It is pretty early over here and I can't sleep so I am off to do a quick 50/60 miles on the bike. A couple of thoughts have occurred to me which is always dangerous !
There is more and more of a concensous on this side of the pond that the Euro programming work is going to be almost as large a problem as Y2K. But I suspect that it is not going to be so much of an automated tool bias, more of a body shop approach.
Second point and intrinsically linked to the above in the medium to long term is the point raised by tech a while back with regard to shortage of skilled manpower. Companies are getting absolutely desperate to recruit. For some companies it is so bad that they have upped salaries/packages by at least 100% in the past two years. This also has a knock on effect within the companies non fee earning salary structure.
For instance if I used to earn say $50k pa as a junior in house systems support techie, I am not going to be happy if peers who joined the company with me 2 years ago are suddenly on a very enhanced package including better car, (vital to retaining staff in the U.K.), bonus if they are still employed in say three years time, evergreening share options, etc, etc.
This problem will also effect Admin/Marketing staff. The Financial Controller isn't going to be happy if senior project managers are now on a bigger wack than they are are.
The underlying point to this is that recruiting is becoming more and more expensive. Present staff are being offered recruiting bounties for successful introductions, packages are being enhanced continuously with golden hellos becoming prevalent, special advertising campaigns are becoming commonplace instead of just relying on a steady dribble of CVs across the HR departments desks.
The result is that companies with a business model which consists of say three revenue streams, say 40% software license fee, 40% services to implement that application and 20% ongoing maintenance fee are running into a major problem. That 40% license fee is almost pure profit if they own the IPR. Sure they make a decent profit on the services but it may be only 20%-40% contribution, no where near the 75%-95% they make on the license.
Because they are struggling so badly with finding the staff to implement each new license they are going to run out of the ability to sell the licenses quickly enough.
In desperation, they will have to look beyond upping the recruiting effort. They will have to start to buy competitors, buy companies whose staff have the skill sets they are desperate for or even buy contracting firms to get hold of the manpower.
I can see companies like Alydaar who have assembled skilled work forces increasingly coming into play as acquisition targets, not just for their inherent profitability but for their second most valuable resource after their software license stream.
Any thoughts guys?
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