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Information Technology Staffing

Brought to you by Staffing Industry Analysts, Inc.

October 2005
Executive Summary

• IT temporary staffing running strong, but potential clouds on the horizon. Revenue and gross margin percentages have been on an improving trajectory over the last year and a half, and short-term prospects remain positive. However, overall U.S. economic growth is projected to slow, and a deceleration in total IT industry spending is also expected sometime in 2006- 2007; both trends will likely affect employment in IT, an economically sensitive segment. Data from Monster indicate that growth in IT temporary job postings is slowing already, though for the moment expansion in permanent IT job postings remains very strong.
• Long-term trends positive. Propelled both by general growth in IT employment as well as increasing employment penetration by temporary workers, particularly in highly skilled occupations, IT temporary staffing revenue is projected to grow over the long term at about 9 percent annually, materially faster than temporary help as a whole. Growth in both domestic IT staffing and IT solutions revenue will be contained to some degree by continued rapid expansion of IT offshoring. But, notably, offshoring is in itself an opportunity for firms able and willing to seize it.
• Staffing or solutions? IT project outsourcing has accelerated over the last decade, and a number of staffing firms are adding solutions business to cash in on the trend. Both stock market valuations and acquisition multiples paid indicate that financial markets see the solutions business as a favorable growth opportunity.
• Best industry markets to approach. Apart from the technology/IT sectors, which together employ about half of IT workers, the best industry markets to approach may be finance/insurance,
  manufacturing and government. Think small. Most IT workers are employed by companies with less than 100 employees.
• Best geographic markets to approach. The metro area with the highest IT employment is Washington, DC; the capital also ranks third in the nation in IT employment as a share of total employment, after Boulder-Longmont, CO, and San Jose, CA. The fastest growing IT employment market is Colorado Springs, CO. Four of the fastest declining metro IT employment areas are in California, and one of them is San Jose, of Silicon Valley fame. In general, IT employment is growing faster percentage-wise in smaller metro areas than in larger metro areas. On a statewide basis, data suggest that there may be a favorable imbalance (of more IT job postings than IT resumes) for IT staffing and solutions sales in New York, DC, Illinois, California, Massachusetts and Connecticut.
• Best skills to target. Five IT occupations are both in relatively short supply, as indicated by low unemployment rates, and experiencing growth in total employment. These are: hardware engineers, software engineers (systems), software engineers (applications), network/system administrators and systems analysts. IT hiring managers project information security to be their most needed skill over the next few years.
• When and how to find skilled professionals. The best time of the year to recruit is in the first quarter—there is a high degree of seasonality in both IT job applications and job searches with the frequency declining toward the end of the year. When recruiting through ads, be sure to include words from our most searched-for IT keywords list. For international recruiting purposes, H-1B visas present an important source. Currently visas are still available for individuals with advanced degrees. Visas for individuals without advanced degrees, but who possess special skills, are available annually-but the window for application is typically very short. On a statewide basis, data suggest that there may be a favorable imbalance (IT resumes greater than IT job postings) for recruiting in Maryland, Michigan and Texas.
• How much to pay and how much to bill. Estimated mean wages for IT temporary employees vary markedly by position, with computer software engineers (applications) the highest paid and computer operators the lowest paid.Wages for computer programmers have been rising the fastest. The typical bill rate markup for IT workers is in the 47 percent range.
• How to incent internal staff and what to expect from them. Total compensation for internal IT staffing firm employees is among the highest in the staffing industry, and typically more of it is paid in bonuses than for almost any other segment. But they earn it; gross margin per internal IT staffing employee also is among the highest.

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