Sector Paper on Computer
Programming, Consultancy
and Related Activities
ISIC rev. 4 draft Sector 62
23rd Voorburg Group Meeting
Author: Michael Holdway
US Bureau of Labor Statistics
Outline


Introduction
Classification
• Structure
• Issues

Turnover
• Sources of Data
• Issues

SPPI
• Pricing Methods
• Issues

Summary
Introduction to Sector Paper


Provides a summary of international
progress and challenges in
measurement of turnover and
service producer price changes
Provides an overview of classification
structures
Classification

Industry
• ISIC 62 (rev 4.0 draft)
• NAICS 54151
• NACE 62 (rev 2.0)

Product
• CPC 831 (rev 2.0)
• NAPCS 35
Classification
ISIC 62
NAICS 54151 NACE 62
6201-Computer
Programming Activities
541511-Custom
Computer Programming
Services
62.01-Computer
Programming Activities
541512-Computer
System Design Services
62.02-Information
Technology Consultancy
Activities
541513-Computer
Facilities Management
Services
62.03-Computer
Facilities Management
Activities
541519-Other Computer
Related Services
62.09-Other Information
Technology Service
Activities
6202-Computer
Consultancy and
Computer Facilities
Activities
6209-Other Information
Technology Services
Classification
CPC Code and Subclass Title
NAPCS Code and Census Inquiry Title
83131 IT technical consulting services
35000 IT technical consulting services
83132 IT technical support services
35501
35502
35503
35504
35505
35506
35507
Software related technical support services
Hardware related technical support services
Combined hardware and software support services
Auditing and assessing computer operations
Data recovery services
Disaster recovery services, business continuity services
Other IT support services
83141 IT design and development
services for applications
35050
35051
35052
35053
35054
35056
Custom computer application design and development services
Web site design and development services
Database design and development services
Customization and integration of cross-industry application software
Customization and integration of vertical market application software
Other custom application design and development services
83142 IT design and development for
networks and systems
35101
35102
35151
35152
35153
Computer
Computer
Computer
Computer
Computer
network
network
systems
systems
systems
security design and development services
design and development, except security
design services
design and development services
integration services
83161 Network management services
83161 Computer systems management
services
35450 Information technology infrastructure and network management services
Classification
Primarily facilities management
(A)
• 24/7 computer and network
support
• 24/7 server support
• 24/7 network monitoring and
network management
• Network design and
implementation
• Network security
• Patch management, virus and
spyware protection
• Online license management
• Backup and recovery
• PC and printer setup
• Unlimited remote & on-site support
• Monthly fixed cost computer and
network support
• Built-in disaster recovery (no extra
charge)
• On-site within 4 hours or less
•Network engineers who can
communicate in Plain English, not
techie language
Primarily facilities
management (B)
• Network and Systems
Administration and Support
• Computer and Network
Troubleshooting
• Server Health Monitoring
• Data Backup
• Remote Connectivity - Branch
Offices and Remote Users
• Server Applications Monitoring
• Anti-Virus
• Spam Filtering Solutions
• Spyware and Malware Removal
• Security Audits & Management
• Disaster Recovery and High
Availability Solutions
• IT Asset Management and
Change Tracking
• 24x7 Automated Monitoring
• Custom and Flexible Solutions
to meet all your needs
Primarily computer
consulting (C)
• Evaluation of current
computer and network
technologies
• Researching computer
hardware / software
alternatives specific to the
organization
• Computer hardware and
application software sourcing
• Network design,
implementation,
maintenance, and training
• Management of existing
networks
• Network cabling
• Software setup
• Computer maintenance
• Internet connectivity
installation and support
Turnover

Sources of Data
• Administrative records, tax data, trade
association statistics & company reports

Sweden
• Surveys




France - annual survey of business
Netherlands – annual structural business &
quarterly business tendency surveys
US – 5 year economic census, annual &
quarterly surveys
Korea – annual and monthly surveys
Turnover

Sources of Data
• Regardless of source, minimum
requirement of annual data with
economic benchmarks
• More frequent data may be required for
national accounts
Turnover

Issues
• Comparability of estimates

ISIC 4.0 and NACE 2.0
• Rapid changes in industry composition


consolidation (buy outs/mergers)
New market entrants
• Shifts in outputs
• Own Account Software
Own Account Software




Defined as “in-house expenditures
for new or significantly enhanced
software created by business
enterprises or government units for
their own use”
No ISIC or NAICS industry
Measured in national accounts by
expenditures
Occurs in any industry
Services Producer Price Index

Pricing Methods
• Pricing based on working time

Charge out rates
• Model pricing


Developed from establishment data
Developed from trade association data
• Direct use of repeated services
• Contract pricing
Services Producer Price Index

Pricing Methods Choices
• Variety of very different services which
require different pricing methods
• Record keeping practices vary
• “Obligation of means” versus
“Obligation of results”
Services Producer Price Index

Prices based on working time
• Charge out rates

In addition to hourly rates, also
require:
• description of services provided

For example, type of program, features of
program
• other price determining characteristics
of the rates

For example, include programming
languages, skill level of programmers
Services Producer Price Index

Transfer pricing issues
• May not represent market transactions
• Long standing issue for all industries
• However, if captive entities revenue are
included in national accounts, the SPPI
should include transfer prices
Services Producer Price Index

Out of sample bias
• Laspeyers formula versus current
outputs
• Frequent refreshing of sample/services
• Quality adjustment necessary
Services Producer Price Index

Advantages of frequent refreshing of sample
• Rapid new services development
• Frequent new entrants into industries
• Consolidation/mergers

Disadvantages of frequent refreshing of sample
• Costly sampling/service selection
• Difficulty in identifying new entrants
• Length of time from sampling to index introduction
Services Producer Price Index

Quality adjustment issues
• Frequent violation of match model


Custom service
Changes to repeated services
• BEA function point analysis
• Most common methods


Overlap
Estimation of quality/price changes
Services Producer Price Index

Outsourcing issues
• Pricing based on working time (charge out rates)
 Do charge out rates represent poor estimates
of prices when companies outsource or
contract out parts of a computer services job to
a subcontractor (off shore or not, affiliated or
not)?
 If the charge out rates do not reflect the price
to the client, then they are not appropriate for
SPPI (same as list price – can only be used if
transactions actually occur at that price)
Services Producer Price Index

Outsourcing issues
• Pricing based on working time (charge out
rates)


If the service stays the same and charge out rates
remain the same, then there is no price change even
though there are lower input costs
If service stays the same and charge-out rates are
lowered due to outsourcing, then this is a price
decline
Services Producer Price Index

Outsourcing issues
• Pricing based on working time

(charge out rates)
If there is a change in service (violation of
matched model), need to quality adjust to
isolate the price change from quality
change, based on the change in the service
provided not due to outsourcing
Services Producer Price Index

Outsourcing issues
• Pricing based on working time (charge out rates)

If the service changes due to outsourcing, on
what should the quality adjustment be based?
Can a reliable value be estimated for quality
adjustment?
Summary of Countries Measuring Computer
Programming, Consultancy and
Related Activities*
ISIC 6201
# of Countries
ISIC 6202
# of Countries
ISIC 6209
# of Countries
Industry-level prices calculated
8
9
6
Industry-level turnover calculated
12
13
12
PPI Details ≥ CPC***
1
1
1
PPI Details  CPC soon**
0
0
0
Turnover details ≥ CPC
4
5
4
Turnover details ≥ CPC soon**
1
2
2
Industry-level turnover and prices aligned
6
7
5
Industry-level turnover and prices aligned
soon**
3
3
2
No Direct industry coverage for prices
and/or turnover
9
8
11
* From the Voorburg Group Country Progress Report: 2007 (18 countries reporting)
** In development