Proposal for the Revision of the CSPI
(CSPI: Corporate Services Price Index)
Hina KIKEGAWA
Bank of Japan
e-mail: [email protected]
1
Outline of presentation
1. Update of the Corporate Services Price Index
(CSPI) to the 2005 base: An Overview
2. Focus on issues for IT related industries
(a) Selection of pricing method:
Internet based services
(b) Extension of Averaged Charge-out Rates:
Survey method of Custom software services
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1.Update of the CSPI to the 2005 base
3
Update of the CSPI
The 2005 base Corporate Services Price Index
(CSPI) will be introduced by the end of 2009.
We have 2 key strategies.
 Incorporating IT and outsourcing related services
 Capturing various types of prices
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Key Strategy 1
Incorporating IT and outsourcing related services
 Acceleration of data transmission speed facilitated the
development of internet network and the demand for
related services: Internet based services
 An increasing number of firms cut overhead cost by
outsourcing back-office functions: Education and
training services
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Key Strategy 2
Capturing various types of prices
 As evident in cellular phone charges, there has been a growing
trend in which various types of non-linear price schedules are
provided.
 Conducting price surveys, which are done by keeping services
quality constant, and compiling price statistics have become
increasingly difficult.
 Improvements are being made to increase the accuracy of
sample prices. e.g. Model pricing, Unit value method
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2. Focus on issues for IT related Industries
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2.Focus on issues for IT related Industries
 In today’s presentation, two examples of
our attempt to capture various types of prices
will be explained.
(a) Selection of pricing method
The introduction of a new item Internet-based services
raises an issue of keeping quality constant.
(b) Extension of “Averaged charge-out rates method”
In Custom Software services, “Averaged charge-out
rates” method will be improved.
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(a) Selection of pricing method
Internet based services -- online shop seller fees
 Online shop seller fees
 Online shop seller fees vs. Real estate rental
 Difference between online shop and real estate
 Pricing method for “online shop seller fees”
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Online shop seller fees
To open and keep a virtual shop on an online mall, a shop seller
needs to pay a fee to an administrator.
The online mall administrator offers a web page, helps to build
sellers’ own pages, etc.
Online shop seller
fees:
Transaction fee +
Monthly price
Online mall
administrator
"Matching"
Sell goods
Online shop
seller
Consumer
Pay bills
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Online shop seller fees vs. Real estate rental
 The price setting formula of online shop seller fees is
similar to that of real estate rental (Sales space rental):
C
＝ A * Ｘ
Online shop seller fees,
Real estate fee
Fee rate
( ＋ B)
Turnover
Monthly
charges
Is there a difference in characteristics between online
shop seller fees and real estate rental fees?
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Difference between online shop and real estate
Online shop
Price setting formula
Real estate (Sales rental)
C=A*X+B
Space resource
Basically unlimited
Limited
Principal function
Provision of opportunities
for sellers and buyers to
meet smoothly
Provision of space for sales
 For price survey purposes, the pricing method for this services
goes as follows.
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Pricing method for “online shop seller fees”
 For price survey purposes, online shop fees should
be evaluated at unit value of transactions.
 The surveyed prices are calculated as follows;
P ＝ C
Surveyed
Price
On-line shop
seller fees
c.f. P ＝ C
Surveyed
Price
Real estate
rental
/ N = (AX+B) / N
Number of
transactions in
a month
/ S = (AX+B) / S
Space
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(b) Extension of “Averaged charge-out rate method”
 Custom software services
 What is “Averaged charge-out rates?”
 Why do we apply “Averaged charge-out rates?”
 Advantages and disadvantages
 “Progressive completion base” price
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Custom Software Services
 Custom Software Services refers to the
development of customized software for
computers, including related research,
analysis and technical support.
*Packaged Software Services is a separate item in the CSPI.
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What is “Averaged charge-out rates”?
 Averaged charge-out rates are the charge-out rate for
projects in a specified section of respondents.
 For instance, at System Solution Section of respondent A,
five projects are being carried out.
Project
Client
Deadline
Number of SE
Project I
Internet Banking System
Bank A
Sep. 08
3
Project II
Settlement System
Bank B
Sep. 08
4
Project III
Safety inquiry System
Bank C
Sep. 08
5
Project IV
Personnel management System
Bank D
Mar. 09
2
Project V
Expenditure calculation system
Bank E
Apr. 09
6
The price calculation goes as follows.
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What is “Averaged charge-out rates”?
In September, projects I to III are completed. Turnover
and man-months for each project are measured in the
completion month.
“Averaged charge-out rates” are calculated by total
turnover divided by total man-months.
Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
Project I
Project II
Project III
Project IV
Project V
Completion
base
Project
Turnover
Man-months
Project I
$100,000
3SEs*3months=9
Project II
$300,000
4SEs*6months=24
Project III
$500,000
5SEs*9months=45
Total
$900,000
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Surveyed Price　= $900,000/78 man-months
= $11,538/man-month
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Why do we apply “Averaged charge-out rates”?
 Long-term, continuous (≈exclusive) contracts have
decreased.
-- The prices are usually quoted by the monthly rate per SE.
 “One shot” (one off) contracts have increased.
-- The prices are usually defined as a unit amount of sales
divided by the number of man-months.
With conventional charge-out rates, constant quality prices for
“one shot” contracts are difficult to measure.
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Advantages and disadvantages
Advantages
(a) Supply and demand conditions in the market
are reflected flexibly.
(b) The index compiled with averaged charge-out
rates tends to move proportionately with
economic fluctuations.
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Advantages and disadvantages
(2005CY=100)
（2000CY=100）
108.0
110.0
Continuous contracts
One shot contracts
Indices of Industrial Production* (s.a., right scale)
106.0
104.0
105.0
102.0
100.0
100.0
98.0
95.0
96.0
94.0
90.0
92.0
90.0
85.0
└
00
└
01
└
02
└
03
└
04
└
05
└
06
└
07
└
08
* Ministry of International Trade and Industry
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Advantages and disadvantages
Disadvantage: Index fluctuations
Index fluctuates widely because:
(a) Constant quality principle is relaxed due to the limited
availability of detailed data from respondents.
-- Rates for projects in a section is averaged instead of
keeping individual project constant.
(b) Charge-out rates are measured at completion month
only, due to the limited data availability from respondents.
-- In Japan, larger scale projects with skilled SEs are generally
completed and the rates tend to rise at the end of fiscal year.
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“Progressive completion base” price
Disadvantage can be resolved as follows:
-- Allocating total turnover and man-months equally to each month
-- Taking the average of all projects being carried out in a month
“Progressive Completion Base” price
Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec.
Project I
Project II
Project III
Project IV
Project V
Progressive completion
base
Man-months / month
=Number of SEs
Project
Turnover / month
Project I
$100000 / 3
3
Project II
$300000 / 6
4
Project III
$500000 / 9
5
Project IV
$300000 / 11
2
Project V
$600000 / 9
6
Total
$232,828
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Surveyed Price per month　= $232,828 / 20 SEs
= $11,641/SE
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“Progressive completion base” price
With “Progressive completion base” price, constant
quality principle is less relaxed.
 Large sample including both completed and
uncompleted projects enables us to reduce volatile
fluctuations of prices.
Fluctuations of index due to sampling and data
availability are addressed.
 Respondents are asked to submit the number of working days
of each project, additionally. BOJ conducts allocation of period.
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“Progressive completion base” price
（2005CY=100）
200
Completion base
180
Progressive completion base
160
140
120
100
80
05/01
02
03
04
05
06
07
08
09
10
11
12
06/01
02
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End
Gracias!
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