By Avinash Sethi , Chief Marketing Officer, Innovize Tech Software
Everyone believes that time is money but I have yet to see companies that have a Time Accounting system like they do for Cash Accounting. This is quite intriguing and makes it clear that companies and even individuals do not take time as seriously as cash. This is ironical especially in today’s knowledge economy where individual time and team effort are acknowledged as the biggest driver of output.
Why this anomaly, where we track cash diligently but take time for granted?
One reason is that time is an intangible form of currency, and therefore one is not reminded of its importance every time you spend it (or more correctly, let it slip through). On the contrary, cash reminds you of its importance and value every time you spend. We are trained to regulate cash expenditure with caution.
Another reason is of denomination. Cash notes have a denomination printed on it. We can see the value of the paper note that we spend. We get a receipt if we use plastic (credit or debit card). The reminder prompts us to assess the value that we get in return – did I get my Rs. 1,000 worth of value from the product or service or experience?
Finally, unlike cash which one can run short of, time appears to be infinitely available. This is especially true of India - where the concept of eternal time is embedded in our psyche. Regret for lost time occurs only when it is too late.
Cash Is King, But Is Time the Emperor?
It is not surprising that we don’t quite know how much time was spent on actual work while in office. It is easy to spend one hour or more at the company cafeteria, playing table tennis on the office campus, or tracking India's batting team collapse and the latest scam on the web. That one hour has no way to remind us of its value. It could be worth $20 if that was a billable hour for a client, or it may be worth a million dollars if it results in some innovation. Who knows?
This "Who Knows" is precisely the problem. It needs to be corrected – especially in today's services oriented businesses, where time is more important than money (because ultimately, time drives output, which results in revenue). If the quantum and quality of time and effort is improved, then the financials will follow.
The Services sector accounts for more than 55 percent of India's GDP today. Time is the biggest resource, since it is the effort being put in by qualified/trained professionals that result in the end service. In manufacturing, machines convert raw material into usable products. They also consume time but most of that is machine time, and hence time leakage is not an issue.
The Times They Are A-Changing
The high profile IT Services companies in India are facing huge challenges. Their financials are under pressure on several fronts. In Time & Material billing, the billing rates are constant or falling due to competition from within India and emerging countries such as China, Philippines, and East Europe etc. Costs keep increasing with the salary gap reducing relative to Western countries. Another trend is that customers are opting for Fixed Cost or Outcome-based contracts. Vendors too are pro-actively transitioning to such models. Based on a study done, the top five Indian IT Services companies are targeting to increase their revenue share from "Outcome-based" contracts. Wipro aims to get 50 percent of its sales by 2012 from orders where it shares risk with clients seeking to cap their costs to boost its own profitability. HCL Technologies says that it has a large proportion of its revenue coming from outcome-based pricing. These models have helped them win big contracts.
The new approach is changing the outsourcing game. The risk of outsourcing success is transferred to the vendor. Those firms that have an efficient delivery process will prosper. The objective is to deliver results with least amount of effort and in a predictable manner, so that profitability is high. In this situation, it becomes important to be able to measure effort on projects accurately, and then use them for future bids. Further, the productivity at individual and team level must keep rising to stay competitive. Hence, Time Accounting is now the highest priority for IT vendors who are leading this transformation. It turns out that even the T&M model can benefit from higher productivity. Customers want accountability in today’s world, and IT Services firms who show transparency about actual person-month effort, will have an edge. Customer retention and winning new business will depend on the vendor's ability to show case that they are providing services at peak efficiency.
Measuring Time/Effort For The Enterprise
So what are the solutions to account for time?
There are a wide array of tools that help individuals and companies to keep track of cash. You have accounting software, formal processes and systems to regulate cash receipts and expenses, professionals who are trained as accountants, and corporate balance sheet and profit-loss statements that are a direct reflection of the business.
However there is no equivalent solution for Time Accounting. There are a few employee monitoring tools that help individuals track their time. However, they provide low level data and are more focused on which websites the user is spending time on. They do not fit the employee friendly culture in today's progressive knowledge firms. Managers have no interest in a flood of raw time utilization data of employees – they want actionable intelligence. InnovizeTech’s product, Sapience, is designed for the enterprise, and provides the business with the ‘big picture’ about Time @ Work, which should more correctly be seen as ‘Money spent @ Work’.
The article is authored by Avinash Sethi, Chief Marketing Officer, InnovizeTech.com, Pune based software product company.