Edition 44

  • Posted on: 11 December 2017
  • By: ruchir@saralweb.com

Introduction

The Indian economy got a push in the form of upgraded Moody’s rating from Baa3 to Baa2 on 16th November, 2017[1]. In the month of September also, India made an iconic jump of 21 rankings in world bank’s ease of doing business. Among the numerous growth variables, India’s service sector, with around 66% of gross value added growth in 2015-16, claims the centre of stage. Analysing the total cost of service, we bring to you the 44th edition of Saralweb’s research note.

Service Sector in India

Service sector refers to a wide range of activities: trade, hotel & restaurants, transport, storage and communication, financing, insurance, real estate, business services community, social and personal services, services associated with construction being some. For an organisation providing services, various factors are responsible for competitiveness. The requirement of the respective service with customers, skills set, number of providers, experience, etc., sum up to provide an edge.

The costing of services is a tedious task. Unlike traditional tangible products, you cannot measure the output per unit input and thus it needs to be studied with a different approach. The relationship between the input and output can be divided into two sections. First, being the inputs which are fixed, for example: material requirements to complete a job and their relative cost, applicable taxes, etc. Second, being the variables such as number of man-hours required, skill sets, etc. These factors vary from person to person, organisation to organisation. A person with more experience is expected to be preferred for the job, getting more opportunities as compared to a less experienced worker.

Similarly, an organisation which has one person doing all the job will be overshadowed by an organisation, with designated trained professionals doing designated jobs, as was pointed out by F.W.Taylor[2]; but that would result in increased manpower, thus increasing the cost of service, resulting in a setback to competitiveness. Apparently, in most of the cases, even the end result of services cannot be measured and is said to be on a scale of satisfaction. The scale varies from customer to customer. Thus, the real cost of service needs to be calculated carefully.

Total cost of service in security service industry

As per the Grant Thornton’s report on Private security services in India, 2015,[3] the industry is classified into two categories: Security services segment and security systems segment. Security services segment includes the private manned security services, while security system segment covers security provided through electronic devices. The total cost for the latter moves around the cost of equipment, and confines to first type of input, with installation and maintenance being the other factors.

In the case of security services segment, manpower is in focus. All the complexities mentioned above are applicable. Although the industry has unified the work timings on the basis of shifts, they too can vary on the basis of location. The skill set equation has been sorted out on the basis of designation, but the allocation needs to be in equilibrium, else the organisation might end up shedding more. For an organisation developing a model to cater to these complexities, the government’s rules and policies induce a need for flexibility in the system.

With the changing business practises, it seems to be the time when even the security industry should start looking at it’s service industry family. The technological advancements provided by IT can ease up business processes, while providing the necessary flexibility to the system. Selecting a solution though, is a non-trivial process. An expensive IT product might serve all the needs but it’s cut-over time can be a cause of concern, while a cheap product might not have what the industry needs. Also, the expensive product might not be suitable for the organisation with small man-power, which constitutes the major percentage of the industry. While the complexities keep the questions flowing, it won’t be wrong to say that the industry needs a solution, developed in accordance to it’s requirements, while priced in accordance to the industry structure. Bibliography 1: Livemint, Moody’s upgrades India rating, backs Modi govt reforms, 2017 2: F.W.Taylor, The principles of scientific managment, 1911 3: Grant Thornton, Private security services in India, 2015