1. NACE / ISIC 62 Computer programming, Consultancy And related activities Updated Sector Paper 27 th Voorburg Group Meeting October 1-5, 2012 Warsaw, Poland Ruth Vizner, CBS Israel

2. 2012 Voorburg meeting, Warsaw2 Topics Introduction Industry Overview Classification Turnover Statistics SPPI Summary and Main Conclusion

3. 2012 Voorburg meeting, Warsaw3 Introduction History For Computer During the 1990's studies from UK, Canada, New Zealand and Czechoslovakia 2002, 2003 Mini Presentation on SPPI and output from INSEE, UK, Sweden, Australia and Canada 2007, 2008 papers from France, Sweden, Netherland and the United States, results with a Sector Paper on Computer Programming, Consultancy and Related Activities by the BLS.

4. 2012 Voorburg meeting, Warsaw4 Results of Survey among NSOs ISIC/NACE62SPPITURNOVER 6201 Computer Programming Activities 1521 6202 Computer Consultancy and Computer Facilities Activities 1621 6209 Other Information Technology Services 1021

5. 2012 Voorburg meeting, Warsaw5 Industry Overview The industry is growing in the last years The market is dynamic, providing different service products companies rapidly change the structure and content of services provided unique, bundled services Secondary activities subcontracting, off-shoring providing services in-house

6. 2012 Voorburg meeting, Warsaw6 Industry Overview Revenues in 2010 Germany - 80.8 billion euro Japan - 11.4 trillion yen Canada - 33.2 billion dollar Spain - 21.8 billion euro Korea - 23.9 billion dollar

7. 2012 Voorburg meeting, Warsaw7 Size of industry Distribution of revenues among groups ISIC 62 ISICAustriaSwedenNorwayEstoniaHungarySlovakia 620146.44619.9563331 620242.84079.7242824 620910.8140.4203945 ISICGermanyCroatiaSingaporeCzechKoreaSlovenia 620145.567,54845.770.733 620235.317.144.440.329.347 620919.215.47.64-20

8. 2012 Voorburg meeting, Warsaw8 Classification - Industry ISIC 4NACE 2 6201 Computer Programming Activities 62.01 Computer Programming Activities 6202 Computer Consultancy and Computer Facilities Activities 62.02 Information Technology Consultancy Activities 62.03 Computer Facilities Management Activities 6209 Other Information Technology Services 62.09 Other Information Technology Service Activities

9. 2012 Voorburg meeting, Warsaw9 Classification - Industry NACE 2 / ISIC 4NAICS US/Canada 6201 Computer Programming Activities 541511 Custom Computer Programming Services 541512 Computer System Design Services 6202 Computer Consultancy and Computer Facilities Activities 541513-Computer Facilities Management Services 6209 Other Information Technology Services 541519 Other Computer Related Services

10. 2012 Voorburg meeting, Warsaw10 Classification - Industry all three classification systems are similar. NACE and NAICS specify Computer Facilities Management Services as a separate industry. ISIC combines this business activity with Computer Consultancy.

11. 2012 Voorburg meeting, Warsaw11 Classification – Products CPC vs. NAPCS CPCNAPCS 83131 IT technical consulting services35000 IT technical consulting services 83132 IT technical support services35501 Software related technical support services 35502 Hardware related technical support services 35503 Combined hardware and software support services 35504 Auditing and assessing computer operations 35505 Data recovery services 35506 Disaster recovery services, business continuity services 35507 Other IT support services

12. 2012 Voorburg meeting, Warsaw12 Classification – Products CPC vs NAPCS CPCNAPCS 83141 IT design and development services for applications 35050 Custom computer application design and Development services 35051 Web site design and development services 35052 Database design and development services 35053 Customization and integration of cross-industry application software 35054 Customization and integration of vertical market application software 35056 Other custom application design and development services 83142 IT design and development for networks and systems 35101 Computer network security design and development services 35102 Computer network design and

13. 2012 Voorburg meeting, Warsaw13 Classification - Products CPA vs ISIC ISIC Rev. 4 CPA 2008 Computer Programming, Consultancy and related Services 620162.01Computer Programming Services62.01.11 IT design and development for application 62.01.12 IT design and development for network 62.01.21 Computer game’s software original 62.01.29 Other software original 620262.02Computer Consultancy Services62.02.10 Hardware consultancy services 62.02.20 System and software consultancy services 62.03Computer facilities management services 62.02.30 IT technical support services 62.03.11 Network management services 62.03.12 Computer systems management services 620962.09Other information technology and computer services 62.09.10 Installation services of computer and peripheral equipment 62.09.20 Other information technology and computer services i.e.

14. 2012 Voorburg meeting, Warsaw14 Turnover Statistics progress  All countries collect and publish turnover data  Most countries collect turnover data at the product level and publish at the industry level  All counties moved to the new classification  European counties use NACE v. 2 and CPA 2008.  North America countries use NAICS and NAPCS  Australia use ANZIC  Some countries use a local version based on ISIC Rev.4 (Japan uses JSIC, Korea KSIC, Singapore SSIC)

15. 2012 Voorburg meeting, Warsaw15 Turnover Statistics data collection Most countries use survey The frame is the Business Register Method for selection of companies is stratified sampling according to size of turnover / number of employee / combination. Some use combination of survey and administrative data Few countries use census. detailed data of industry and product level are available on SBS statistics

16. 2012 Voorburg meeting, Warsaw16 Turnover Statistics Challanges Challenges stem from the dynamic nature of the industry and the change in classification  Finding a predominate activity according to the new classification  Merger and acquisitions and new products and services  Outsourcing  Companies have a lot of secondary activities  Confidentiality issues for multinationals companies

17. 2012 Voorburg meeting, Warsaw17 Recommended Approach CategoryData SourceLevel of Detaildisadvantage s advantages BestSurvey/CensusIndustry turnover detailed and product turnover detail -Most expensive - response burden detailed information on a timely manner GoodSurvey/Census or combination Industry detail only Expensive -Industry detail not sufficient -less response burden MinimumAdministrative (tax data, industry association data etc.,) Industry detail only -Least expensive -Little or no respondent burden - Imperfect Estimates - Not timely

18. 2012 Voorburg meeting, Warsaw18 SPPI 16 of 21 countries have SPPI 10 of 16 countries cover all 3 groups 16 countries cover 6201 and 6202 6 countries don’t cover 6209 12 of 16 countries collect prices and publish on a quarterly basis 3 countries, Czech, Japan and Korea, collect prices monthly and in Canada the index is Annual.

19. 2012 Voorburg meeting, Warsaw19 Pricing method The most dominant is charge out rate  Characteristics of workers: professions, skill level, experience  Characteristics of service: kind of service, type of software, project and clients  All countries uses time based method for group 6201 computer programming services. For the other groups other pricing methods are used: contract pricing, direct use of prices of repeated services

20. 2012 Voorburg meeting, Warsaw20 Pricing method ExampleSub- group Time-basedHourly charge-out rates for chief programmer for analysis 6201 Direct use of prices for repeated services Security services for network 6209 Percentage feesPercentage of software licenses6202

21. 2012 Voorburg meeting, Warsaw21 Main pricing issues  subcontracting or outsourcing - charge out rates might not be good estimates of real price change when part of the job outsourced, especially when the subcontractor is an off-shore establishment. The solution is to take in account the off shoring effect and to reflect the change in labor composition in the charge out rates.  internal prices - companies that offer IT services in- house. Company-internal prices are in general difficult to handle for index calculation because the price development isn’t always comparable to the development of market prices.  Changes in the labor productivity - are to be excluded from the charge out rates.

22. 2012 Voorburg meeting, Warsaw22 Recommended Approach CategoryPricing methodData type in the survey and frequency AdvantageDisadvantages BestPrices for repeated services, - Time-based methods Real transaction prices, The price for the time spent on the service is used as a proxy for the real price The information is available, specification allow comparison over time. response burden is moderate Not possible for unique services (costume software) May not reflect productivity changes Specification must be defined to Keep GoodModel pricing Contract pricing Price based on expert estimates. By using a fictitious service or a real service as a model Holding constant quality High response burden Need to be updated frequently The contract must specify the service MinimumUnit valueRevenue and amount sold / time spend Least expensive lowest response burden Services must be sufficient homogeneous Price changes can be highly volatile

23. 2012 Voorburg meeting, Warsaw23 Summary Much progress has been done in the last years, since the last Sector Paper on Computer Services, both in SPPI and Turnover data All counties moved to the new industry classification The most dominant pricing method is charge out rates It is recommended that charge out rates will be based on detailed specification that identifies both the workers qualifications and the service definition Constant quality SPPI present a challenge for computer services. Future improvements include effort to improve company’s cooperation

24. Thank You Very Much! RUTH VIZNER MAIL: VIZNER@CBS.GOV.IL