Services lndustrie Beginning to Show Its Strength


The computer services industry is booming and should outgrow its "nondoting parent" - computer hardware - in 1975.

Computer services and net worldwide, general-purpose computer hardware shipments are expected to tie at about $7 billion in 1975 revenues.

The services industry has been showing about 50% stronger growth than hardware sales. The industry is youthfuI, lean - it shed a lot of baby fat in '69 and '70 and is learning well about the economies of scale.

There are no behemoths feeding upon the smaller competition - the gitans of this industry still generate less than $200 million in sales.

Computer services should fare especially well in this tightening economy as users' "capital spending" budgets generally have been slashed. But the services vendors, by placing increasingly greater emphasis on anaIytical and other decision-making/money-saving tools, continue to win a larger share of clients' operating budgets.

A quick look at the 1975 Adapso forecast for the computer services industry breaks that $7 billion down, with support services, including education, third-party leasing and maintenance and used computers garnering 30% followed by facilities management with 21%.

Network information services should edge ahead of batch service bureaus with 16.6% and 16.2% respectively, followed by software products, 9% and software services, 7.9%.

The data processing services segment, which generate about $5 billion of revenues this year, which is more than the anticipated 1975 net growth in U.S. hardware shipments.

There are about 1,700 U.S. vendors of computer services ranging from simple, source data conversion to total facilities management.

All of them, unlike in-house DP facilities, function as profit centers - a business in itself - and one that continually learns from and resells its experience.

The typical in-house system staff, in contrast, is constantly pioneering - trudging uphill, all the way. How many pyroll, inventory, financial reporting systems or even networks, does one organization need?

Beat of a Different Drummer

The pressures today on top management are not merely to cut DP costs, but to minimize overall costs.

The days of the chrome-plated; showcase-window computer and the grandiloquent management information system dream schemes are gone. Users have matured and are thoughtful, cost conscious and results-oriented Using outside services can offer several advantages.

A user pays for 100% of that in-house hardware configuration, but rarely ever uses 100% of what he has - even 50% of the time.

Services offer "variable processing power" and cost and without constant reconfiguring or major commitments.

It has been estimated that one out of five companies now uses a services organization exclusively for processing its data.

Another survey showed that well over half of the computer services industry revenue comes from large clients with sizable in-house installations.

New users are contracting for outside services at record rates in