Model for Indian IT Services

The Indian IT Service industry has seen some phenomenal growth numbers. This year, some of the bigger companies like Infosys and TCS continue to post gravity-defying growth figures. Growth has many implications for the industry – most of them positive. A not-so-positive fallout of growth is its impact on the staffing model.

Growth has a pretty direct relationship with two variables:

– Average experience of Project Managers
– Span of control in projects

To illustrate these relationships, I have created a staffing model for the IT Services industry. The model vastly simplifies the dynamics but is nevertheless a close approximation of reality.

Here is the spreadsheet. Courtesy of Zoho. Change the gradient and Growth values only. Reloading will reset all changes.

http://sheet.zoho.com/publish.do?docurl=ubVDbluHK93TUvKlhqUDh4yGjcxN0v6xO6I3WCQvbYPwNdUZiLQjeQ%3D%3D&name=jlXqOO0EyE4%3D

In this post, I will just describe the model. In the coming days, over multiple posts, I will talk about the conclusions that the model can help us reach.

Here are the assumptions:

– It models the total Indian IT Services industry rather than an individual company. To model a company, at a minimum, another variable, Attrition, will need to be included. For the total industry, it can be argued that excluding entry level hiring, net attrition is not significant.
– The model looks at billable resources only. Strictly speaking it is for billed resources with utilization held constant over time.
– Average bill rates have been assumed to be constant over time. Thus Revenue growth equals growth in billed person months.
– There are two tabs in the embedded spreadsheet. One assumes Managers to be of 4 to 6 years in experience. The other assumes them to be 5 to 7 years in experience. Senior people, over 6 or 7 years of experience, have been assumed to be in delivery management and non-billable.
– The Span or span of control is the number of Developers a Manager manages directly. Realistic values of Span vary from 5 to 10.
– The embedded spreadsheet is interactive, i.e. you can change the input values and see the new output values right there. There is no ‘Undo’ button, but if you want to go back to the original values, just reload the page.
– The way to work the model is to set a starting value of Span in Year 1. You do this by changing the value of ‘gradient’. Just remember that to reduce the value of Span, you need to increase the value of Gradient. Stick to Span values between 5 and 10. Outside of that isn’t realistic.
– Once you’ve set a value of Span in Year 1, you are now solving for an Optimum Growth rate. The Optimum Growth rate is the maximum value of Growth that does not result in Year 2 and Year3 Span values to exceed Year 1.

I hope you can play around with the model. If you reach any conclusions yourself, do post a comment. In future posts, we’ll have a more detailed discussion on the corollaries of this model.

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6 Responses to Model for Indian IT Services

  1. Siddharth says:

    Assuming that the Indian IT Services industry kicked off in 1995, the billable range extends upto 10 years atleast. This will increase everyone year. The % of non-billables is best esttimated as a fraction of total — it has nothing to do with years of experience. As the industry ages, the average age of each role increases.

    So, Basab, if you upload this excel again, please have 2 tabs
    5 to 10 years, and 10 to 15 years. The current ones are too close to each other anyways.

    Like

  2. raj says:

    Not sure if this is true:
    Quote
    One assumes Managers to be of 4 to 6 years in experience. The other assumes them to be 5 to 7 years in experience. Senior people, over 6 or 7 years of experience, have been assumed to be in delivery management and non-billable.
    Unquote
    My experience and I quote out of the place where I work, Project Managers start at 7/8 years experience and Senior Managers at 10+

    Raj

    Like

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  4. Satish says:

    Hi Basab,

    I am a direct/indirect victim of the model presented here. I work with one of the companies that post gravity defying growth figures and inside that, the unit I am with, has lil more than gravity that was pushed back to achieve growth and the targets for the coming years as you know are always higher…

    Problem: Average age of Project Managers

    Issues: Learnability is low
    Focus on process/quality is very low
    Expect faster growth & Pay packets
    Strong tech expertise/Less Management Skills
    Communication Issues – Language/Articulation skills

    Results in –>

    Attrition – Voluntary in nature

    Leadership – Average Project Manager is today not efficient, might be result oriented..

    Low quality product/delivery

    Also growth has resulted in people who are not PM’s doing PM Activites in 70% of the cases..

    Would Love to quote what happened today..

    I walked into the room of a Senior Project Manager to talk about few Quality related issues..

    ” Hey, I am not worried about the training program, tell me how can I get over it and you be happy, let me be happy.. ”

    These are my personal experiences and opinions

    Like

  5. Mohan says:

    Interesting post and analysis. Though one phrase kept coming to mind while reading the post: “Past performance is no guarantee of future results” .. and the phrase applies to both aspects of your argument

    Average experience of Project Managers: Yes, in the past people with a few years in the Indian software services sector would automatically get promoted to Project Management roles (dilbert’s law : being promoted to one’s level of incompetence?) However this may not be a sustainable model. Just look at the western IT model: a developer, for an IT shop may be content to remain a ‘hands on’ developer or programmer for years…as long as he is acquiring some new skills around technology and is well paid.

    Span of control in projects: There is only so many PMs an organization needs….and they better be really good. Which means that the span of control of better PMs will continue to increase.

    Again the phrase from financial investing “Past performance is no guarantee of future results” comes to mind. 😉

    Like

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