Computer and Related Activities
August 2008
Introduction
The computer services industry lies at the heart of a range of activities described under the term "Information Technology" (IT) which is usually taken to include all matters concerned with the furtherance of computer science and technology and with the design, development, installation and implementation of information systems and applications. IT is often taken to include telecommunications, the reproduction of computer media and even call centre activities as well as computer activities. In this profile, however, the focus is entirely on the Standard Industrial Classification (SIC, 2003) heading of "Computers and Related Activities". This heading is comprised of the following sub-components:
- 7210 Hardware consultancy
- 7221 Publishing of software
- 7222 Other software consultancy and supply
- 7230 Data processing
- 7240 Database activities
- 7250 Maintenance and repair of office, accounting and computer machinery
- 7260 Other computer related activities
It should be noted that this definition, whilst covering all business and associated employees working directly in the field of computer services, does not include those many other industries and businesses that use or provide similar services in-house in support of their own organisational activities. There are probably as many computer services professionals working in other sectors (e.g. banks, retailers, manufacturing) as in the computer services industry proper. The true extent and economic importance of the sector is therefore likely to be significantly higher than implied by official statistics based on the SIC categorisation.
Employment
According to the Annual Business Inquiry (ABI) there were some 10,300 employee jobs in the Lancashire computer services industry in 2006, based in 2,045 separate local units (firms/businesses). This employment base represented 1.7% of all employee jobs in the sub-region, a similar share to that of the wider North West Region but slightly below that of 2.0% in Great Britain. Of the Lancashire employee jobs, men, the majority of whom worked on a full-time basis, held three-quarters. Amongst female employees 28% worked part-time – a somewhat lower share than is common amongst most service sectors. Overall, 90% of the local sector's employees were full-time workers (Table 1).
| Employment Status | No. of Employees | % of Employees |
|---|---|---|
| Male full-time workers | 7,400 | 71.4 |
| Male part-time workers | 200 | 2.3 |
| Female full-time workers | 2,000 | 19.0 |
| Female part-time workers | 800 | 7.3 |
| Male workers | 7,600 | 73.7 |
| Female workers | 2,700 | 26.3 |
| Full-time workers | 9,300 | 90.4 |
| Part-time workers | 1,000 | 9.6 |
| Total | 10,300 | 100.0 |
| Source ONS - Annual Business Inquiry, 2006 | ||
Computer service jobs are present across all parts of the Lancashire sub-region but Fylde District has the largest representation accounting for about 30% of the local sector's workforce (Figure 1). A further third are based in Blackburn, Chorley and Preston. As a source of local jobs, the computer services headcount in Fylde provides for nearly 8% of all employee jobs in the district followed by a 2.7% share in Chorley. At the other extreme, computer services account for just 0.5% of local jobs in Burnley and Hyndburn.
As can be seen from Figure 2 showing the distribution of computer services jobs by ward across Lancashire, there are a few clear concentrations of such activity, most especially across parts of the Fylde Coast and Central Lancashire. The top ranking wards (all having in excess of 8% of jobs in computer services) are Astley and Buckshaw, Clayton-le-Woods North, and Wheelton and Withnell (all in Chorley); Marton (Blackpool); and Heyhouses, Warton and Westby, and Clifton (Fylde). Fylde District has no less than five wards with computer services employee job shares in excess of 4%. Elsewhere several districts have wards that also exceed the 4% job share threshold, most notably South Ribble with three wards. Across East Lancashire just three wards are within this grouping – Clover Hill (Pendle), Little Harwood (Blackburn) and Chatburn (Ribble Valley).
Structurally the Lancashire computer services sector is dominated by other software consultancy and supply (Table 2). Often regarded as the higher tech and fastest growing end of the industry this activity comprises more than a half of the computer activity business units in Lancashire, though the size of the average business unit is quite small with just over four people. Data processing activities comprise about 27% of the workforce but only 3.7% of business units and it is this element of the industry that is comprised of somewhat larger companies. The average size of company in data processing is 38 employees and several are very much larger. Many of these are involved in out-sourced activities – that is, the management and operation on a continuing basis of data processing facilities belonging to others.
| Local Units | Employee Jobs | Average Employment Size | |
|---|---|---|---|
| Hardware consultancy | 136 | 300 | 2.0 |
| Publishing of software | 25 | 200 | 6.5 |
| Other software consultancy and supply | 1,138 | 4,600 | 4.1 |
| Data processing | 75 | 2,800 | 37.5 |
| Database activities | 63 | 100 | 2.2 |
| Maintenance and repair of computers, etc. | 28 | 300 | 9.7 |
| Other computer-related activities | 580 | 2,000 | 3.5 |
| Total | 2,045 | 10,300 | 5.0 |
| Source ONS - Annual Business Inquiry, 2006 | |||
The computer services industry in Lancashire in terms of companies is overwhelmingly one of small or even micro sized enterprises: nearly 92% of companies employ less than 5 people, the majority of these being one and two-person employee businesses (Table 3). Taken overall, statistically the "average" company employs just 5 people. Nonetheless, the 41 local units with 25 or more employees still comprise about 60% of the sector workforce and there are a number of larger companies employing several hundred people each. Amongst the larger computer services companies operating locally are Electronic Data Systems Ltd, CSC Computer Sciences Ltd and Siemens Business Services Ltd, global information technology companies that each have a presence across several sites in Lancashire largely providing out-sourced services. Amongst more locally based companies within the sector, examples include AppLabs Ltd, Preston, providing IT services and specialising in quality management, testing and certification solutions; CegedimRx Ltd, Leyland, supplier of pharmacy IT solutions; K3 Business Technology Group plc, Colne, providing enterprise software in the retail, distribution and manufacturing sectors; Lanway Corporate Business Systems Ltd, Burnley, offering cost effective IT solutions to business; Positive Solutions Ltd, Brinscall, offering IT solutions to business; Promethean (UK) Ltd, Blackburn, interactive learning technologies; Triscan Systems Ltd, Blackburn, providing fuel management systems and support services to the commercial sector and commercial fuelling sites; Ufindus, Lancaster, and Voiteq Ltd, Blackpool, provider of voice solutions to hardware, software, business management systems, warehouse management and epos systems.
| Size Band | Local Units | Employees | ||
|---|---|---|---|---|
| No. | % | No. | % | |
| 1-4 employees | 1,876 | 91.7 | 2,900 | 28.1 |
| 5-10 employees | 94 | 4.6 | 700 | 6.6 |
| 11-24 employees | 34 | 1.7 | 600 | 5.5 |
| 25+ employees | 41 | 2.0 | 6,200 | 59.9 |
| Total | 2,045 | 100.0 | 10,300 | 100.0 |
| Source ONS - Annual Business Inquiry, 2006 | ||||
Employment Changes
As a mass market activity the computer services industry is a relatively new one. There were a few hundred related jobs in Lancashire in the early 1980s largely linked to mainframe applications but the industry really began to take off in the early 1990s as the use of personal computers began to expand rapidly. The trend was given further impetus by the rapid development of the Internet. Since 1991 the number of computer service jobs in Lancashire has expanded eight-fold (Figure 4/Table 4). New business formation in the sector expanded apace though the great bulk of computer service jobs were generated by the out-sourcing or buying in of computer and information management activities previously undertaken by mainstream businesses in-house. Many large Lancashire companies as well as public sector organisations followed this route and a number of national and global information services companies established an important presence in the sub-region specifically to take advantage of the new opportunities. In many instances of such out-sourcing the new computer service companies took over responsibility for their clients information technology staff as well. In this sense, the movement of employees to a new "pay-point" at a computer services company represented simply a transfer of jobs to a new SIC activity heading and not the creation of net new jobs per se. Indeed, it is almost certain that a large slice of computer service jobs throughout Lancashire has been generated in this fashion and would explain a big part of the apparent increase in the sector overall. Since 2001 the local industry, like that nationally has experienced a modest downturn in job numbers. Initially this was presumably linked with the global "dot.com" fall-out. More recently it has been associated with some rationalisation of out-sourced activities as suppliers have bedded-in and perhaps also reflected some decrease in corporate IT budgets as major clients became more cost-conscious but the underlying upward trend in employment and new business activity appears to be continuing apace.
| Hardware Consultancy | Software Publishing | Software Consultancy | Data Processing | Database Activities | Computer Repair | Other Services | |
|---|---|---|---|---|---|---|---|
| 1995 | 100 | — | 1,600 | 200 | 0 | 200 | 200 |
| 1996 | 100 | — | 2,600 | 300 | 0 | 300 | 200 |
| 1997 | 200 | — | 2,700 | 600 | 0 | 300 | 500 |
| 1998 | 200 | — | 2,800 | 1,000 | 100 | 100 | 900 |
| 1999 | 300 | — | 3,600 | 900 | 100 | 100 | 1,500 |
| 2000 | 300 | — | 5,400 | 1,100 | 100 | 100 | 1,900 |
| 2001 | 300 | — | 5,100 | 2,200 | 100 | 100 | 1,900 |
| 2002 | 300 | — | 4,600 | 1,900 | 100 | 200 | 1,800 |
| 2003 | 200 | 300 | 4,800 | 2,100 | 100 | 200 | 1,600 |
| 2004 | 200 | 200 | 4,500 | 1,700 | 100 | 200 | 1,600 |
| 2005 | 200 | 300 | 4,500 | 1,500 | 200 | 200 | 1,800 |
| 2006 | 300 | 200 | 4,600 | 2,800 | 100 | 300 | 2,000 |
| Source ONS - Annual Business Inquiry | |||||||
General Characteristics
As defined above, the UK software and computer services sector is a key enabling activity and is one of the most vibrant and fastest growing markets in the UK. It is also Europe's largest. The Office for National Statistics (ONS) have estimated that the computer services industry had total turnover of nearly £61bn in 2006 (compared with £17bn in 1995), employed about 560,000 people in 103,000 separate enterprises and generated gross value added of £37bn (£8bn in 1995). UK figures for the net growth in VAT-registered business over the past decade rank all the constituent sectors (except for SIC 7250) as amongst the top 30 fastest growing business sectors in the economy. Sector turnover has, and is expected to continue to outpace the UK economy over coming years, though the market is now set on a more mature phase of growth.
The computer services industry is made up of a large range of organisations and services that provide help in configuring, installing, maintaining and utilising business technology and its activities are pervasive throughout all sectors of industry and commerce. Much of the computer services market is dominated by large national and global companies with long experience of handling major data processing for banks, industrial companies and government organisations. They are tied into long-term outsourcing contracts which can include a full remit of services such as installing, managing and servicing entire networks and have guaranteed revenue streams which help them to weather changing economic conditions. High public expenditure over recent years on large information systems have helped to keep the UK market relatively buoyant. Outsourcing remains the driving force in computer services but a very large number of smaller and even micro firms have also capitalised on the growing demand for IT services, many operating in particular niche markets and emerging technologies and the growth in the Internet itself has opened up many new opportunities, particularly for software consultancy companies. Computer service firms have made it their responsibility to stay at the cutting edge of technology and to offer services that most company in-house facilities cannot match.
Some uncertainty has been introduced into the industry over recent years by another global shift in IT provision as it has become acceptable business practice to rely on off-shoring of software development and IT-enabled services through companies in other parts of the world, such as India. This process is becoming increasingly sophisticated, with suppliers using a combination of offshore and onshore resources, with, it is reckoned, every UK-based person leveraging as many as 20 offshore personnel. Despite the growth of off-shoring, the UK maintains a strong positive balance of payments in IT services, reflecting its position in higher value project management and systems analysis and continues to lead the European inward investment market.
The diverse requirement of services required of the industry means that job opportunities exist not only for those with specific technical qualifications related to computer and information technology (e.g. technical development, systems analysis and testing, programming, internet and web design services) but also for a large range of other disciplines in business/management, sales and marketing and in areas like finance, human resources and other functions common to most businesses.
For further details, please contact:
Peter Kivell
Tel 01772 534157
Email Peter.Kivell@lancashire.gov.uk