State of the Industry – A Quarterly Overview of IT & Engineering Staffing Industry
Every quarter, TechServe Alliance provides an overview of the IT & engineering staffing industry. During our most recent update, TechServe Alliance CEO Mark Roberts and veteran industry analyst Jim Janesky shared key industry metrics and their perspective on trends impacting the industry. Mark and Jim also provided their latest forecast on future industry performance.
Industry Performance: Is the Past Prologue?
Like most industries, IT & engineering staffing was impacted by the pandemic. While the industry as a whole contracted modestly in 2020, profitability increased for many firms largely attributable to lower operating expenses.
With the dramatic improvement in demand for high skilled talent since its low ebb in July 2020, IT employment now exceeds pre-pandemic levels. While a positive development to be sure, it has given rise to its own set of challenges: a deepening talent shortage approaching crisis proportions. As noted by TechServe Alliance CEO Mark Roberts while some may be view it as a “good problem, it is a problem nonetheless.”
Public Policy: A Shift?
How will the new Biden Administration policy impact IT & engineering staffing firms?
While the Biden administration is expected to be mostly supportive of immigration from a policy standpoint—a significant departure from the prior administration, its policy positions in other areas is likely to be less employer friendly. However, with only a razor-thin democratic majorities in the House and Senate, any policy shift is likely to be limited to what can be accomplished through executive orders and the regulatory process. Given the partisan divide on immigration, labor and employment issues, Roberts indicated he doesn’t believe any legislation will be enacted in these areas that will have a material impact on the industry.
Then there is inflation….
While the impact of public policy is likely to be modest in most respects, economists are watching the unprecedented levels of committed and proposed federal spending on inflation. The question remains, are the prices increases we are seeing permanent or merely transitory?
Industry Metrics: A Few Highlights
Roberts shared highlights from the recently released TechServe Alliance 2021 Operating Practice Report including.
Top-line revenue contracted for the first time since 2009
- High-profit firms primarily achieved their elevated levels of profitability through lower expenses rather than higher margins Bottom-line profitability surged – the median firm at had profit before taxes of 5.7%, high-profit firms at 11.6%
- While VMS/MSP business had much lower margins and close rates than ‘retail’ business, it was much more resilient during the downturn
- Many industry firms are contracting their real estate footprint
- Remote work for both internal teams and consultants is here to stay in some form
Future Outlook
Economists are projecting strong GDP growth for the remainder of 2021 as the economy continues to open up. Along with this economic rebound comes a demand for talent and the industry will be a clear beneficiary. Roberts and Janesky are expecting a record year for IT staffing which we are projecting to grow by 10% with engineering staffing increasing by 7%. A bullish outlook to be sure!
