INDUSTRY PROFILE Information Technology
QUARTERLY UPDATE 9/21/2009
SIC CODES: 7371, 7373 NAICS CODES: 5415
Industry Overview
The US information technology (IT) industry includes about 95,000 companies that generate about $175 billion in annual revenue. Large companies include Accenture, Computer Sciences Corporation (CSC), and the technology consulting arms of IBM and Hewlett-Packard. The facilities outsourcing segment of the industry is highly concentrated: the 50 largest companies hold more than 80 percent of the market. The rest of the industry is fairly fragmented: the 50 largest companies hold less than half the market. Related industries covered in separate profiles include manufacturers of computer hardware, software, and telecommunications equipment, as well as providers of Internet and telecommunications services. COMPETITIVE LANDSCAPE Demand for IT services is driven by rapid technological advances, but spending for these expensive products depends on the health of the US economy. The profitability of companies depends on offering technical expertise, innovative services, and effective marketing. Large companies have advantages in broad service offerings and global reach, which give them the ability to provide outsourcing services to big corporate customers. Small companies can compete effectively by specializing in market niches or by partnering with larger companies that want to broaden their mix of services. Average annual revenue per employee is close to $160,000. PRODUCTS, OPERATIONS & TECHNOLOGY IT companies mainly provide consulting, systems integration, data processing, and technology outsourcing services to business customers. Roughly half of industry revenue comes from consulting and systems integration activities, while the rest comes from outsourcing. These companies help clients use computers, software, and communications systems more efficiently. In addition to providing advice on using computer systems, they frequently recommend hardware and software systems to their customers. Firms provide a variety of associated services, including business function outsourcing, data warehousing, systems planning, enterprise resource planning, and training. Companies may be pure consulting operations, or also operate outsourcing and data processing functions, such as IBM and Hewlett-Packard. The types of contracts firms have with customers depend on the service being rendered. Data processing and outsourcing contracts typically last for many years because of the substantial initial cost. In a typical outsourcing contract, the IT company operates (and may own) the computer systems of a client, either operating them at the customer's location or at a centralized data center that serves multiple clients. Consulting contracts are shorter, usually lasting less than a year, and typically specify either a fixed project cost or services billed at hourly rates. IT operations most often begin at a service provider's website. Large companies like IBM's Global Services division use the Internet to introduce prospective clients to their services. Once a contract is signed, an IT provider can assist customers with on-site staff, live teleconferencing or Webcast tutorials, and longer-term online support (via e-mail and instant messaging between IT staff and customers). Primary applications for IT include aligning IT initiatives with overall business goals, improving IT infrastructure efficiency, and creating a flexible service-oriented architecture that combines systems development with business processes. SALES & MARKETING
The customers of IT firms are often the IT departments of corporations and government agencies. Companies typically offer time-and-materials contracts or fixed-price contracts, or some combination of both. Major contracts are often secured after a bidding process. For contracts that also involve the purchase of hardware or software, consultants often partner with a specific hardware or software company to provide a comprehensive bid. Marketing is largely through personal selling by executives and senior managers, or through reputation within a particular industry. Because the most effective use of computer technology is different for different industries, IT companies often specialize in a particular industry, such as healthcare or financial services, or in segments within an industry. Large companies have service groups for different industries and market their services to those groups specifically. Due to the complexity of their services, companies often customize their prices for each service, accounting for the required skills and the estimated cost of providing the service. Competition comes in multiple forms, including offshore providers, service arms of large global technology firms, niche providers, and companies that rely on their own internal IT resources. Pricing can be competitive, particularly among large IT providers. Competitors put significant investments in creating closed and proprietary IT platforms in order to lock customers into a specific IT system. That can drive up prices as a result. Firms also work to develop differentiated and premium IT products that allow them to charge more. FINANCE & REGULATION Since IT companies mainly provide expertise, labor is their largest expense. Companies typically have highly variable cash flow that is dependent on timely receivables management, investment opportunities and large outsourcing contracts, and effective capital management. Accounts receivable are often high, as much as 30 or 40 percent of annual revenue. Companies often use forward contracts to hedge against future risk, such as fluctuations in foreign currency. Data processing and outsourcing services providers have large investments in computer centers and periodically must make additional investments to upgrade their computer systems. IT companies that do business with the US government fall under various governmental contracting and accounting regulations, including federal acquisition regulations, cost accounting standards, and federal agency audits. Companies that have extensive overseas operations must also abide by international and local country regulations covering trade and labor conditions, among others. REGIONAL & INTERNATIONAL ISSUES In the US, the number of IT service professionals in a state is inversely related to the average hourly rates for IT service. Fewer IT consultants in states like Wyoming and Alaska mean longer wait times for service and higher rates. Many IT companies have substantial foreign revenues since computer systems are heavily used in many countries outside North America. Some IT companies engaged in data processing or the outsourcing of computing or programming activities have established operations in foreign countries like India, where labor costs are much lower. HUMAN RESOURCES IT companies need technologically skilled labor, and finding and keeping such labor is an ongoing concern. Firms find entry-level employees among recent college graduates who have degrees in computer science or mathematics. IT skills and experience bring premium pay: average hourly industry wages are significantly higher than the national average. A few key people often determine the success of a smaller firm. Annual turnover is an industry-wide issue, and firms have significant expenses for finding, training, and retaining qualified labor. The IT industry’s safety record is excellent, with an extremely low incident of injuries. The strong growth in demand for IT professionals in the past decade prompted many firms to recruit abroad. Firms sponsor foreign professionals and bring them to the US through visas under the H-1B program, which can allow visa holders to work in the US for up to six years. Industry Employment Growth Bureau of Labor Statistics
Average Hourly Earnings & Annual Wage Increase Bureau of Labor Statistics
Recent Developments INDUSTRY INDICATORS Total US consumer spending, a driver for the IT needs of consumers, fell a slight 0.8 percent, primarily from nondurable goods expenditures, in July 2009 compared to the same month in 2008. US corporate profits, an indicator for corporate investment in information technology, fell 10.9 percent in the second quarter of 2009 compared to the same period in 2008.
MONTHLY NEWS Green IT Gains Priority Status Baseline, 24 September, 2009, 495 words Although global companies once looked at green IT as a wish-list item, they are now actively pursuing it, according to the findings of a recent survey. The poll of 1,052 IT executives in 15 countries, which Applied Research conducted for ...
When the Business Is IT CIO, 23 September, 2009, 888 words Despite the fact that a CIO's responsibilities are easily as wide and deep as any other executive's, we at CIO magazine are always urging CIOs to do more. Grab product development, take over a P&L, run a non-IT part of the business. Why ...
Corp IT Heads Thin Supplier Ranks To Focus On Larger Vendors Dow Jones News Service, 14 September, 2009, 667 words NEW YORK (Dow Jones)--Chief information officers, the executives charged with running corporate technology departments, are looking to reduce their number of suppliers to focus on larger vendors with wider product offerings. The changes ...
QUARTERLY INDUSTRY UPDATE IT Project Failure Rates Up - The rate of failure for IT projects rose to 24 percent in 2008 from 19 percent in 2006, according to new research from The Standish Group. Failed projects, as defined for the Standish survey of 400 organizations, are those that are canceled before they are completed or delivered but never used. The failure rate was driven in part by layoffs due to budget restrictions. Industry observers attribute the bleak IT environment to recessionary pressures and funding cuts as corporate IT managers rein in spending. IT Staffing Remains Challenge - Nearly two-thirds of US companies plan to freeze IT-related hiring over the next year. CIOs and human resource leaders are struggling to control labor costs while retaining talented workers, according to a recent Gartner report. Skilled enterprise architects, database administrators, project managers, and Web architects are among the most sought-after and hard-to-find positions in the IT market. Meanwhile, turnover has dropped over the past year, an indication that the weak job market discourages people from leaving their current employers. Government IT Spending to Rise - The federal government may spend as much as nearly $76 billion on IT in 2010, a 7.2 percent increase over 2009 expectations. While details are still being sketched out, spending could focus on such initiatives as cloud computing (dynamically scalable Internet-based resources), collaboration, and government transparency. Spending figures may change as investments are finalized as part of the $787 billion federal stimulus package. The government has also announced stronger oversight policies, including improved early strategic planning and early announcement of federal IT project requirements, to ensure effective IT spending, according to InformationWeek.
Business Challenges CRITICAL ISSUES Revenue Depends on Corporate Technology Spending - Because spending for IT services comes mainly from corporation upgrades, much of it can be postponed during economic downturns. About half of all US capital investment in recent years has been computer-related, exposing IT spending to economic cycles. For example, corporate profits, an indicator of technology spending, fell nearly 10 percent during the late 2000s recession. Competition from Hardware, Software Suppliers - As computer and communication hardware and software become commodity-type products with lower margins, their manufacturers are providing more integration and maintenance services, in competition with traditional IT companies. Often manufacturers, particularly computer makers, have deeper financial resources and greater capacity to perform IT functions than their traditional IT counterparts. Other competitors that are not necessarily traditional IT firms nonetheless can offer services that overlap with an IT rival's own offerings. OTHER BUSINESS CHALLENGES Customer Concentrations - Because IT companies, particularly smaller firms, may depend on only a few large customers for most of their revenue, customer consolidations or failures can have serious financial consequences. Many IT firms lost large contracts through the failure of telecom and energy customers in the early 2000s recession. In the late 2000s IT firms competed for customers as companies consolidated due to the economic downturn. High Capital Investment - IT outsourcing companies must make high initial capital investments in equipment and facilities at the beginning of an outsourcing contract. IT companies buy hardware, software, facilities, and other services, and their cost must be amortized over the life of the contract; early contract termination caused by business failures or mergers can result in heavy losses. Many smaller firms in the industry don't have access to enough capital to serve large customers. Technical Risks Associated with System Implementation - IT firms implement new computer hardware and software systems for clients. Unsuccessful implementations are rare but can seriously damage a firm. Complicated projects may also cost more to implement than originally anticipated, leading to financial quarrels with the customer.
Dependence on Key Employees - The expertise that IT companies sell to customers often resides in a few key individuals. For small firms, especially, the loss of a few employees can be catastrophic. Hiring and retaining talented employees with increasingly diverse skills is an ongoing concern for IT companies. Dependence on Alliance Partners - IT companies large and small depend heavily on larger partners to market their services. While alliances usually benefit both partners, they also increase the risk that the partner won't perform adequately. Business allies or partners that fail to sufficiently deliver their contributions to a project can open an IT company to multiple liabilities. Vulnerability to Rapid Technological Evolution - The very rapid evolution of computers, telecommunications, and software makes staying abreast of the latest technology difficult for many IT firms. The high degree of specialization within the industry makes it easier for firms to understand developments in their own niche. But too much specialization also leaves the company vulnerable to obsolescence if there is a technology shift.
Trends & Opportunities BUSINESS TRENDS Slower IT Growth - Growth in the IT industry is expected to slow dramatically as large businesses rein in their technology spending. Middle market customers, with annual sales from $10 to $500 million, spend from $250,000 to $25 million per year on IT. Although IT leaders are cutting their budgets, many anticipate continued hardware and software investments. Global Standardization - The global adoption of e-commerce business practices has widened the scope and scale of the IT industry. International laws and regulations on policy issues like taxation, privacy, security, and encryption are slowly being implemented. With Europe and Japan quickly catching up to the US in terms of computer technology use, including wireless and high-speed broadband technology, the need for service and product standardization is being addressed. Foreign IT Workers - Many IT companies depend heavily on imported foreign workers on H-1B visas, which can be awarded to highly trained foreign workers, if American workers with similar skills can’t be found. The current annual cap for 2010 on the H-1B category is 65,000, but the H-1B Visa Reform Act of 2004 makes available each year 20,000 additional H-1B visas for foreign workers with a Master's or higher level degree from a US academic institution. Offshore Outsourcing - Solutions providers, software companies, and integrators are tapping into global IT resources to bolster competitiveness by partnering with foreign firms. Outsourcing services, especially, make more use of offshore operations, of which India is a major provider. Microsoft established a joint venture in China that provides it with outsourcing of technical support for various products. Increased Joint Ventures, Strategic Alliances - IT firms are rapidly developing strategic alliances, including partnerships and joint ventures with software and hardware companies, to offer mutual customers more comprehensive solutions to IT functions. IBM, for instance, has launched joint ventures with universities and foreign governments in addition to commercial partners to speed the flow of its products and services to market. INDUSTRY OPPORTUNITIES
Security Systems - The heightened focus on security will provide additional opportunities for IT companies, which will be called on to design and implement new computerized security systems for both businesses and governments. Systems are needed both for physical security and to protect computers against viruses, hackers, and intelligence intrusions. Public sector customers are particularly interested in IT systems that offer a solid security component. Networks, Wireless Systems - The rapid evolution of business networks to include wireless devices has created new opportunities for IT firms. Internet and intranet systems that allow mobile and wireless access are in stronger demand and often require IT consulting to implement. IT professionals are being called on more often to help customers integrate their wireless communications with their computing and content needs. E-Commerce Increases IT Needs - Companies hoping to gain a strong edge in the new economy are launching e- business initiatives that require significant new investments in IT solutions. Firms will need solutions for interpreting and transferring data online, which will increase IT services. Customer relationship management systems, for instance, enable companies to find and retain profitable customers while enhancing their cross-selling capabilities. Next-Generation Digital Technology - Next-generation digital technology like wikis and blogs are opening important doors for IT firms. Companies increasingly need to offer collaboration and sharing mechanisms to their employees, suppliers, and clients. For instance, an IT firm can create a custom blog program for a customer that allows employees to share best practices in real time. Growing State Government Market - Pressured to reduce costs due to tight budgets, more states are outsourcing computer functions and data processing. State governments are also looking to IT firms to help implement federally mandated programs such as Medicaid. These contracts do not always go well and often come with a certain amount of risk, however. States are taking a harder look at IT contracts after complaints about costs, quality, and usability.
Executive Insight CHIEF EXECUTIVE OFFICER - CEO
Maintaining Relations with Large Customers Many IT companies depend on a few customers for a large part of revenue. Satisfied customers prefer to stay with an IT company they know well, rather than seek other vendors for additional IT work. Consequently, a single customer may provide an IT company with a succession of projects.
Negotiating Major Contracts Because computer systems are very important to customer operations, contracts for IT work tend to be large and therefore require senior executives to be involved. Contracts typically stipulate a list of specifications and a fixed price with the IT company responsible for cost overruns. Many contracts are awarded after bidding. Since the failure of a project can be catastrophic for an IT company, senior executives are closely involved in contract decisions.
CHIEF FINANCIAL OFFICER - CFO
Negotiating Computer Equipment Purchases IT companies that operate data processing centers for their customers regularly need new computer equipment, including software. IT companies may also negotiate the purchase of new computer equipment on behalf of customers. By buying in quantity, companies can typically receive large discounts off list prices from dealers or directly from manufacturers.
Planning for Uneven Business Demand Corporate spending for IT services depends on the level of corporate profits, which can swing widely from year to year. During the early 2000s recession, corporate IT spending, which had previously increased at a 30 percent annual rate, was flat. Generally, corporate IT expense funds operations, maintenance, and project development. In economic downturns, most development work is deferred or canceled. Because a lot of IT work is done as projects, companies may have revenue gaps between assignments, but don’t want to lay off workers with IT expertise.
CHIEF INFORMATION OFFICER - CIO
Anticipating Product Demand Because computer technology changes rapidly, IT companies must prepare for changes in customer demand. In previous years, the focus of IT consulting shifted in turn from minicomputers to PC networks, to wireless networks, to Internet applications. To remain abreast of new technology and business developments, IT companies stay in touch with computer and software companies through conferences, trade shows, consultants, and personal contacts.
Implementing Project Management Software To manage IT projects that may take from months to years to complete--and may involve many participants--companies can use project management software. Even the migration to an external data center must be carefully planned, and IT integration projects can be highly complex. Project management systems typically include scheduling, file exchange, communications, and Internet collaboration tools.
HUMAN RESOURCES - HR
Hiring and Retaining IT Workers IT companies compete for workers with corporations that maintain their own IT department, with hardware and software companies, and with management consultants. Because of specialization, a worker with specific knowledge may be difficult to find. In recent years, many companies have hired foreign IT workers through the H-1B visa program. To retain workers, companies must pay well: The average pay of IT workers is more than double that of other US workers.
Providing Continuing IT Education Because of the rapid evolution of IT, companies need to keep their workers abreast of changing knowledge. To do this, some have internal "universities"; others develop ties with real universities and regularly attend industry conferences and seminars. Companies also foster close relations with large hardware and software producers.
VP SALES/MARKETING - SALES
Establishing Alliances with Other IT Companies Because they usually offer specialized knowledge, IT companies may form alliances with complementary companies to offer a broader array of services. Companies also may ally with large companies like IBM, to basically become resellers of their services or hardware. By establishing a portfolio of alliances, companies can benefit from the marketing efforts of all partners.
Customizing Industry Marketing Although IT services can be used by customers in many different industries, many IT companies customize their marketing approach to appeal to individual customers. While some companies specialize in a particular industry, such as healthcare, others use industry intelligence tools to enable them to understand the business of a variety of customers.
Call Preparation Questions CONVERSATION STARTERS How does the company manage shifts in corporate technology spending? Because spending for IT services comes mainly from corporation upgrades, much of it can be postponed during economic downturns. How vulnerable is the company to non-traditional competition? As computer and communication hardware and software become commodity-type products with lower margins, their manufacturers are providing more integration and maintenance services, in competition with traditional IT companies. How many customers does the company need to stay profitable? Because IT companies, particularly smaller firms, may depend on only a few large customers for most of their revenue, customer consolidations or failures can have serious financial consequences. How is heightened demand for security impacting the company? The heightened focus on security will provide additional opportunities for IT companies, which will be called on to design and implement new computerized security systems for both businesses and governments. What opportunities do networking and wireless technology present the company? The rapid evolution of business networks to include wireless devices has created new opportunities for IT firms. How is the growth of e-commerce affecting the company? Companies hoping to gain a strong edge in the new economy are launching e-business initiatives that require significant new investments in IT solutions. QUARTERLY INDUSTRY UPDATE How is the company working to improve IT project success rates? IT project failure rates are on the rise, the latest casualties of IT budget and staff cuts. What is the company doing to retain talented IT workers? HR leaders can revise human capital management programs and can make employee engagement and retention a top priority to ensure they retain IT talent. OPERATIONS, PRODUCTS, AND FACILITIES Which services does the company provide? Examples include systems design and integration, data processing, outsourcing, data warehousing, training, and consulting. Does the company specialize in a particular IT sector, such as e-commerce, networks, or security systems? E-commerce, networks, and security are important issues facing potential IT customers in the current global economy. Does the company specialize in working with hardware from a particular vendor? Many IT firms develop strategic alliances with hardware companies to offer more comprehensive customer service offerings. How many offices does the company operate? Even smaller companies may have several locations. If an outsource, how many data centers does the company operate? IT firms are tapping into global resources to boost competitiveness by partnering with foreign firms. Does the company also develop hardware and/or software? Larger companies often provide software programming, while hardware companies frequently provide IT consulting. CUSTOMERS, MARKETING, PRICING, COMPETITION Is the company's work concentrated in a few customers? Customer concentration is common with IT firms. How long does a typical contract last? Contracts may last anywhere from one month to 10 years; three-year contracts are common. Outsourcing contracts typically last 10 years because of the large upfront costs. Are contracts typically bid fixed-cost or time-and-materials? Fixed-cost contracts have great profit potential, but also greater risk. How many projects does the company usually work on at a time? Companies often use project management systems to handle multiple projects at once. Does the company usually have a backlog of projects? IT companies anticipate product demand by attending conferences and trade shows, or through their consultants and personal contacts. Does the company do business with the government? How profitable is this work? More states are outsourcing IT functions, although government contracts are traditionally less profitable than private- sector work. Does the company participate in trade shows? Many IT companies use trade shows to display their newest products and services. What types of competition does the company face? IT services firms are aware of intense competitors, such as large systems integrators, big consulting firms, and hardware vendors; but often underestimate software and offshore IT firms as emerging competitors. Has the company rewritten the pricing terms in any of its contracts? In previous years, IT firms charged by the hour, which put the risk of cost overruns mainly on the customer. Now, more contracts are being quoted fixed-price, with the risk of cost overruns shouldered by the provider. What types of security products or services does the firm market? The market for security-related hardware, software, and services is expected to grow substantially as corporations and government agencies increase IT security spending. REGULATIONS, R&D, IMPORTS AND EXPORTS
Does the company have any international business? Large companies like Hewlett-Packard get a major share of their business overseas. ORGANIZATION AND MANAGEMENT How does the company hire, train, and retain qualified staff? Finding qualified personnel is a major issue and firms spend significant resources to find, train, and retain qualified labor. Does the company depend on any key employees? A few key people often determine a small firm’s success. How does the company mitigate the risk that a key person may leave the company? In small companies, stock options or awards are often used to keep key personnel. Does the company ally with other companies to seek new business? Because of specialization, companies frequently collaborate to bid on a contract. How much and what type of work does the company outsource? Even IT companies may outsource IT projects to save on employee costs. How much does the company use foreign IT workers brought in with H-1B work visas? Computer-related occupations account for about 40 percent of approved H-1B petitions. FINANCIAL ANALYSIS How uneven is company cash flow? Cash flow in IT companies can be highly uneven because money must often be spent at the beginning of a project, before any payments are received. Conversely, some contracts provide for a large initial payment. Does the company raise money from venture capitalists? Small IT companies often go through several rounds of venture capital financing before going public. Does the company fund growth with equity or debt? Companies use debt and/or equity financings to help pay for such things as expansion, acquisitions, and R&D. If an outsourcer, how much does the company spend per year on new computer equipment? In a typical outsourcing contract, an IT company operates (and may own) a client's computer systems either at its location or at a centralized data center. Does the company typically receive progress or lump-sum payments on consulting projects? IT firms usually make either fixed-price or time-and-materials bids. How does the company recognize revenue? Consultants may book revenue as progress is made, or when a project is complete. On operations contracts, revenue may be booked before any payments are received. The accounting treatment of revenue can be an important feature of income statements. If the company has foreign sales, how does it protect itself against currency fluctuations? Contracts may be denominated in dollars, or the company may hedge with futures contracts. BUSINESS AND TECHNOLOGY STRATEGIES How does the company manage vulnerability to economic cycles? Many customers cut IT spending sharply during the early 2000s recession. What areas of revenue growth has the company identified? The overall trend in IT spending is toward software and services and away from hardware. Integrating communications with computer systems is expected to be an area of strong corporate demand. Does the company ally with a number of partners? Partnering with larger firms can give small IT companies credibility. Large companies use small partners with expertise in a market niche. Does the company expect more outsourcing from corporations? Because computer systems are heavily used in many countries, a large number of IT companies have substantial outsourcing contracts. How does the company plan to grow? Acquisitions have been an important way for firms to get new expertise.
Financial Information
COMPANY BENCHMARK INFORMATION
Computer Systems Design and Related Services (NAICS: 5415) - (NAICS: 5415)
12 Month Rolling Data Period Last Update September 2009 Small Company Data Sales < $1,208,902 Table Data Format Median Values
US Private Company Data Aggregate Small Company Company Count in Analysis 4319 1080
Income Statement Net Sales 100% 100% Gross Profit 51.1% 60.0% Operating Income 4.8% 4.8% Net Profit After Tax 2.8% 2.3%
Balance Sheet Cash 14.2% 19.6% Accounts Receivable 35.9% 17.1% Inventory 0% 0% Total Current Assets 52.6% 37.7% Total Fixed Assets 7.1% 9.4% Other Non-Current Assets 40.3% 52.8% Total Assets 100.0% 100.0% Accounts Payable 6.3% 4.3% Total Current Liabilities 39.7% 40.2% Total Long-Term Liabilities 0.1% 0% Net Worth 60.2% 59.8%
Financial Ratios (Click on any ratio for comprehensive definitions) Quick Ratio 1.38 1.36 Current Ratio 1.74 1.85 Current Liabilities to Net Worth 48.0% 19.0% Current Liabilities to Inventory 683.0% 457.5% Total Liabilities to Net Worth 60.0% 27.0% Fixed Assets to Net Worth 10% 3% Collection Period 40.6 20.3 Inventory Turnover NA NA Assets to Sales 29.0% 27.0% Sales to Working Capital 6.3 4.1 Accounts Payable to Sales 2.0% 1.0% Return on Sales 3.0% 2.0% Return on Assets 9.0% 8.0% Return on Investment 38.0% 59.0% Interest Coverage 9.6 3.8
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VALUATION MULTIPLES
Information Technology
Acquisition multiples below are calculated using at least 30 private, middle- market (valued at less than $1 billion) industry transactions completed between 2/1997 and 12/2008. Data updated every six months. Last updated: September 2009.
Valuation MVIC/Net MVIC/Gross MVIC/EBIT MVIC/EBITDA Multiple Sales Profit Median Value 0.7 1 6 5.4
MVIC (Market Value of Invested Capital) = Also known as the selling price, the MVIC is the total consideration paid to the seller and includes any cash, notes and/or securities that were used as a form of payment plus any interest- bearing liabilities assumed by the buyer. Net Sales = Annual Gross Sales, net of returns and discounts allowed, if any. Gross Profit = Net Sales - Cost of Goods Sold EBIT = Operating Profit EBITDA = Operating Profit + Noncash Charges
SOURCE: Pratt's Stats™ (Portland, OR: Business Valuation Resources, LLC) To purchase more detailed information, please either visit www.BVMarketData.com or call 888-287-8258.
Industry Forecast The output of US computer and data processing is forecast to grow at an annual compounded rate of 3 percent between 2008 and 2013. Data Sourced: December 2008 Computing Services Growth Strengthens After Dip
First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy.
First Research Industry Growth Rating The First Research Industry Growth Rating reflects the expected industry growth relative to other industries, based on INFORUM's forecasted average annual growth for the combined years of 2009 and 2010.
Demand: Technical advances spur demand Efficient use of expensive labor required Risk: Slow economy cuts corporate demand
First Research Industry Drivers Changes in the economic environment that may positively or negatively affect industry growth. Data provided by First Research analysts and reviewed annually.
Technology Innovation: Advances in science and technology, including information technology
Web Links & Acronyms INDUSTRY WEBSITES CDW IT Monitor Bimonthly IT industry outlook. Computerworld Latest news, features, and opinions of IT, software, and computers. Forrester Research Industry research and news. Gartner Industry research and news. Government Computer News Government IT news. See especially the Outsourcing and State & Local sections. Information Technology Association of America Articles, news, publications, government affairs, calendars, and events. Information Technology Industry Council News and IT government relations resources.
InformationWeek News. See especially Business Services section. ITworld IT news, topics, and links. TechWeb News and technology on segments of electronic industry, like networks, wireless, and e-business. The McKinsey Quarterly Prescriptive IT articles.
GLOSSARY OF ACRONYMS CSC - Computer Sciences Corporation PC - Personal Computer SaaS - software-as-a-service
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