German IT-Related Service Providers: Cyclical Fluctuations in Demand Predominate

The demand for services by providers of the information economy is subject to great fluctuations. In the fourth quarter of 2004, more that 65 per cent of the companies of this economic sector report that they were strongly or very strongly affected by fluctuations in demand. This value was below 47 per cent in the fourth quarter of 2003.

But IT-related service providers are mainly subject to cyclical rather that seasonal fluctuations in demand. In the fourth quarter of 2004, almost 67 per cent of the companies were affected by cyclical fluctuations, slightly more than 27 per cent by seasonal fluctuations in demand.

This is the result of a business survey among German IT-related service providers conducted by the Centre for European Economic Research (ZEW), Mannheim, in cooperation with Creditreform, Neuss, in November and December 2004. About 1,000 companies participated in the survey. The IT-related services sector comprises Information and Communication Technology (ICT) service providers (firms in the branches of software and IT services, ICT-specialised trade as well as telecommunication services) and knowledge intensive service providers (firms in the branches of tax consultancy and accounting, management consultancy, architecture, technical consultancy and planning, research and development as well as advertising).

IT-related service providers can draw on different adaptation measures to respond to fluctuations in demand. In an evaluation of 15 such options, the number-one measure put forward by the companies of the information economy consists in awarding fixed-term employment contracts. In second and third place are overtime hours or short-time work as well as further education programmes, which are supposed to allow a more flexible organisation of the workforce.

Just like in the previous year, the most frequently used tools for expanding or reducing operating capacities were extra working hours and short-time work. More than 48 per cent of the companies make use of these possibilities. Fixed-term contracts used by almost 41 per cent of the companies rank second, followed by further education measures, introduced by approximately 38 per cent.

Architects, advertising agencies, tax advisors and certified public accountants make particularly frequent use of overtime hours and short-time work. Fixed-term employment contracts are often drawn up by advertising agencies, architects, and  ICT-trading companies. Architects, business consultants and R&D firms frequently provide their employees with additional training to ensure a more flexible deployment of staff.

In the meantime, companies have dismissed significantly more personnel than in the previous year. Whereas in 2003, about 20 per cent laid off staff to respond to fluctuations in demand, more than 30 per cent did so in the fourth quarter of 2004.

Remark on the projection

To ensure the analyses’ representativity, the ZEW projects the answers of the survey participants with the turnover value of the businesses with regard to the entire IT-related services sector. The phrasing "share of the businesses" therewith reflects the share of turnovers of the businesses.

Contact

Jörg Ohnemus, phone: +49(0)621/1235-354, E-mail: ohnemus@zew.de