IT Economics News Still Bad — sorry!

The information economy still is struggling in the United States.      Telecommunications continue to slash jobs with the labor pool at 927,700 workers, down 1,700 in May and down 49,200 since May 2009. Data processing and hosting companies handed out 2,500 pink slips.

The information sector includes publishing, movies, broadcasting, telecommunications, and data processing and hosting companies has struggled for the past decade.  This sector has lost nearly 844,000 jobs since it peak in 2001 or about 25 percent of the once well paying jobs.

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Published in: on June 8, 2010 at 21:03  Leave a Comment  
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US Economic News for IT – not so good!

Last week the Bureau of Labor Statistics reported that unemployment remained flat at 9.7 percent.   It seems that government, manufacturing and even construction industries added jobs, but IT jobs lost ground.

Within the very broad information segment of the economy, which includes movies, music, publishing, broadcasting, telecoms, and data processing, the telecommunications industry lost 5,000 jobs, to 943,300, while data processing, hosting, and related services companies cut 600 jobs, to 247,500.

The professional and business services segment, which has a total of 16.35 million people working within it, has some IT-related parts. Companies providing computer systems design and related services cut 9,600 jobs in the quarter, a small portion of the 1.43 million people in this field but significantly nonetheless.

http://www.bls.gov/news.release/empsit.nr0.htm

IT Economic News – Mixed Results.

Harry Truman (former President of the USA) once quipped something like, “I want a one handed economist because economist always say things like on the one hand things looked good, but on the other hand things don’t look so good.”

This is especially true with the latest economic figures from the Bureau of Labor Statistics for the IT sector.

The information sector includes publishing, movies, broadcasting, telecommunications, and data processing and hosting, the Telco’s shed 2,600 jobs, down to 951,100, while data processing and hosting companies added 2,900 jobs, to 248,900. In the professional and business services sector, the IT-related segment is for companies that are involved in computer systems design and related services, and in this area there are nearly 1.44 million people employed, and in February the number of people employed in this area rose by 8,700.

Finally, management consulting and technical services – which often has an IT component, given the importance of computing to the running of any business – as a group shed 2,100 jobs last month. So… it is not all good new or all bad news.

http://www.bls.gov/news.release/pdf/empsit.pdf

Marginal Cost

Marginal cost is different from Average Cost.  Average cost is total costs divided by total functionality created.  Marginal cost is the cost of adding one more unit of functionality to a software product.

Why is this concept important for software development?

The marginal cost curve looks something like the Nike Swoosh.   Marginal costs rise as software projects get large.  The reason for this is many software organizations do not have the discipline and necessary infrastructure to support large scale software development.   The fewer infrastructures the faster marginal costs will raise. 

In other words if you try to build something that is large and you do not have the skill set to build it the unit costs are going to go up rapidly.  People are going to be standing around looking for stuff to-do.  

Organizations need to find its sweet spot where productivity or unit cost is the lowest.

Published in: on December 30, 2009 at 01:01  Leave a Comment  
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Average Total Cost of Software Development

As an economist l like terms like Average Total Cost or unit cost. Average total cost is just total costs divided by output (quantity of the software produced). These terms are somewhat alien in the field of software development.

The problem is what a unit in software is and what represents total cost. Total Costs Total cost should include all costs to create and maintain the software product. It would include all requirements gathering, design, and analysis, coding, testing, maintaining and enhancing the software product. Many software organizations only include coding (or development) costs which greatly understate the actual cost of software development.

Labor costs are the most significant ingredient in software costs. Other costs can be training, software, equipment, travel, and entertainment.

Units
The amount of functionality delivered (see www.SoftwareMetrics.Com)

Average Total Costs
The equation is Total Cost divided by Units Produced. In terms of software it is total cost divided by function points (or functionality delivered). The lower the average cost the higher the rate of productivity.

Average Total Cost equals Average Variable Cost plus Average Fixed Costs