Differences in Efficiency between B2Bs and B2Cs in the Japanese IT Services Industry

The purpose of this study is to investigate the efficiency of the hierarchies embedded in the Japanese IT services industry. Especially, this paper focuses on the differences in efficiency between B2Bs and B2Cs. Empirical models used in the literature on the productivity paradox and outsourcing often have conflicting results. To mirror the reality of the industry, it is necessary to show results in a more graphical fashion. This paper uses an instrument called the RL-chart method to visualize efficiency. The method has three components: the RL-chart, the RPE-LCP curve and the RPE-cascade. The RL-chart expands a one-dimensional index for revenue per employee (RPE) to a two dimensional map. The RPE-LCP curve is drawn on the RL-chart by conducting curve regression analysis to identify the average annual salary per person. The RPE-cascade is comprised of a set of indicators (RPE (i), i=0, 1, 2, 3) according to an SG&A (Sales, general, and administrative expenses) structure to envision the cost balance between outsourcing and in-house operation.