The business services industry consists of a very broad variety of services sold to other businesses.
Companies from this sector help other firms focus on their core competencies.
These companies help benefit others by increasing their operating efficiencies and avoid spending resources on what is not the most important to them..
Business services companies provide support to other businesses, such as office administration, hiring and of personnel, security services, telecommunication, travel, cleaning and maintenance, waste disposal and so on. The USA and Europe are the primary markets for these types of services.
USA business services consists of about 400,000 businesses (single-location and establishments of multi-location companies). Combined annual sales are estimated about $870 billion. Though estimates vary because the exact number is difficult to determine and that amount may be somewhat lower.
Most segments of the industry have lower barriers to entry than other industries due to capital investment requirements. The low barrier can result in intense competition. They have to compete with each other and much larger, established companies with greater resources.
Analysts expect the business services to grow quickly in the coming years. What are the reasons for this robust growth?
Many firms have found success in expanding beyond their local markets. A University of Washington study that showed that local firms conducted a large portion (up to 36%) of their business outside their primary market, mostly within the United States. Other firms supply services that were formerly imported, this is called import substitution. Data is not hard to find, but many observers think that the replacement of services formerly imported has spurred growth of the local business services companies.
Outsourcing is common in many companies. Some services which had formerly been conducted internally (such as accounting) is now obtained from business services firms.
Advances in technology including telecommunications, computer and IT have driven demand too. Often new services have been adopted. Information technologies are often the basis for new service industry products such as prepackaged software and computer systems integration.
Another source of revenue is growth is that consumers have increased their use of business services sectors as their income increases. This can include security systems, photocopying services, prepackaged software and other.
Enhanced productivity and more competition especially in manufacturing, has resulted in the dramatic growth in the use of temporary workers – a sub-segment of business services. Additional reasons why firms are using temporary workers include the lower hourly costs per worker, increased flexibility, and the desire to screen potential permanent employees.
