Despite a slowdown in growth in 2024, digital services companies<\/a> continue to be driven by new growth drivers such as artificial intelligence, cybersecurity, big data, cloud computing, and responsible digital technology. <\/p>\n\n To maintain their market position, digital services companies must have precise management tools to drive growth, improve profitability, and build customer loyalty. Key performance indicators (KPIs) give executives a clear picture of their company\u2019s health and enable them to make the right decisions at the right time. <\/p>\n\n This involves :<\/p>\n\n At Veryswing, we are committed to providing practical solutions for digital services companies, including performance metric management. Here\u2019s everything you need to know about this specialized topic. <\/p>\n\n A performance indicator, or KPI (Key Performance Indicator), is a quantitative measure used to assess the effectiveness and profitability of an IT services company\u2019s operations. These indicators help guide the company, forecast results, and optimize strategic decisions. <\/p>\n\n To help you gain perspective on your IT services company’s results and facilitate decision-making, discover 8 performance indicators for effective management of your IT services company <\/strong>.<\/p>\n\n Sales are a measure of a company’s ability to generate value. <\/strong><\/p>\n\n When analyzing this performance indicator, we need to distinguish between several elements:<\/p>\n\n What to watch for: A <\/strong>growing gap between revenue recognized and revenue billed (high FAE) signals a delay in billing that negatively impacts cash flow. Rising PCA figures may indicate risky advance overbilling. Analyze these four components together, not in isolation. <\/p>\n\n The ADC provides a vision of the company’s profitability<\/strong>. It corresponds to what the employee costs the company every day. <\/p>\n\n CJM employee = ([gross annual salary + payroll taxes + total value of various benefits over one year] \/ number of potential workdays per year) \u00d7 overhead coefficient.<\/em><\/p>\n\n For an external employee, his daily purchase price is his CJM.<\/em><\/p>\n\n What to watch for: The average <\/strong>project cost (CJM) must always remain below the average daily rate (TJM). If the CJM exceeds the TJM, the project is operating at a loss. In healthy IT services companies, the CJM typically represents 60 to 80% of the TJM. The difference between the two is your gross margin per unit. This is the most direct driver of your profitability. The ADR corresponds to the average amount billed to IT services companies’customers for one day<\/strong>.<\/p>\n\n ADR = invoiced sales over the selected period \/ number of days produced over the period<\/em><\/p>\n\n The rate must always cover the average daily rate (ADR) to avoid losses. In France, average daily rates at digital services companies range from \u20ac450 to \u20ac800 per day<\/strong>, depending on the specialization (development, cybersecurity, data, cloud). Highly specialized roles (AI, offensive security) can exceed \u20ac1,000 per day. <\/p>\n\n What to watch for: A <\/strong>stagnant average daily rate (ADR) while the average monthly rate (AMR) rises (due to wage increases and labor costs) squeezes margins. Analyze the trend in the ADR\/AMR ratio over 12 months, not just the ADR in absolute terms. <\/p>\n\n Also known as Staffing Rate, ELAR gives an overview<\/strong> of an IT services company’s operational performance. Excluding absences, this rate is relatively homogeneous for each month of the year. <\/p>\n\n ELAR = (Number of days produced) \/ (Number of potential days – (CP + RTT))<\/em><\/p>\n\n What to watch for: A <\/strong>TACE between 75% and 85% is generally considered healthy for digital services companies. Below 70%, profitability is at risk. Above 90%, be mindful of staff burnout and the risk of underinvestment in skills development. <\/p>\n\n <\/p>\n\n The LIAR keeps track of absences<\/strong> and gives an activity rate that can fluctuate much more than the ELAR for months with many absences (summer vacations, for example).<\/p>\n\n LIAR = Number of days produced \/ Number of potential days<\/em><\/p>\n\n What to watch for: The <\/strong>TACI naturally fluctuates from month to month (with lows in August and December). Always compare it to the same period the previous year, not to the previous month. It\u2019s a useful indicator for anticipating recruitment or outsourcing needs during peak periods. <\/p>\n\n The gap-between-assignments rate measures the proportion of non-billed time between two assignments, excluding vacation time. It complements the TACE: a TACE of 82% corresponds to a gap-between-assignments rate of 18%. <\/p>\n\n Inter-contract rate = (Days between contracts \/ Business days excluding holidays) \u00d7 100<\/em><\/p>\n\n What to watch for: The <\/strong>best-managed digital services firms maintain a gap-between-contract rate below 5%.<\/strong> Between 5% and 10%, the net margin comes under pressure. Above 15%, the company\u2019s long-term viability may be at risk. A consultant who is between contracts for 20 days with an average daily rate of \u20ac600 represents \u20ac12,000 in uninvoiced revenue for that month alone. <\/p>\n\n The gap between contracts isn\u2019t just a financial issue: a consultant who isn\u2019t properly supported during this period is a consultant who may leave. To learn more, read our article: Gaps Between Contracts in IT Services Firms: How to Plan for Them and Turn Them into a Tool for Retention.<\/a> <\/p>\n\n The margin is used to analyze the money earned by the company<\/strong> through its services. <\/p>\n\n Gross margin = ADR – ADC<\/em><\/p>\n\n Margin rate =<\/em> (Average Daily Volume \u2013 Average Trading Volume) \u00d7 100 \/ Average Trading Volume<\/em><\/p>\n\n What to watch for: In <\/strong>digital services companies, a gross margin between 25% and 40%<\/strong> is generally considered satisfactory. Below 20%, the business is vulnerable to unforeseen circumstances (gaps between contracts, unpaid invoices). Above 50%, make sure you\u2019re not underpaying your consultants relative to market rates, which creates a risk of high turnover. <\/p>\n\n Accounts receivable\u2014or DSO (Days Sales Outstanding)\u2014measure the average time it takes for your customers to pay<\/strong>, in days. It is one of the indicators most directly linked to the financial health of the IT services company. <\/p>\n\n DSO = (Accounts receivable \/ Revenue billed during the period) \u00d7 number of days in the period<\/em><\/p>\n\n What to watch for: In <\/strong>the digital services sector, a DSO of less than 45 days<\/strong> is a healthy target. Between 45 and 60 days, cash flow begins to tighten. Beyond 60 days, the risk of cash flow strain is high, especially for growing companies that need to finance new hires. <\/p>\n\n A high DSO is often a sign of flawed billing processes (late approval of CRA forms, late issuance of invoices) rather than delinquent payers. It is an operational issue before it is a business problem. <\/p>\n\n <\/p>\n\n To evaluate workforce-related performance, several metrics can be used: the turnover rate, average tenure, and the percentage of productive employees.<\/p>\n\n What to watch for: <\/strong> According to Numeum,employee turnover in the IT services sector<\/a> typically hovers around 18%. A rate exceeding 25% over a 12-month period is a red flag that requires an analysis of the underlying causes. The consequences of high turnover<\/a> go far beyond the simple loss of an employee: they include an increased workload for the remaining teams, recruitment costs, and the loss of client knowledge. <\/p>\n\n Taken on its own, each indicator tells only part of the story. It is their combination that reveals the true health of your digital services company. <\/p>\n\n Example 1 \u2014 High TACE + low margin: Your <\/strong>consulting teams are adequately staffed, but your average daily rates are too low or your average hourly rates are too high. The solution lies in sales (renegotiating contracts) or HR (optimizing payroll). <\/p>\n\n Example 2 \u2014 High DSO + tight cash flow: Your <\/strong>business is profitable on paper, but your customers are paying late. The solution is operational: automate invoicing, send reminders sooner, and review payment terms. <\/p>\n\n Example 3 \u2014 Rising gap-between-assignments rate + rising turnover: a <\/strong>strong warning sign <\/strong>. Consultants on extended assignments are looking for other opportunities. Take action on both staffing and HR support simultaneously. <\/p>\n\n Making decisions based on reliable data<\/strong> is very important for your IT services company.<\/p>\n\n If you use spreadsheet programs like Excel, or multiple management tools that are independent of one another, you may run into several issues:<\/p>\n\n There’s a solution to these problems: ERP software.<\/strong><\/p>\n\n Specially designed for consulting firms<\/a> and IT services companies, the VSActivity software is perfectly tailored to your business.<\/p>\n\n Implementing the VSActivity<\/a> ERP system in your digital services company also allows you to: <\/p>\n\n Discover the power of our SaaS ERP VSActivity and all its features<\/a> during a demo<\/a>!<\/p>\n","protected":false},"excerpt":{"rendered":" CA, TJM, CJM, TACE, margin, DSO, inter-contract period\u2026 Learn about the 9 key metrics and how to interpret them.<\/p>\n","protected":false},"author":6,"featured_media":7283,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_titles_title":"9 Performance Metrics for Your Digital Services Company - Veryswing","_seopress_titles_desc":"CA, TJM, CJM, TACE, margin, DSO, inter-contract period\u2026 What are the essential KPIs for managing an IT services company? Discover the 9 key metrics and how to interpret them.","_seopress_robots_index":"","_seopress_robots_follow":"","_seopress_robots_imageindex":"","_seopress_robots_snippet":"","_seopress_robots_primary_cat":"none","_seopress_robots_breadcrumbs":"","_seopress_robots_freeze_modified_date":"","_seopress_robots_custom_modified_date":"","_seopress_robots_canonical":"","_seopress_social_fb_title":"","_seopress_social_fb_desc":"","_seopress_social_fb_img":"","_seopress_social_fb_img_attachment_id":0,"_seopress_social_fb_img_width":0,"_seopress_social_fb_img_height":0,"_seopress_social_twitter_title":"","_seopress_social_twitter_desc":"","_seopress_social_twitter_img":"","_seopress_social_twitter_img_attachment_id":0,"_seopress_social_twitter_img_width":0,"_seopress_social_twitter_img_height":0,"_seopress_redirections_value":"","_seopress_redirections_enabled":"","_seopress_redirections_enabled_regex":"","_seopress_redirections_logged_status":"both","_seopress_redirections_param":"","_seopress_redirections_type":301,"_seopress_analysis_target_kw":"","_seopress_news_disabled":"","_seopress_video_disabled":"","_seopress_video":[],"_seopress_pro_schemas_manual":[],"_seopress_pro_rich_snippets_disable_all":"","_seopress_pro_rich_snippets_disable":[],"_seopress_pro_schemas":[],"inline_featured_image":false,"footnotes":""},"categories":[1],"tags":[],"article--metier":[81],"solution":[74],"class_list":["post-7445","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-non-classifiee","article--metier-esn","solution-vsa-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/posts\/7445","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/comments?post=7445"}],"version-history":[{"count":7,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/posts\/7445\/revisions"}],"predecessor-version":[{"id":124869,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/posts\/7445\/revisions\/124869"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/media\/7283"}],"wp:attachment":[{"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/media?parent=7445"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/categories?post=7445"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/tags?post=7445"},{"taxonomy":"article--metier","embeddable":true,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/article--metier?post=7445"},{"taxonomy":"solution","embeddable":true,"href":"https:\/\/veryswing.com\/en\/wp-json\/wp\/v2\/solution?post=7445"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
What is a performance metric in an IT services company?<\/h2>\n\n
The 9 Key Performance Indicators to Track in the Digital Services Industry<\/h2>\n\n
1. Sales figures<\/h3>\n\n
\n
2. Average Daily Cost (ADC)<\/h3>\n\n
3. Average daily rate (ADR)<\/h3>\n\n
4. Excluded Leave Activity Rate (ELAR)<\/h3>\n\n
5. Leave-inclusive activity rate (LIAR)<\/h3>\n\n
6. The inter-contract rate<\/h3>\n\n
7. The Margin<\/h3>\n\n
8. Accounts Receivable<\/h3>\n\n
9. Headcount<\/h3>\n\n
How can you effectively track these performance metrics in your digital services company?<\/h2>\n\n
\n
![\"breakdown](\"https:\/\/veryswing.com\/wp-content\/uploads\/ventilation-activite.svg\")
<\/figure>\n\nHow should we interpret these KPIs together?<\/h2>\n\n
What mistakes should be avoided when managing an IT services company using KPIs?<\/h2>\n\n
\n
Manage your digital services company using an ERP system, an essential tool for performance management<\/h2>\n\n
\n
\n