31 January 2009

Service Company Analysis (and Web Site Load Times)

We received a question from a reader:

How can I apply the gauges described here for a pure service company or an IT (non product) company - let's say Infosys or (in)famous Satyam.

With service companies, "Inventory" is not the meaningful parameter it is for manufacturers, and this reduces the information available to the Cash Management gauge.  By adjusting the weights of the metrics on which this gauge depends, we can still produce a Cash Management score.  However, the gauge is somewhat less insightful.

The other gauges apply equally to manufacturers and service companies.  No adjustments are necessary.

Compared to manufacturers, service companies tend to have a greater ratio of intangible assets to total assets.  Much of the assets are the skills of the people, the company's processes, and its relationships with customers.  If the company runs into trouble, these are harder to monetize than a factory full of equipment or a warehouse stuffed with inventory.

Brand-name pharmaceutical firms are similar in this respect.  They depend on smart researchers and valuable patents.  The researchers can leave for competitors and the patents expire or can be challenged in court.

We don't presently distinguish between tangible and intangible assets in computing a gauge scores, but we will investigate how we might do so.  Any suggestions?


The same reader commented that the embedded spreadsheets, while useful, slow down the loading of the web site.  Thanks for the feedback -- this concerns us greatly.  We suspect the greater culprit are the embedded charts showing share prices over time.  The spreadsheets, hosted at zoho.com, seem more speedy.  We will cut out the price charts for the time being.  Please let us know if this makes a difference or if you believe the spreadsheets are in fact the problem. 

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