PPB July 2018

FEATURE | PPAI Exclusive Research distributor companies are outsourcing IT services in 2018—an effective approach to maintaining flexibility and agility as business conditions continually evolve. On the other hand, keeping long-term third-party services can be equally costly and limit process standardization, while an on-demand workforce bridges the gaps between business goals and technology requirements throughout the company. Internal IT workforces within the promotional products industry operate at 59 percent of suppliers and 36 percent of distributors. Yet, further analysis reveals that, within this group, 60 percent of supplier companies and 81 percent of distributor companies employ part- time IT staff (Figure 2) . This means the role of IT is shared among those with multiple priorities. While only five percent of distributor companies have more than two IT professionals on staff, 15 percent of supplier companies are more likely to have a team. The threshold is better determined by company size, and firms with larger head counts (100 employees or more) are more likely to invest in technology- focused human capital (Figure 3) . The U.S. software sector is currently the main driver of the overall technology market, and associated costs may account for a combination of subscriptions, licenses or support contracts, typically with a set price on a fixed term. Software technologies may include applications, operating systems or middleware, which is software between the operating system and the end user. Software was originally—and rightly—relegated to the domain of the IT department, but today it serves a multitude of functions for many different business units. The rising increase in process automation and workflow management solutions has not only led to an increase in enterprise productivity but has also radically reduced the cost of production and time to market. The Rise Of Connected Products The dynamics of business are evolving virtually at the speed of thought, so much so that futurist Gerd Leonhard foresees more change in the next 20 years than has occurred in the previous 300 years. For most of history, however, change has been sluggishly successive, and as Craig Nadel, CEO of distributor Jack Nadel International, says, “we have all made some really bad and some really good guesses.” Though against our linear intuition, future predictions declaring exponential growth are illustrated by the fundamentals of Moore’s Law. Named after Intel co-founder Gordon Moore, the 1965 prediction suggests a dramatic increase in computing power and a decrease in relative cost at an exponential pace. Unlike linear growth, which results from repeatedly adding a constant, exponential growth is the repeated multiplication of a constant. Therefore, in contrast to a steady straight line over time, exponential growth produces an accelerating rate of change against a vertical axis. Often, exponential trends are missed in their early stages because the initial pace of exponential growth is deceptive—it begins slowly and steadily and is hard to differentiate from linear growth; hence, predictions based on the expectation of an exponential pace can seem improbable. In practice, exponential trends do not last forever; however, the origins of Figure 2: The Role Of IT 2011 2018 In-House IT Third-Party Company No IT Support Supplier (n=243) Distributor (n=706) Supplier (n=89) Distributor (n=334) Source: PPAI Business Study (2011, 2018) 56% 14% 30% 16% 13% 71% 59% 24% 17% 36% 34% 30% Figure 3: Scale Of Operations Source: PPAI 2018 Business Study Company Size (By Number Of Employees) IT Team Size <100 EMPLOYEES 2 TO 4 101-500 EMPLOYEES 5 TO 10 501+ EMPLOYEES MORE THAN 11 28 | JULY 2018 |