Scale Key to Maintaining Higher Levels of Profitability
Alexandria VA, May 29, 2024 – IT and engineering staffing firms faced headwinds last year amid a pullback in hiring and macroeconomic uncertainty, according to the 2024 TechServe Alliance Operating Practices Report (OPR), the industry’s foremost benchmarking analysis.
The just-released report highlights several long-standing and newly emerging industry trends:
After robust top-line growth and improving profitability in 2021 and 2022, the median IT & Engineering Staffing saw a decline on both fronts. A few key highlights from the report include:
- In a Market where Demand Declines, Scale Provides an Advantage: While earnings declined across the board, firms were more likely to generate above-average profitability through lower expenses as a percentage of revenue—providing an advantage to larger firms attributable to scale.
- Client Diversification is Even More Critical as Demand Recedes: While client diversification is critical for all firms at all times, smaller firms become particularly vulnerable during down markets given higher levels of client concentration.
- Firms Were Less Reliant on H-1Bs Provided By Third Parties: For a myriad of reasons, firms have become less reliant on H-1Bs provided by third parties.
“After two years of strong double-digit growth, 2023 was a challenging year for most IT & Engineering firms. Despite these headwinds, there are firms that continue to outperform others,” said Mark Roberts, CEO of TechServe Alliance. “As we have seen in prior downturns, lower SG&A expenses as a percentage of revenue was the primary determinant of whether someone achieved ‘High Profit’ status. Larger firms have an advantage on this front as they can spread their back office and other internal costs over more revenue—achieving economies of scale,” observed Roberts.
As the only annual benchmarking analysis exclusively focused on the IT & engineering staffing industry, this comprehensive benchmarking report covers a wide range of metrics including data points on operating in the remote and hybrid work models.
- Revenue
- Gross Margin & Profitability
- Impact of Direct Client Relationship, VMS/MSP with Hiring Manager Contact, and VMS/MSP Without Hiring Manager Contact on Close Rates, Margins and Profitability
- SG&A Expenses—what areas of expense control help drive higher profitability
- Compensation and Metrics for Sales & Recruiters at Different Levels of Experience
- Benefits for Internal Staff, Hourly and Salaried Consultants
- Industry Trends
And much more!
Learn more about the 2024 Operating Practices Report here. A Sales & Recruiter Metrics Report will be released in the future.
About TechServe Alliance
TechServe Alliance is the national trade association of the IT & Engineering staffing and solutions industry. IT & Engineering staffing and solutions firms and affiliated professionals count on TechServe Alliance to keep their leadership informed, engaged, and connected. By tapping the “collective scale” of its companies, TechServe provides access to industry best practices and insights as well as innovative products and services supporting its stakeholders in the efficient delivery of best-in-class IT & Engineering staffing and solutions for clients and exceptional professional opportunities for every consultant.
