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Drivers and future demand for T&M service models in IT services market

Hi community.

How can I analyse the drivers and future demand for time & material services in the IT services sector in Spain?

The question is that IT services in Spain follow a taxonomy similar to the following (for business to business):

  1. Time&Material services: in which the consultancy company invoices the client by the hour. In other words, a consultant is made available to the client and the client is billed on a monthly basis for the hours worked on the services. In this case, the nature of the service means that the risk is assumed by the client, as the consultant does not work by objectives and does not have a predefined scope.
  2. Managed services: in which a service contract is drawn up, normally application maintenance services, and a team is assembled, the members of which are usually under the decision of the service provider, since what is agreed is a quality of service.
  3. Fixed-price projects: in which the provider agrees with the client on the work to be done and will invoice for it at a price previously agreed in the contract. The risk is assumed by the supplier, since if the project deviates in time or effort, the cost is assumed by the supplier.
  4. Agile projects: which are invoiced by sprints. If a sprint is determined for example in 2 weeks, a price per sprint is fixed for the client. It is a service model that is similar to T&M or managed service, depending on the agreement between supplier and client regarding the members of the technical team. Except that a price is determined for the team for the 2-week sprint.

My question is directed to service type 1, i.e. T&M. I am interested in knowing how to develop a framework or approach to analyse the drivers that drive the demand for this type of service in Spain (or in Europe) taking into account the current reality, i.e., taking into account that we are in a pandemic, that the interests of customers are changing, and that service models are changing. The objective with the development of this framework or approach is to answer the following question:

Will Time&Material services in the IT market tend to become more demanded or will they become less and less demanded? It is understood that if they are less demanded it is because customers will prefer another type of service.

As a basic simplification of the proposed approach, we could be tempted to say that in the midst of a pandemic like the current one, companies are under much more pressure with prices and competition, which leads them to control costs more, and this is achieved with fixed services. But that is a huge oversimplification, and we would be making the mistake of underestimating the cons of fixed-price services (closed projects).

Hi community.

How can I analyse the drivers and future demand for time & material services in the IT services sector in Spain?

The question is that IT services in Spain follow a taxonomy similar to the following (for business to business):

  1. Time&Material services: in which the consultancy company invoices the client by the hour. In other words, a consultant is made available to the client and the client is billed on a monthly basis for the hours worked on the services. In this case, the nature of the service means that the risk is assumed by the client, as the consultant does not work by objectives and does not have a predefined scope.
  2. Managed services: in which a service contract is drawn up, normally application maintenance services, and a team is assembled, the members of which are usually under the decision of the service provider, since what is agreed is a quality of service.
  3. Fixed-price projects: in which the provider agrees with the client on the work to be done and will invoice for it at a price previously agreed in the contract. The risk is assumed by the supplier, since if the project deviates in time or effort, the cost is assumed by the supplier.
  4. Agile projects: which are invoiced by sprints. If a sprint is determined for example in 2 weeks, a price per sprint is fixed for the client. It is a service model that is similar to T&M or managed service, depending on the agreement between supplier and client regarding the members of the technical team. Except that a price is determined for the team for the 2-week sprint.

My question is directed to service type 1, i.e. T&M. I am interested in knowing how to develop a framework or approach to analyse the drivers that drive the demand for this type of service in Spain (or in Europe) taking into account the current reality, i.e., taking into account that we are in a pandemic, that the interests of customers are changing, and that service models are changing. The objective with the development of this framework or approach is to answer the following question:

Will Time&Material services in the IT market tend to become more demanded or will they become less and less demanded? It is understood that if they are less demanded it is because customers will prefer another type of service.

As a basic simplification of the proposed approach, we could be tempted to say that in the midst of a pandemic like the current one, companies are under much more pressure with prices and competition, which leads them to control costs more, and this is achieved with fixed services. But that is a huge oversimplification, and we would be making the mistake of underestimating the cons of fixed-price services (closed projects).

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Hi Roberto,

Yours is a layered question :). So let me pick out the key elements:

Taxonomy as you say- T&M, MS, Fixed Price etc

This is not specific to Spain or Europe, but used world over by organisations depending on the type of project, resourcing, cost, budget & quality requirements

T&M

This is typically used when its diffcult to accurately nail the scope of the project or the client just wants resources (think bodyshopping/bums on seats) to fill gaps. There are pros & cons to this, and personally I have not come across any research or PoV to suggest that over time this will be more in demand. I am happy to help you with detail of this if you are keen as this is huge subject in itself. But there is plenty of material online on this

Drivers for T&M

  • Skills gaps that organisaiton cant fill themselves or immediate hiring
  • Scope of project can change over time, so a billing by day & effort model works
  • Client/organisation willing to take on more risk
  • Timelines are short and some work needs to be done quickly

Trends

World of IT is shifting to agile (it will never be 100% agile though), gone are the days where organisations will wait many weeks/months before a project starts to deliver value. Getting something (a minimum viable product) quickly and improving it is Agile. Then if you make a mistake, you can course correct quickly via the sprints.

I am personally seeing a lot of T&M Agile contracts and also Fixed-Price Agile contracts in the industry.

Manages Services kicks in once deployment is complete and the organisation needs maintenance, support, continuous improvement. Typically all large IT projects will have MS built it for a certain duration.

There isnt a one size fits all approach as IT is a complex domain.

Happy to help more so feel free to shoot me direct message.

Hi Roberto,

Yours is a layered question :). So let me pick out the key elements:

Taxonomy as you say- T&M, MS, Fixed Price etc

This is not specific to Spain or Europe, but used world over by organisations depending on the type of project, resourcing, cost, budget & quality requirements

T&M

This is typically used when its diffcult to accurately nail the scope of the project or the client just wants resources (think bodyshopping/bums on seats) to fill gaps. There are pros & cons to this, and personally I have not come across any research or PoV to suggest that over time this will be more in demand. I am happy to help you with detail of this if you are keen as this is huge subject in itself. But there is plenty of material online on this

Drivers for T&M

  • Skills gaps that organisaiton cant fill themselves or immediate hiring
  • Scope of project can change over time, so a billing by day & effort model works
  • Client/organisation willing to take on more risk
  • Timelines are short and some work needs to be done quickly

Trends

World of IT is shifting to agile (it will never be 100% agile though), gone are the days where organisations will wait many weeks/months before a project starts to deliver value. Getting something (a minimum viable product) quickly and improving it is Agile. Then if you make a mistake, you can course correct quickly via the sprints.

I am personally seeing a lot of T&M Agile contracts and also Fixed-Price Agile contracts in the industry.

Manages Services kicks in once deployment is complete and the organisation needs maintenance, support, continuous improvement. Typically all large IT projects will have MS built it for a certain duration.

There isnt a one size fits all approach as IT is a complex domain.

Happy to help more so feel free to shoot me direct message.

(edited)

Thank you Adi for your ideas. — Roberto on Apr 10, 2021

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