,490 



© 1991 by INPUT. Reproduction Prohibited. 



47 



TJHE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



7. Switzerland 



EXHIBIT IV-18 

Professional Services Market Forecast, 1990-1995 

Switzerland 





SF Millions 


Subsector 


1989 


1990 


1991 


1990- 

1 \j \j \y 

1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


80 


95 


120 


22 


260 


Custom Software 
Development 


440 


510 


610 


19 


1,200 


Education and 
Training 


120 


140 


180 


23 


400 


Total 


640 


745 


910 


20 


1.860 



8. Austria 

EXHIBIT IV-19 



Professional Services Market Forecast, 1990-1995 

Austria 





Sch Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


320 


390 


470 


22 


1,050 


Custom Software 
Development 


1,800 


2,090 


2,440 


17 


4,580 


Education and 
Training 


350 


430 


530 


23 


1,200 


Total 


2,470 


2,910 


3,440 


19 


6,830 



48 



© 1991 by INPUT. Reproduction Prohibited. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



9. Spain 

EXHIBIT IV-20 



Professional Services Market Forecast, 1990-1995 

Spain 





Pta Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


7,250 


9,060 


1 1 ,400 


26 


28,800 


Custom Software 
Development 


38,800 


47,300 


58,200 


23 


133,000 


Education and" 
Training 


5,600 


7,000 


8,820 


26 


22,200 


Total 


51 .650 


63,360 


78,420 


24 


184,000 



10. Rest of Europe 

EXHIBIT IV-21 



Professional Services Market Forecast, 1990-1995 

Rest of Europe 





$ Millions 


Subsector 


1989 


1990 


1991 


1990- 
1995 
CAGR 
(Percent) 


1995 


IS Consultancy 


15 


18 


22 


23 


50 


Custom Software 
Development 


95 


119 


145 


21 


305 


Education and 
Training 


15 


18 


23 


25 


55 


Total 


125 


155 


190 


21 


410 



MERGE 



©1991 by INPUT. Reproduction Prohibited. 



49 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



© 1991 by INPUT. Reproduction Prahibiled. MEROE 




Vendor Issues 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 




Vendor Issues 



Software Maintenance The vendor research programme for this report concentrated on issues 

related to the development of software maintenance business. The 
professional services industry has traditionally lived by helping clients to 
tackle new projects. As the installed base of software systems has grown, 
so has the challenge for IS departments of maintaining the vast array of 
increasingly complex systems. 



EXHIBIT V-1 



Software Maintenance — 
The Problems 




• High business dependence 






• Aging software tools 






• Poor software documentation 






• Lost skills 






• Motivation of development staff 






• Recruiting maintenance staff 







Some of the problems which arise as active software ages are listed in 
Exhibit V-1. By definition, if software is still in use after several years 
then it is probably an integral part of the business operations. Seldom 
does such software not require maintenance activity to keep it in step 
with changing needs or to fix new-found problems. 

The software tools originally used to create the applications can become 
part of the problem, either because they have been abandoned by the 



MERGE 



© 1991 by INPUT. Reproduction Prohibited. 



51 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



vendor in favour of a new product, or because they have been enhanced 
and may have become incompatible with the old application. Both these 
issues require well-defined procedures to ensure continued compatibility 
between inter-dependent pieces of software. 

Much software documentation, which may have seemed adequate at the 
time of writing, is found later to be too abbreviated to be understood by 
new staff (or the originator!). For smaller IS departments the loss of a 
key member of staff can mean a complete loss of skills required for the 
maintenance of essential software. 

The status of staff used for software maintenance tends to be low com- 
pared to those used for new developments. In fact, in many 
organisations they are seen as being very different characters: develop- 
ers are keen to innovate in the use of software and quick to move on to 
the latest technology; maintainers tend to be more thorough and me- 
thodical. Motivating developers to behave like maintainers is diffi- 
cult. Recruiting maintainers requires a firm management commitment to 
the task of software maintenance rather than a fire-fighting approach to 
every problem. 

A variety of reports have put the expenditure on software maintenance 
by IS departments at well over 50% of their annual people budgets. As 
discussed in last year's INPUT report, this represents a large opportunity 
for professional service and software product vendors. Exhibit V-2 lists 
some of the key areas. 



Software Maintenance — 
The Opportunities 




• Re-engineering tools 






• Reverse engineering tools 






• Software conversion tools 






• Systems software services 






• Applications software services 






• Formal maintenance methods 







© 1991 by INPUT. Reproduction Prohibited. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



Re-engineering offers the opportunity to put existing applications through 
an analysis and documentation cycle, which — for example — identifies the 
structure of the programs, logical inconsistencies, and potential compila- 
tion difficulties. These can form the basis for improved maintenance 
quality, or a partial system re-write using this analysis as a specification. 
The results may also form the starting point for conversion to a com- 
pletely new system. Reverse engineering tools usually aid the move from 
third to fourth generation languages, or from hierarchical to relational 
databases. Conversion tools minimise the amount of revision required by 
such upgrades, but often leave the maintenance of the original software 
just as difficult as it ever was. 

There are three categories of service opportunity in software mainte- 
nance: 

• Maintenance of systems software such as languages, databases, net- 
working and operations. This is the most common service according to 
input's research. 

• Maintenance of applications software seems to be largely restricted at 
present to applications originating from the vendor. INPUT uncovered 
no cases where a service vendor had taken on the maintenance of a 
major application which had been developed independently by the 
client in-house. 

• Formal methods for managing and implementing maintenance projects 
seem to have been supplied to clients on an ad-hoc basis rather than as 
part of a grand service strategy. 

B 

Vendor Approaches to Software maintenance is still a very small or non-existent part of most 
Software Maintenance software and services vendor revenues in Europe. The next few pages 

discuss the responses of 20 vendors (to the questionnaire in Appendix B) 

on how they address this market sector. 

The majority of vendors favoured running this type of business from a 
dedicated profit centre. Exhibit V-3 lists their responses in priority order. 
The answers indicate a strong preference for profit centres organised by 
industry sector, with resources being arranged contract by contract and 
situated as close to clients as possible. 

Although re-organisation of software and services businesses along 
industry sector lines has been a trend for several years, it does not show 
up as clearly as expected as the preferred method for software mainte- 
nance services. 



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INPUT 



EXHIBIT V-3 



Vendor Organisation Preferences for 
Software Maintenance Services 



Dedicated team 
or profit centre 

Within industry 
sector groups 

Locally resourced 
contract by contract 

Part of systems 
operations business 

Centrally resourced 
contract by contract 






7 



1 




4.0 




3.2 





3.0 




Zl 



2.5 





2.4 



2 3 4 

Average Scores 
(Range 1-5)* 



No. of 
Respondents 
(20 maximum) 

17 



19 



19 



17 



14 



Responses to the question: What is the best way to resource this business? 

*1 = unimportant, 5 = very important. 
Standard Error: 0.3 



Exhibit V-4 lists in priority order the vendor response to questions on 
their sales methods. The most consistent message to come out was that 
software maintenance services need to be custom designed for each 
client. Software maintenance is such a broad area that it was felt impos- 
sible to offer a range of standard services, except as a marketing ploy to 
attract attention. In reality each client would require a custom-made set 
of services to match their unique circumstances. 



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INPUT 



EXHIBIT V-4 



Vendor Selling Preferences for 
Software Maintenance Services 



Packaged customer 
by customer 

Packaged as a 
specific service 



Using specialised 
sales staff 



Special incentives for 
account managers 



1 




No. of 
Respondents 
(20 maximum) 

14 



17 



14 



16 



2 3 4 

Average Scores 

(Range 1-5)* 



Responses to the question: What is the best way to sell this service? 

*1 = unimportant, 5 = very important. 
Standard Error: 0.25 



Although preferring profit centres, none would dedicate their sales 
people to selling maintenance services only. At this stage, most vendors 
offer the service as just one part of a whole range of products and ser- 
vices with which to win business. It also seems that no one is using 
software maintenance service to win new accounts. All respondents 
claim to offer it only to existing major customers. In many cases it was 
part of a total solution to a larger problem — for example, one company 
offered its client this service so that the client could release staff to work 
on another project in which the vendor had a stake. Another was main- 
taining the client's old software while implementing a new replacement 
system. 

When introducing software maintenance as a new service, many vendors 
offered special incentives to staff to encourage sales and establish the 
business. In some cases these compensation packages reflected the full 
value of a contract lasting several years. 



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EXHIBIT V-5 



Vendor Opinions on Profitability of 
Software Maintenance Services 



How 
profitable 
now? 

How 
profitable 
in future? 




1 




3.5 





3.8 



2 3 4 

Average Scores 
(Range 1-5)* 



*1 = unimportant, 5 = very important. 
Standard Error: 0.1 



No. Of 
Respondents 
(20 maximum) 

13 



13 



As illustrated in Exhibit V-5, all vendors felt that the service was a good 
contributor to profit, with several seeing this position improving further 
over the next few years. Most of those unable to comment on this 
question did not have access to the relevant information at this level of 
detail within their business. 

Overall, the European software maintenance opportunity looks relatively 
untapped. Technically this market segment is only now beginning to be 
attractive as vendors develop some innovative software tools and meth- 
odologies for managing the maintenance problems, helping clients 
maximise the return on their past software investments. Financially, the 
market looks particularly attractive, with clients and vendors as willing 
partners in the creation of profitable business, and in-house budgets 
heavily biased towards support maintenance and evolution of existing 
systems. 



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c 

Professional Services The real growth of the professional services sector has been reduced by 
Market Trends recent downturns in IS spending growth generally. The market is also 

becoming more competitive. Its relatively high growth rate is still attract- 
ing a wide range of vendors into the market who have not previously 
treated professional services as a main line of business: 

• Equipment vendors who are looking for greater account control and 
more margin contribution as hardware prices fall; 

• Management consultancies that are seeing the IT proportion of their 
business grow much more rapidly than any other sector; 

• Software product companies that are introducing professional services 
in order to develop more major account business and ensure customer 
loyalty in the longer term. 

• Telecommunications vendors who are developing similar strategies to 
spread their influence in the market. 

• Staff agencies that have thrived on the continued difficulties of recruit- 
ing and retaining good IS staff. 

Vendors were questioned about the factors which are either stimulating 
business growth or inhibiting it. Exhibit V-6 illustrates the positive 
responses in priority order. The growing size and complexity of IS 
projects is clearly the primary driving force in the growth of professional 
services business. Most users have difficulty affording the mix of neces- 
sary knowledge and skills required for implementing modern information 
^ systems. This corresponds directly with the vendors' view that complex- 
ity is the most significant driver of growth. 

Ninety percent of respondents were very positive about the gains they 
were making by enforcing the use of standards and methodologies among 
their own staff. Many had found that their clients were also keen to adopt 
the same procedures for their own use. Particular mention was made of 
the importance of project management procedures and change control 
procedures. 

The messages on quality which have been widely discussed in the last 
two years are now being reflected in the marketing stance of vendors 
interviewed. The vendors were not questioned on their ability to measure 
quality improvements. A "quality" culture is now seen as an essential 
part of a vendor's competitive armoury. Thirty percent of those inter- 
viewed were concerned that they had not made sufficient progress on 
actual quality improvement, though their clients may be unaware of this. 



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EXHIBIT V-6 



Professional Services Vendor Opinions 
Growth Drivers 



Growing size and 
complexity of projects 

Standards and 
methodologies 

Quality improvements 



Modern software tools 
High staff training costs 

Shortage of skilled staff 

Better, richer application 
packages 

Modern software 
languages/databases 

Kernel or blueprint 
applications 

Competitors shortening 
timescales 



7 






7 







Z 







2J 



4.4 




4.0 




3.8 






3.7 



3.7 



3.7 





3.6 



3.6 





3.5 



3.5 



No. of 

Respondents 
(20 maximum) 

14 



18 

18 

19 

8 

14 
5 

20 

8 



1 2 3 4 5 

Average Scores 
(Range 1-5)* 

Responses to the question: How important are these factors in increasing 
professional services growth rates? 

*1 = unimportant, 5 = very important. 
Standard Error: 0.2 



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The introduction of better, richer application packages was seen as 
creating more professional services opportunity by only 30% of respon- 
dents. However, as shown in Exhibit V-7, 45% saw packages as a threat 
to professional services growth. 

Eight out of twenty respondents expect their own use of kernel or blue- 
print packages to stimulate more professional services business. They all 
saw this as a way of improving staff productivity, rather than as a way in 
which clients could develop their own solutions more rapidly. 

In Exhibit V-7, the most obvious inhibitor of professional services 
growth appears at the top of the list — reducing client budgets. Seventy- 
five percent of respondents admitted to experiencing reduced revenues 
from a significant number of cHents. 

Nearly half the respondents felt that the high cost of training their staff 
was limiting their professional services business growth. Only one 
respondent quoted a figure — 7% of turnover — for staff training costs. 
This relatively high figure was quoted as a reason for the company's 
success in the market. 

Competition from other vendors was not seen by many respondents as a 
very significant threat. Only half ranked it at all, and those that did 
scored it low. This reflects the very complex process in which users 
select a suppher for a particular professional services task. Demonstrable 
ability to do the job is generally far more important than beating a com- 
petitor on price. (In the public sector, ability and price are of similar 
importance.) 



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EXHIBIT V-7 



Professional Services Vendor Opinions 
Growth Inhibitors 



Lower client budgets 



Quality improvements 



High staff training costs 



Modern software 
languages/databases 

Better, richer application 
packages 

Competitors shortening 
timescales 



Lower competitor prices 



Kernel or blueprint 
applications 








3.5 




3.3 




3.1 




3.0 





2.7 





2.5 





2.4 




1.8 



No. of 
Respondents 
(20 maximum) 



15 



1 



2 3 4 

Average Scores 
(Range 1-5)* 



10 



Responses to the question: How important are these factors in reducing 
professional services growth rates? 

*1 = unimportant, 5 = very important. 
Standard Error: 0.2 



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INPUT 



P 

Strategic Directions 



As competition between professional services vendors increases and real 
growth rates slow, it becomes more important for vendors to have a clear 
position in the market. The threats to traditional vendors from manage- 
ment consultancies, the major equipment manufacturers and the larger 
software product vendors require reaction and change. The implications 
of new platform technologies, methodologies and the resulting powerful 
applications software portfolios must be carefully considered. 



Assuming that there is already a strong industry sector orientation to a 
vendor's professional services business, there are four natural elements of 
business growth strategy to consider, as listed in Exhibit V-8. 



EXHIBIT V-8 



Vendor Growth Strategies 




• New technology, old services 






• New services, old clients 






• Old services, new clients 






• New services, new clients 







The first stage of development strategy should address the problem of 
how to remain competitive by improving productivity and performance. 
Vendors should maximise the use of new tools in order to remain com- 
petitive in professional services in terms of quality, costs and completion 
timescales. Clients must be able to see a continuous programme of 
improvement if they are to stay loyal and not succumb to the sales efforts 
of attractive professional services competitors. This requires imposition 
of software standards and procedures for both development and manage- 
ment of projects, a heavy continuous training programme for staff, and 
full management attention given to customers and the service they 
require. 

The second element of strategy must be how to win more business from 
existing client accounts and take a larger share of their budget. Vendors 
should expand their portfolio of services in order to win more business 
from existing customers — for example, by considering what software 
maintenance services could be packaged on a customer-by-customer 
basis. Careful assessment should be made of the types of new services 
clients would value; these could be the subject of test marketing. 



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Thirdly, and requiring higher investment and higher risk, any strategy 
must consider how to better position the company to win more new name 
business, but using existing resources and familiar services. In many 
cases this will be best managed within industry sector or geographic 
groupings, since past experience and deep, demonstrable understanding 
of niche markets is the key to success in winning new account business. 

Finally the strategy should assess the opportunities for building entirely 
new business. Inevitably, such a strategy requires high investment and 
poses the highest risk. The risk might be lowered by an acquisition 
strategy or a partnership strategy. There are many successful examples 
of both strategies in Europe, as well as no small number of failures. 
Moving up-market and gaining entry through a management consultancy 
to boardrooms of potential new clients is one of the most attractive 
options. However, it appears that moving in the opposite direction — 
diversifying down the demand chain from consultancy to software 
development and implementation — is the more successful manoeuvre at 
present. 

Whatever the final strategic mix of business moves, the industry can look 
forward to a continuing period of consolidations, take-overs and partner- 
ships in the fight for maximum profit and market share. Fuelled by the 
unchanged trend to outsource many IS activities, the competition looks 
worth winning. But who knows when the groundswell of self-sufficient 
IS users will begin to counteract the slow demise of the large IS depart- 
ments and the good fortunes of the professional services vendors. 



© 1991 by INPUT. Reproduction Prohibrted. 



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Appendixes 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



L 



Definition of Terms 



A 

Information services - computer/telecommunications-related products 
and services that are oriented toward the development or use of informa- 
tion systems. Information services typically involve one or more of the 
following: 

• Processing of specific applications using vendor-provided systems 
(called processing services) 

• A combination of hardware, packaged software and associated support 
services which will meet a specific application processing need (called 
turnkey systems) 

• Packaged software (called software products) 

• People services that support users in developing and operating their 
own information systems (called professional services) 

• Bundled combinations of products and services where the vendor 
assumes responsibility for the development of a custom solution to an 
information system problem (called systems integration) 

• Services that provide operation and management of all or a significant 
part of a user's information systems functions under a long-term con- 
tract (called systems operations) 

• Services associated with the delivery of information in electronic 
form — typically network-oriented services such as value-added net- 
works, electronic mail and document interchange, on-line data bases, 
on-line news and data feeds, videotex, etc. (called network services) 

In general, the market for informadon services does not involve provid- 
ing equipment to users. The exception is where the equipment is bundled 
as part of an overall service offering such as a turnkey system, a systems 
operations contract, or a systems integration project. 



Overall Definitions 
and Analytical 
Framework 



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The information services market also excludes pure data transport ser- 
vices (i.e., data or voice communications circuits). However, where 
information transport is associated with a network-based service (e.g., 
EDI or VAN services), or cannot be feasibly separated from other 
bundled services (e.g., some systems operations contracts), the transport 
costs are included as part of the services market. 

The analytical framework of the information services industry consists of 
the following interacting factors: overall and industry- specific business 
environment (trends, events and issues); technology environment; user 
information system requirements; size and structure of information 
services markets; vendors and their products, services and revenues; 
distribution channels; and competitive issues. 

All information services market forecasts are estimates of user expendi- 
tures for information services. When questions arise about the proper 
place to count these expenditures, INPUT addresses them from the user's 
viewpoint: expenditures are categorized according to what users per- 
ceive they are buying. 

By focusing on user expenditures, INPUT avoids two problems which 
are related to the distribution channels for various categories of services: 

• Double counting, which can occur by estimating total vendor revenues 
when there is significant reselling within the industry (e.g., software 
sales to turnkey vendors for repackaging and resale to end users) 

• Missed counting, which can occur when sales to end users go through 
indirect channels such as mail order retailers 

Market sectors or markets, are groupings or categories of the users who 
purchase information services. There are three types of user markets: 

• Vertical Industry markets, such as Banking, Transportation, Utilities, 
etc. 

• Functional Application markets, such as Human Resources, Account- 
ing, etc. These are also called "Cross-Industry" markets. 

• Generic markets, which are neither industry- nor application-specific, 
such as the market for systems software. 

Specific market sectors used by INPUT are defined in Section D, below. 

Captive information services user expenditures are expenditures for 
products and services provided by a vendor that is part of the same 
parent corporation as the user. These expenditures are not included in 
INPUT forecasts. 



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Non-captive information services user expenditures are expenditures that 
go to vendors which have a different parent corporation than the user. It 
is these expenditures which constitute the information services market. 

Delivery modes are defined as specific products and services that satisfy 
a given user need. While market sectors specify who the buyer is, deliv- 
ery modes specify what the user is buying. 

Of the eight delivery modes defined by INPUT, five are considered 
primary products or services: 

• Processing Services 

• Network Services 

• Professional Services 

• Applications Software Products 

• Systems Software Products 

The remaining three delivery modes represent combinations of these 
products and services, bundled together with equipment, management 
and/or other services: 

• Turnkey Systems 

• Systems Operations 

• Systems Integration 

Section B describes the delivery modes and their structure in more detail. 

Outsourcing is defined as the contracting of information systems (IS) 
functions to outside vendors. Outsourcing should be viewed as the 
opposite of insourcing: anything that IS management has considered 
feasible to do internally (e.g., data center operations, applications devel- 
opment and maintenance, network management, training, etc.) is a poten- 
tial candidate for outsourcing. 

IS has always bought systems software, as it is infeasible for companies 
to develop it intemally. However, all other delivery modes represent 
functions or products that IS management could choose to perform or 
develop in-house. Viewed this way, outsourcing is the result of a make- 
or-buy decision, and the outsourcing market covers any product or ser- 
vice where the vendor must compete against the client firm's own inter- 
nal resources. 



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B 

Industry Structure and 1. Service Categories 
Delivery Modes 

The following exhibit presents the structure of the information services 
industry. Several of the delivery modes can be grouped into higher-level 
service categories, based on the kind of problem the user needs to solve. 
These categories are: 

• Business Application Solutions (BAS) - prepackaged or standard 

solutions to common business applications. These applications can be 
either industry-specific (e.g., mortgage loan processing for a bank), 
cross-industry (e.g., payroll processing), or generic (e.g., utility 
timesharing). In general, BAS services involve minimal 
customization by the vendor, and allow the user to handle a specific 
business applicadon without having to develop or acquire a custom 
system or system resources. The following delivery modes are in- 
cluded under BAS: 

- Processing Services 

- Applicadons Software Products 

- Turnkey Systems 

• Systems Management Services (SMS) - services which assist users in 

developing systems or operadng/managing the information systems 
funcdon. Two key elements of SMS are the customizadon of the 
service to each individual user and/or project, and the potendal for the 
vendor to assume significant responsibility for management of at least 
a portion of the user's information systems function. The following 
delivery modes are included under SMS: 

- Systems Operadons 

- Systems Integration 

Each of the remaining three delivery modes represents a separate service 
category: 

• Professional Services 

• Network Services 

• System Software Products 

Note: These service categories are a new concept introduced in the 1990 
Market Analysis Program. They are purely an aggregation of lower level 
delivery mode data. They do not change the underlying delivery modes 
or industry structure. 



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2. Software Products 

There are many similarities between the applications and systems soft- 
ware delivery modes. Both involve user purchases of software packages 
for in-house computer systems. Included are both lease and purchase 
expenditures, as well as expenditures for work performed by the vendor 
to implement or maintain the package at the user's sites. Vendor-pro- 
vided training or support in operation and use of the package, if bundled 
in the software pricing, is also included here. 

Expenditures for work performed by organizations other than the package 
vendor are counted in the category of professional services. Fees for 
work related to education, consulting, and/or custom modification of 
software products are counted as professional services, provided such 
fees are charged separately from the price of the software product itself. 

• Systems Software Products 

Systems software products enable the computer/communications system 
to perform basic machine-oriented or user interface functions. These 
products include: 

- Systems Control Products - Software programs that function during 
application program execution to manage computer system resources 
and control the execution of the application program. These products 
include operating systems, emulators, network control, library con- 
trol, windowing, access control, and spoolers. 

- Operations Management Tools - Software programs used by opera- 
tions personnel to manage the computer system and/or network 
resources and personnel more effectively. Included are performance 
measurement, job accounting, computer operation scheduling, disk 
management utilities, and capacity management. 

- Applications Development Tools - Software programs used to prepare 
applications for execution by assisting in designing, programming, 
testing, and related functions. Included are traditional programming 
languages, 4GLs, data dictionaries, data base management systems, 
report writers, project control systems, CASE systems and other 
development productivity aids. Also included are system utilities 
(e.g., sorts) which are directly invoked by an applications program. 

• Application Software Products 

- Industry-Specific Application Software Products - Software products 
that perform functions related to solving business or organizational 
needs unique to a specific vertical market and sold to that market 
only. Examples include demand deposit accounting, MRPIl, medical 
recordkeeping, automobile dealer parts inventory, etc. 



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- Cross-Industry Application Software Products - Software products 
that perform a specific function that is applicable to a wide range of 
industry sectors. Applications include payroll and human resource 
systems, accounting systems, word processing and graphics systems, 
spreadsheets, etc. 

3. Turnkey Systems 

A turnkey system is an integration of equipment (CPU, peripherals, etc.), 
systems software, and packaged or custom application software into a 
single system developed to meet a specific set of user requirements. 
Value added by the turnkey system vendor is primarily in the software 
and support services provided. Most CAD/CAM systems and many 
small business systems are turnkey systems. Turnkey systems utilize 
standard computers and do not include specialized hardware such as 
word processors, cash registers, process control systems, or embedded 
computer systems for military applications. 

Hardware vendors that combine software with their own general-purpose 
hardware are not classified by INPUT as turnkey vendors. Their soft- 
ware revenues are included the appropriate software category. 

Most turnkey systems are sold through channels known as value-added 
resellers. 

• Value-Added Reseller (VAR): A VAR adds value to computer hard- 
ware and/or software and then resells it to an end user. The major 
value added is usually application software for a vertical or cross- 
industry market, but also includes many of the other components of a 
turnkey systems solution, such as professional services. 

Turnkey systems are divided into two categories. 

• Industry-Specific Systems - systems that serve a specific function for a 
given industry sector, such as automobile dealer parts inventory, 
medical recordkeeping, or discrete manufacturing control systems. 

• Cross -Industry Systems - systems that provide a specific function that 
is applicable to a wide range of industry sectors, such as financial 
planning systems, payroll systems, or personnel management systems. 



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4. Processing Services 

This category includes transaction processing, utility processing, and 
other processing services. 

• Transaction Processing: - Client uses vendor-provided information 
systems — including hardware, software and/or data networks — at 
vendor site or customer site, to process transactions and update client 
data bases. Transactions may be entered in one of four modes: 

- Interactive - Characterized by the interaction of the user with the 
system for data entry, transaction processing, problem solving and 
report preparation: the user is on-line to the programs/files stored on 
the vendor's system. 

- Remote Batch - Where the user transmits batches of transaction data 
to the vendor's system, allowing the vendor to schedule job execution 
according to overall client priorities and resource requirements. 

- Distributed Services - Where users maintain portions of an applica- 
tion data base and enter or process some transaction data at their own 
site, while also being connected through communications networks to 
the vendor's central systems for processing other parts of the 
application. 

- Carry-in Batch - Where users physically deliver work to a processing 
services vendor. 

• Utility Processing: Vendor provides basic software tools (language 
compilers, assemblers, DBMSs, graphics packages, mathematical 
models, scientific library routines, etc.), generic applications programs 
and or data bases, enabling clients to develop their own programs or 
process data on the vendor's system. 

• Other Processing Services: Vendor provides services — usually at 
vendor site — such as scanning and other data entry services, laser 
printing, computer output microfilm (COM), CD preparation and other 
data output services, backup and disaster recovery, etc. 

5. Systems Operations 

Systems operations involves the operation and management of all or a 
significant part of the user's information systems functions under a long- 
term contract. These services can be provided in either of two distinct 
submodes: 

• Professional Services: The vendor provides personnel to operate 

client- supplied equipment. Prior to 1990, this was a submode of the 
professional services delivery mode. 



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• Processing Services: The vendor provides personnel, equipment and 

(optionally) facilities. Prior to 1990, this was a submode of the 
processing services delivery mode. 

Systems operations vendors now provide a wide variety of services in 
support of existing information systems. The vendor can plan, control, 
provide, operate, maintain and manage any or all components of the 
user's information systems (equipment, networks, systems and/or appli- 
cation software), either at the client's site or the vendor's site. Systems 
operations can also be referred to as "resource management" or "facili- 
ties management." 

There are two general levels of systems operations: 

• PlatformI network operations - where the vendor operates the computer 

system and/or network without taking responsibility for the applica- 
tions 

• Application operations - where the vendor takes responsibility for the 

complete system, including equipment, associated telecommunica- 
tions networks, and applications software 

Note: Systems operations is a new delivery mode introduced in the 1990 
Market Analysis Program - Europe. It was created by taking the systems 
operations submode out of both processing services and professional 
services. No other change has been made to the delivery mode defini- 
tions, and the total forecast expenditures for these three delivery modes 
are identical to the total forecast expenditures of the two original modes 
before the breakout of systems operations. 

6. Systems Integration (SI) 

Systems integration is a business offering that provides a complete 
solution to an information system, networking or automation requirement 
through the custom selection and implementation of a variety of informa- 
tion system products and services. A systems integrator is responsible 
for the overall management of a systems integration contract and is the 
single point of contact and responsibiHty to the buyer for the delivery of 
the specified system function, on schedule and at the contracted price. 

To be included in the information services market, systems integration 
projects must involve some application processing component. In 
addition, the majority of cost must be associated with information sys- 
tems products and/or services. 



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INPUT 



The systems integrator will perform, or manage others who perform, 
most or all of the following functions: 

• Program management, including subcontractor management 

• Needs analysis 

• Specification development 

• Conceptual and detailed systems design and architecture 

• System component selection, modification, integration and 

customization 

• Custom software design and development 

• Custom hardware design and development 

• Systems implementation, including testing, conversion and post- 

implementation evaluation and tuning 

• Life cycle support, including 

- System documentation and user training 

- Systems operations during development 

- Systems maintenance 

• Financing 

7. Professional Services 

This category includes consulting, education and training, and software 
development. 

• Consulting: Services include management consulting (related to 
information systems), information systems consulting, feasibility 
analysis and cost-effectiveness studies, and project management assis- 
tance. Services may be related to any aspect of information systems, 
including equipment, software, networks and systems operations. 

• Education and Training: Products and services related to information 
systems and services for the professional and the end user, including 
computer-aided instruction, computer-based education, and vendor 
instruction of user personnel in operations, design, programming, and 
documentation. 

• Software Development: Services include user requirements definition, 
systems design, contract programming, documentation and implemen- 
tation of software performed on a custom basis. Conversion and main- 
tenance services are also included. 

8. Network Services 

Network services typically include a wide variety of network-based 
functions and operations. Their common thread is that most of these 
functions could not be performed without network involvement. Net- 
work services is divided into two major segments: Electronic Informa- 
tion Services, which involve selling information to the user, and Network 



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Applications, which involve providing some form of enhanced transport 
service in support of a user's information processing needs. 

• Electronic Information Services 

Electronic information services are data bases that provide specific 
information via terminal- or computer-based inquiry, including items 
such as stock prices, legal precedents, economic indicators, periodical 
literature, medical diagnosis, airline schedules, automobile valuations, 
etc. The terminals used may be computers themselves, such as communi- 
cations servers or personal computers. Users typically inquire into and 
extract information from the data bases. Although users may load 
extracted data into their own computer systems, the electronic informa- 
tion vendor provides no data processing or manipulation capability and 
the users cannot update the vendor's data bases. 

The two kinds of electronic information services are: 

- On-line Data Bases - Structured, primarily numerical data on eco- 
nomic and demographic trends, financial instruments, companies, 
products, materials, etc. 

- News Services - Unstructured, primarily textual information on 
people, companies, events, etc. 

While electronic information services have traditionally been delivered 
via networks, there is a growing trend toward the use of CD ROM optical 
disks to support or supplant on-line services, and these optical disk-based 
systems are included in the definition of this delivery mode. 

• Network Applications 

- Value-Added Network Services (VAN Services) - VAN services 'die 
enhanced transport services which involve adding such functions as 
automatic error detection and correction, protocol conversion, and 
store-and-forward message switching to the provision of basic net- 
work circuits. 

While VAN services were originally provided only by specialized VAN 
carriers (Tymnet, Telenet, etc.), today these services are also offered by 
traditional common carriers (AT&T, Sprint, etc.). Meanwhile, the VAN 
carriers have also branched into the traditional common carriers' markets 
and are offering unenhanced basic network circuits as well. 



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input's market definition covers VAN services only, but includes the 
VAN revenues of all types of carriers. 

• Electronic Data Interchange (EDI) - Application-to-application ex- 
change of standardized business documents between trade partners or 
facilitators. This exchange is commonly performed using VAN ser- 
vices. Specialized translation software is typically employed to convert 
data from organizations' internal file formats to EDI interchange 
standards; this software may be provided as part of the VAN service, or 
may be resident on the organization's own computers. 

• Electronic Information Exchange (EIE) - Also known as Electronic 
Mail (E-Mail), EIE involves the transmission of messages across an 
electronic network managed by a services vendor, including facsimile 
transmission (FAX), voice mail, voice messaging, and access to Telex, 
TWX, and other messaging services. This also includes bulletin board 
services. 

• Other Network Services - This segment contains videotex and pure 
network management services. Videotex is actually more a delivery 
mode than an application. Its prime focus is on the individual as a 
consumer or in business. These services provide interactive access to 
data bases and offer the inquirer the capability to send as well as re- 
ceive information for such purposes as home shopping, home banking, 
travel reservations, and more. 

Network management services included here must involve the vendor's 
network and network management systems as well as people. People- 
only services, or services that involve the management of networks as 
part of the broader task of managing a user's information processing 
functions, are included in systems operations. 



Vendor Revenue and The size of the information services market may be viewed from two 
User Expenditure perspectives: vendor (producer) revenues, and user expenditures. While 

Conversion primary data for INPUT'S research is vendor interviews, INPUT 

defines and forecasts the information services market in terms of end- 
user expenditures. End-user expenditures reflect the markup in producer 
sales when a product such as software is delivered through indirect 
distribution channels, such as original equipment manufacturers (OEMs), 
retailers and distributors. The focus on end-user expenditure also elimi- 
nates the double counting of revenues which would occur if sales were 
tabulated for both producer (e.g., Lotus) and distributor (e.g., 
BusinessLand). 

For most delivery modes, vendor revenues and user expenditures are 
fairly close. However, there are some significant areas of difference. 
Many microcomputer software products, for example, are marketed 



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through indirect distribution channels. To capture the valued added 
through these indirect distribution channels, adjustment factors which 
incorporate industry discount ratios are used to convert estimated infor- 
mation services vendor revenues to end-user expenditures. 

For some delivery modes, including software products, systems integra- 
tion and turnkey systems, there is a significant volume of intra-industry 
sales. For example, systems integrators purchase software and subcon- 
tract the services of other professional services vendors. And turnkey 
vendors incorporate purchased software into the systems they sell to end 
users. 



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Vendor Questionnaire 



Introduction 

INPUT is a market planning consultancy, specialising in the software and services industries. 

The purpose of my call is to identify the manager responsible for market planning and strategy of 
your Professional Services activities - areas such as IT consultancy, custom software development, 
software maintenance and education and training. 

Are you the right person? Who else then? 

Can you spare some time to answer a few questions on the critical issues facing your business which 
relate to professional services? Please confirm your name, position and address for me. 

(We will be sending you a copy of the Executive Summary of the report as a thank you for your 
contribution). 

Background Information 

1. Could you indicate the size of your organisation - number of staff: 

2. Total Annual Turnover in Europe: Year:__ 

3. Proportion from Software and Services: 



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Can you tell me what proportion of your business fits the following categories of software and 
services defined by us at INPUT. 

Growth Rates 
Proportion (Percent) Importance 

(Percent) Current Future Rank (1-5) 

4. Professional Services 

(e.g., consulting) 

5. Applications Software 

6. Turnkey Systems . 

7. Processing Services 

8. Network Applications 

(EDI, EFT) 

9. Education and Training 

10. Electronic Information 

11. Systems Software 

12. Customer Services 

13. Systems Operations 

-14. Systems Integration 

15. What are your current and future growth expectations in these sectors? (Complete next two 
columns above). 

16. On a scale of 1 (unimportant) to 5 (vital) how would you rank each type of business in 
importance to your future? (Complete final column) 

Professional Services 

17. For Professional Services what is your main Westem European Market (M), and other 
European Markets (O). 

Swi Aus Bel Ned Era Ger UK Ita Yug Gre Spa Por Nor Dk Swe Fin 

18. Which of these do you expect to contribute most to your profits? 



76 



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19. What do you see as the most important opportunities or challenging issues facing your 

professional services business over the next few years? (Economic, Business, Technology, 
Applications, Outsourcing, etc.) 



20. What are the major threats which might limit your success in Professional Services? 
Internal External 



Software Maintenance 

Many users experience a heavy software maintenance work load. Some vendors are now contracting 
to take on this work, freeing the client to use his own staff on new developments. Do you offer a 
service to handle your clients' software maintenance? 

Yes No Plan to 



If YES or PLAN TO then: 

21. What is the best way to resource this business? Score 1 to 5 

22. Dedicated team/profit centre 1 2 3 4 5 

23. Part of systems operations (e.g., FM) business 1 2 3 4 5 

24. Within industry sector groups 1 2 3 4 5 

25. Locally resourced contract by contract 1 2 3 4 5 

26. Centrally resourced contract by contract 1 2 3 4 5 

27. Other 1 2 3 4 5 



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What is the best way to sell this service? 1 2 3 4 5 

28. Packaged as a specific service 1 2 3 4 5 

29. Packaged customer by customer 1 2 3 4 5 

30. Specialised sales staff 1 2 3 4 5 

31. Special incentives for account managers 1 2 3 4 5 

32. Other 1 2 3 4 5 

33. What are your software maintenance revenues?(Currency) /pa 

34. What growth rate have you experienced? %pa 

35. What growth rate are you planning for? %pa 

36. How profitable is this business today (1-5)? 1 2 3 4 5 
-.37. How profitable will it be in future (1-5)? 1 2 3 4 5 



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Custom Software Development 

Changing client expectations, new products, new methods, new tools, lower budgets, staff shortages, 
and so on are the driving forces changing the face of custom software development. 

Please rank the following driving forces according to their importance and their effect on the growth 
rate of custom software development in your business. (1 = unimportant, 5 = very important) 





Custom Software 
Driving Forces 


Growth 
Rate 


Ranking 
Importance 


38. 


Lower client budgets 


Up/Same/Down 


1 


2 


3 


4 : 


39. 


Lower competitor prices 


Up/Same/Down 


1 


2 


3 


4 : 


40. 


Shorter competitor timescales 


Up/Same/Down 


1 


2 


3 


4 : 


41. 


Better, richer application packages 


Up/Same/Down 


1 


2 


3 


4 ; 


42. 


Kernel/blueprint applications 


Up/Same/Down ^ 


1 


2 


3 


4 ; 


43. 


Modem software languages/databases 


Up/Same/Down 


1 


2 


3 


4 ; 


44. 


Modem software tools 


Up/Same/Down 


1 


2 


3 


4 ; 


45. 


Standards and methodologies 


Up/Same/Down 


1 


2 


3 


4 ; 


46. 


Quality improvements 


Up/Same/Down 


1 


2 


3 


4 ; 


47. 


High costs of training staff 


Up/Same/Down 


1 


2 


3 


4 ; 


48. 


Shortage of skilled staff 


Up/Same/Down 


1 


2 


3 


4 ; 


49. 


Size/complexity of projects growing 


Up/Same/Down 


1 


2 


3 


4 : 


50. 


Other 


Up/Same/Down 


1 


2 


3 


4 : 



That's all I wanted to ask at this stage. Very many thanks for your time. May 1 call you again to 
clarify any point of detail? Are there any questions you'd like to put to me? 

Thanks once again. 



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■ s 



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Detailed Country Forecast 
Database, Local Currency 



EXHIBIT C-1 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

France 





FF Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


3,295 


20 


3,950 


4,780 


5,750 


6,850 


8,200 


9,850 


20 


Education 
& Training 


2,475 


21 


3,000 


3,700 


4,500 


5,500 


6,700 


8,150 


22 


Software 
Development 


24,020 


20 


28,800 


34,400 


41,300 


49,600 


59,500 


71,400 


20 


Total 


29,790 


20 


35,750 


42,880 


51,550 


61,950 


74,400 


89,400 


20 



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EXHIBIT C-2 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Germany 





DM Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


495 


19 


590 


715 


855 


1,010 


1,180 


1,400 


19 


Education 
& Training 


705 


19 


840 


1,020 


1,220 


1,440 


1,680 


2,000 


19 


Software 
Development 


2,820 


18 


3,330 


4,000 


4,750 


5,560 


6,450 


7,600 


18 


Total 


4,020 


18 


4,760 


5,735 


6,825 


8,010 


9,310 


11,000 


18 



EXHIBIT C-3 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

United Kingdom 





£ Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
.1995 
CAGR 
(Percent) 


Consulting 


245 


22 


300 


370 


455 


575 


715 


890 


24 


Education 
& Training 


180 


22 


220 


270 


335 


415 


510 


630 


23 


Software 
Development 


1,310 


15 


1,510 


1,750 


2,050 


2,430 


2,860 


3,390 


18 


Total 


1 ,735 


17 


2,030 


2,390 


2,840 


3,420 


4,085 


4,910 


19 



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EXHIBIT C-4 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Italy 





Lira Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


345 


25 


430 


535 


670 


840 


1,040 


1,310 


25 


Education 
& Training 


185 


24 


230 


290 


360 


450 


560 


700 


25 


Software 
Development 


1,955 


19 


2,330 


2,795 


3,325 


3,930 


4,645 


5,490 


19 


Total 


2,485 


20 


2,990 


3,620 


4,355 


5,220 


6,245 


7,500 


20 



EXHIBIT C-5 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Sweden 





SeK Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 

(Percent) 


Consulting 


390 


21 


470 


575 


700 


860 


1,050 


1,280 


22 


Education 
& Training 


435 


20 


520 


630 


770 


930 


1,120 


1,350 


21 


Software 
Development 


2,200 


17 


2,570 


3,050 


3,600 


4,530 


4,990 


5,890 


18 


Total 


3,025 


18 


3,560 


4,255 


5,070 


6,320 


7,160 


8,520 


19 



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EXHIBIT C-6 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Denmark 





DK Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


325 


25 


405 


495 


610 


750 


920 


1,140 


23 


Education 
& Training 


95 


21 


115 


140 


170 


205 


250 


300 


21 


Software 
Development 


1.855 


18 


2,190 


2,560 


3,000 


3,500 


4,100 


4,800 


17 


Total 


2,275 


19 


2,710 


3,195 


3,780 


4,455 


5,270 


6,240 


18 



EXHIBIT C-7 



Professional Service Market Forecast in 

Local Currency by Market Segment, 1990-1995 

Norway 





NK Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


250 


18 


295 


350 


420 


500 


590 


705 


19 


Education 
& Training 


90 


17 


105 


125 


150 


180 


215 


255 


19 


Software 
Development 


1.400 


16 


1.620 


1,900 


2,220 


2,600 


3,040 


3,550 


17 


Total 


1,740 


16 


2,020 


2,375 


2,790 


3,280 


3,845 


4,510 


17 



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INPUT 



EXHIBIT C-8 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Finland 





FM Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


160 


25 


200 


240 


290 


350 


430 


530 


22 


Education 
& Training 


60 


17 


70 


80 


100 


120 


150 


180 


21 


Software 
Development 


875 


19 


1,040 


1,240 


1,480 


1,760 


2,090 


2,490 


19 


Total 


1,095 


20 


1,310 


1,560 


1,870 


2,230 


2,670 


3,200 


20 



EXHIBIT C-9 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Netherlands 





Dfl Millions 


Subsector 


1989 


1989- 
1990 
Growtti 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 

(Percent) 


Consulting 


275 


24 


340 


420 


520 


640 


800 


990 


24 


Education 
& Training 


235 


23 


290 


350 


430 


530 


660 


800 


23 


Software 
Development 


1,650 


15 


1,900 


2,220 


2,600 


3,070 


3,590 


4,190 


17 


Total 


2,160 


17 


2,530 


2,990 


3,550 


4,240 


5,050 


5,980 


19 



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EXHIBIT C-10 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Belgium 





BF Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


2,690 


24 


3,340 


4,150 


5,200 


6,450 


8,000 


10,000 


25 


Education 
& Training 


1.540 


23 


1,900 


2,300 


2,820 


3,450 


4,200 


5,200 


22 


Software 
Development 


15.260 


18 


18,000 


21,500 


25,600 


30,300 


35,200 


41,000 


18 


Total 


19,490 


19 


23,240 


27,950 


33,620 


40,200 


47,400 


56,200 


19 



EXHIBIT C-11 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Switzerland 





SF Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


80 


19 


95 


120 


140 


170 


210 


260 


22 


Education 
& Training 


120 


17 


140 


180 


220 


270 


330 


400 


23 


Software 
Development 


440 


16 


510 


610 


720 


850 


1,010 


1,200 


19 


Total 


640 


16 


745 


910 


1,080 


1,290 


1,550 


1,860 


20 



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EXHIBIT C-12 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Austria 





Sch Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


320 


22 


390 


470 


580 


700 


860 


1,050 


22 


Education 
& Training 


350 


23 


430 


530 


650 


780 


980 


1,200 


23 


Software 
Development 


1,800 


16 


2,090 


2,440 


2,860 


3,340 


3,910 


4,580 


17 


Total 


■ 2,470 


18 


2,910 


3,440 


4,090 


4,820 


5,750 


6,830 


19 



EXHIBIT C-13 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Spain 





Pta Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


7,250 


25 


9,060 


11,400 


14,400 


18,100 


22,800 


28,800 


26 


Education 
& Training 


5,600 


25 


7,000 


8,820 


11,100 


14,000 


17,60C 


22,200 


26 


Software 
Development 


38,800 


22 


47,300 


58,200 


71,600 


88,100 


108,000 


133,000 


23 


Total 


51,650 


23 


63,360 


78,420 


97,100 


120,200 


148,400 


184,000 


24 



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EXHIBIT C-14 



Professional Service Market Forecast in 
Local Currency by Market Segment, 1990-1995 

Rest of Europe 





$ Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


15 


20 


18 


22 


27 


30 


40 


50 


23 


Education 
& Training 


15 


20 


18 


23 


28 


35 


45 


55 


25 


Software 
Development 


95 


25 


119 


145 


175 


215 


265 


305 


21 


Total 


125 


24 


155 


190 


230 


280 


350 


410 


21 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 




Detailed Country Forecast Database, 
ECUS 



EXHIBIT D-1 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 

France 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 

(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


480 


20 


575 


696 


837 


997 


1,194 


1,434 


20 


Education 
& Training 


360 


21 


437 


539 


655 


801 


975 


1,186 


22 


Software 
Development 


3,496 


20 


4,192 


5,007 


6,012 


7,220 


8,661 


10,393 


20 


Total 


4,336 


20 


5,204 


6,242 


7,504 


9,017 


10,830 


13,013 


20 



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89 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT D-2 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 
Germany 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


241 


19 


288 


349 


417 


493 


576 


683 


19 


Education 
& Training 


344 


19 


410 


498 


595 


702 


820 


976 


19 


Software 
Development 


1,376 


18 


1,624 


1,951 


2,317 


2,712 


3,146 


3,707 


18 


Total 


1,961 


18 


2,322 


2,798 


3,329 


3,907 


4,541 


5,366 


18 



EXHIBIT D-3 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 
United Kingdom 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


331 


22 


405 


500 


615 


777 


966 


1,203 


24 


Education 
& Training 


243 


22 


297 


365 


453 


561 


689 


851 


23 


Software 


1,770 


15 


2,041 


2,365 


2,770 


3,284 


3,865 


4,581 


18 


Development 




















Total 


2,345 


17 


2,743 


3,230 


3,838 


4,622 


5,520 


6,635 


19 



90 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



EXHIBIT D-4 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 

Italy 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


230 


25 


286 


356 


446 


559 


692 


872 


25 


Education 
& Training 


123 


24 


153 


193 


240 


300 


373 


466 


25 


Software 
Development 


1,302 


19 


1,551 


1,861 


2,214 


2,617 


3,093 


3,655 


19 


Total 


1,654 


20 


1,991 


2,410 


2,899 


3,475 


4,158 


4,993 


20 



EXHIBIT D-5 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 
Sweden 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


53 


21 


63 


78 


94 


116 


142 


173 


22 


Education 
& Training 


59 


20 


70 


85 


104 


126 


151 


182 


21 


Software 
Development 


297 


17 


347 


412 


486 


611 


673 


795 


18 


Total 


408 


18 


480 


574 


684 


853 


966 


1,150 


19 



MEROE 



© 1991 by INPUT. Reproduction Prohibited. 



91 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT D-6 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 
Denmark 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 

(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


42 


25 


52 


63 


78 


96 


118 


146 


23 


Education 
& Training 


12 


21 


15 


18 


22 


26 


32 


38 


21 


Software 
Development 


238 


18 


281 


328 


385 


449 


526 


615 


17 


Total 


292 


19 


347 


410 


485 


571 


676 


800 


18 



EXHIBIT D-7 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 

Norway 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


31 


18 


37 


44 


53 


63 


74 


89 


19 


Education 
& Training 


11 


17 


13 


16 


19 


23 


27 


32 


19 


Software 
Development 


176 


16 


204 


239 


280 


327 


383 


447 


17 


Total 


219 


16 


254 


299 


351 


413 


484 


568 


17 



92 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT D-8 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 

Finland 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


33 


25 


41 


50 


60 


72 


89 


110 


22 


Education 
& Training 


12 


17 


14 


17 


21 


25 


31 


37 


21 


Software 
Development 


181 


19 


215 


256 


306 


364 


432 


514 


19 


Total 


226 


20 


271 


322 


386 


461 


552 


661 


20 



EXHIBIT D-9 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 
Netherlands 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


120 


24 


148 


183 


226 


278 


348 


430 


24 


Education 
& Training 


102 


23 


126 


152 


187 


230 


287 


348 


23 


Software 
Development 


717 


15 


826 


965 


1,130 


1,335 


1,561 


1 ,822 


17 


Total 


939 


17 


1,100 


1,300 


1,543 


1,843 


2,196 


2,600 


19 



MEROE 



© 1991 by INPUT. Reproduction Prohibited. 



93 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



EXHIBIT D-10 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 
Belgium 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


64 


24 


79 


98 


123 


153 


189 


236 


25 


Education 
& Training 


36 


23 


45 


54 


67 


82 


99 


123 


22 


Software 
Development 


361 


18 


426 


508 


605 


716 


832 


969 


18 


Total 


461 


19 


550 


661 


" 795 


951 


1,121 


1,329 


19 



EXHIBIT D-11 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 
Switzerland 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


44 


19 


53 


67 


78 


94 


117 


144 


22 


Education 
& Training 


67 


17 


78 


100 


122 


150 


183 


222 


23 


Software 
Development 


244 


16 


283 


339 


400 


472 


561 


667 


19 


Total 


■ 356 


16 


414 


506 


600 


717 


861 


1,033 


20 



94 



©1991 by INPUT. Reproduction Prohibited. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT D-12 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 

Austria 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


22 


22 


27 


33 


40 


49 


60 


73 


22 


Education 
& Training 


24 


23 


30 


37 


45 


54 


68 


83 


23 


Software 
Development 


125 


16 


145 


170 


199 


232 


272 


318 


17 


Total 


172 


18 


202 


239 


284 


335 


400 


475 


19 



EXHIBIT D-13 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 

Spain 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


56 


25 


70 


88 


111 


140 


176 


222 


26 


Education 
& Training 


43 


25 


54 


68 


86 


108 


136 


171 


26 


Software 
Development 


299 


22 


365 


449 


552 


679 


833 


1,025 


23 


Total 


398 


23 


489 


605 


749 


927 


1,144 


1,419 


24 



MEROE 



©1991 by INPUT. Reproduction Prohibited. 



95 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 



INPUT 



EXHIBIT D-14 



Professional Service Market Forecast in 
ECUS by Market Segment, 1990-1995 
Rest of Europe 





ECU Millions 


Subsector 


1989 


1989- 
1990 
Growth 
(Percent) 


1990 


1991 


1992 


1993 


1994 


1995 


1990- 
1995 
CAGR 
(Percent) 


Consulting 


18 


20 


22 


27 


33 


36 


48 


60 


23 


Education 
& Training 


18 


20 


22 


28 


34 


42 


54 


66 


25 


Software 
Development 


114 


25 


143 


175 


211 


259 


319 


367 


21 


Total 


151 


24 


187 


229 


277 


337 


422 


494 


21 



96 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 




Inflation and Exchange Rates, 
Western Europe 



U.S. Dollar and ECU Exchange Rates, 1990 



Country 


Currencv 


U.S. Dollar 
Exchange 
Rate 


ECU 

Exchange 
Rate 


France 


FF 


6.17 


6.87 


Germany 


DM 


1.81 


2.05 


United Kingdom 


£ 


0.631 


0.74 


Italy 


Lira 


1,336.00 


1,502.00 


Sweden 


Sek 


6.39 


7.41 


Denmark 


DK 


7.05 


7.80 


Norway 


NK 


6.85 


7.94 


Finland 


FM 


4.21 


4.84 


Netherlands 


Dfl 


2.05 


2.30 


Belgium 


BF 


38.06 


42.29 


Switzerland 


SF 


1.61 


1.80 


Austria 


Sch 


12.77 


14.39 


Spain 


Ptas 


115.80 


129.70 


Rest of Europe 


$ 


1.00 


0.83 



© 1991 by INPUT. Reproduction Prohibited. 



97 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



Inflation Assumptions 



Country 


Mbbuinpiiuri 
1989-1994 


MboUiTipiIOi 1 

1990-1995 


Change 


rrdllOfc; 


A 




+U.O 




9 'S 

C ■ o 


4 




UllllcJU lAliiyUUIll 


O.O 


7 


+ 1 .o 


ltal\/ 
iidiy 


D 


7 


-1-1 n 

+ 1 .u 




u 


7 




L/Ul II 1 Idl r\ 


D 




-1 n 


iNUIWciy 


/I 


c; 


+ 1 .u 


PinlpinH 

1 MM dl IVJ 


'J 




D n 


iNcLI IcI Idl lUo 


O 
c. 


Q 

O 


4-1 n 

+ 1 .u 


Belgium 


3.5 


4 


+0.5 


Switzerland 


2.5 


5 


+2.5 


Austria 


3 


4 


+ 1.0 


Spain 


5.5 


6.5 


+ 1.0 


Rest of Europe 


8 


10 


+2.0 


European Average 


4.5 


5.5 


+ 1.0 



©1991 by INPUT. Reproduction Prohibited. 



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THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 




Forecast Reconciliation, 1989-1990 



Exhibit F-1 shows the changes made in this year's forecast in comparison 
to that of the previous year. The principal reasons for these changes are: 

• The general rise of European currencies against the U.S. dollar ac- 
counts for some 3.3% of the increase. 

• A re-evaluation of the market size resulting from the research carried 
out for this report. 

• The current indications of recession in Europe are assumed to be 
relatively short temi rather than applying throughout the whole five- 
year period. 

• The growth in the popularity of outsourcing (contracting out any or all 
of the whole range of IT activities) is assumed to continue as a reaction 
to recessionary pressures among user organisations and the growing 
complexity of system solutions. 

• Leading computer manufacturers are expected to increasingly focus the 
market's attention on their software and services as they try to compen- 
sate for falling hardware margins with new revenue streams. 



MEROE 



© 1991 by INPUT. Reproduction Prohibited. 



99 



THE WESTERN EUROPEAN MARKET FOR PROFESSIONAL SERVICES, 1990-1995 INPUT 



EXHIBIT F-1 



Professional Services Reconciliation of Market 
Forecast Western Europe 





1989 Market 


1994 fvlarket 






- 

Subsector 


1989 
Report 
{$ M) 


1990 
Report 
($ M) 


Variance 
(Percent) 


1989 
Report 
($ M) 


1990 
Report 
{$ M) 


Variance 
(Percent) 


1989- 
1994 

CAGR 
Forecast 

in 1989 


1990- 
1995 

CAGR 
Forecast 

in 1989 


IS Consultancy 


1,925 


1,990 


+3.4 


5,100 


5,410 


+6.1 


22 


22 


Education 
and Training 


1,570 


1,640 


+4.5 


4,120 


4,430 


+7.5 


21 


22 


Software 
Development 


11,590 


12,060 


+4.1 


28,600 


28,330 


-0.9 


20 


19 


Professional 

Services 

Total 


15,085 


15,690 


+4.0 


37,820 


38,170 


+0.9 


20 


20 



*Note that systems operations was reported partly within professional services in 1989. 



100 



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MERGE