Service Providers of the Information Society – Extra Working Hours and Short-time Labour Counterbalance Fluctuations in Demand

About 45 per cent of service providers of the information society react to cyclical and seasonal fluctuations in demand by working extra hours and/or hiring short-time workers. In the IT sector, these instruments are most frequently used to cope with short-term changes in business capacities.

Service providers of the information society think that extra hours and/or short-time labour provide an efficient way to manage fluctuations in demand. Companies of the information economy were asked to theoretically assess 15 possible measures to overcome phases of fluctuating demand. The only instrument the companies believe to be more efficient than extra hours and/or short-time work is drawing up fixed-term employment contracts. However, this measure is actually employed by just 40 per cent of those companies that claim to use it often to very often, and thus ranks only second. In addition to these possibilities, almost 40 per cent of the companies very frequently subcontract services to third party enterprises.

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 2005. About 1,000 firms participated in this survey. The sector of the IT-related service providers comprises the Information and Communication Technology (ICT) service providers (firms in the branches of computer service and leasing, 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).

The way service providers of the information society assess the possibilities to adapt to fluctuations in demand and the instruments they actually employ for a flexible adaption to business capacities differ significantly depending on the branch they work in. Extra hours and/or short-term labour are most frequently used in the branches of tax consultancy and accounting as well as in telecommunication services. In contrast, they make use of fixed-term employment contracts rather rarely. This measure is in turn very important for architects as well as in research and development. Outsourcing to third-party enterprises is most frequently used by IT service providers and leasing firms. However, advertising agencies and architects make frequent use of this instrument as well.

In 2005, the cyclical influences had a greater impact on demand in all branches of the sector than seasonal factors. The branches of ICT-specialised trade, technical consultancy and planning, as well as advertising display the highest share of companies that state to be subject to substantial cyclical fluctuations in demand. The impact of seasonal factors on demand is particularly pronounced among tax consultants and accountants. By contrast, seasonal fluctuations in demand barely play a role in the branches of telecommunication services, research and development, and management consulting.

Remark on the projection

To generate a representative analysis, the ZEW is projecting the answers of the firms participating in the survey with their shares of total turnover realized in the sector of the German IT related service providers.

Contact

Dr. Margit Vanberg, E-mail: vanberg@zew