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.
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.