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| MAPS : IT Recruitment: 2001 |
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This report covers: IT recruitment, agencies, E-Recruiting,
companies covered include: Hays IT,S-Three, Group, Spring, Modis International, Elan Computing, MSB International, Parity Group, Select, Vedior, Lorien,
EXECUTIVE SUMMARY
| Executive Summary |
| Reality Bites |
| The IT recruitment market has endured a dramatic change in fortunes. Once a boom industry, with sales growing above 20% per annum between 1996 and 1998, it has been transformed into one in which profits have slumped and industry revenue has stagnated since 1999. |
| A combination of factors have destroyed the industry's advantage, and led to a period of reflection by recruitment agency directors. Faced with the end of work associated with the year 2000 and worldwide retrenchment in the IT industry, IT recruitment agencies have had to adapt quickly to a new business environment. |
| In addition, a series of legislative changes have made life harder for the staff agencies and contractors, although they have not directly led to a reduction in industry revenue. |
| Agencies Adapt to the Brave New World |
| The agencies' response has been twofold. On one level, the industry has retrenched, by slashing costs and by imposing tight fiscal controls on overheads. On another level, it has looked to the future, repositioning itself for a new environment in which core-business revenues will grow only slowly year-on-year. In this environment, agencies are shifting onto higher ground and moving up the value chain. |
| Agencies are developing a new raft of services to complement their core job-placement operations, with the aim of reinventing the business model of the agency market. Instead of relying on contract and project-based work, many agencies are developing end-to-end human resource (HR) management services in order to offer a complete outsourcing package to their clients. The revenue stream based on one-off, low-margined project work becomes an ongoing revenue stream, with higher margins. In moving to offer the new services, agencies are explicitly and implicitly focusing much of their energy on their key accounts, with many introducing preferred-supplier agreements. |
| Combined with these strategic changes, agencies are seeking both geographical diversification and diversification into allied computer-services markets. Geographical diversification is being encouraged by the following factors: |
| the need to reduce dependency on a single national market in a period of volatility for IT markets |
| the fact that continental European markets are set to grow more quickly than the UK market in the next few years |
| the fact that major accounts are becoming global in scale and consequently require a global human-resourcing solution |
| common skill shortages across all developing countries, meaning that major clients are looking to developing regions and countries such as India for the appropriate staff. |
| The Internet: Opportunity and Threat |
| At the same time that the IT recruitment market has undergone a dramatic reversal of fortunes, it has also been able to use a new distribution and advertising channel to reach job seekers. E-recruiting has become a new force in the market. On one level, the Internet provides a major opportunity for agencies to achieve the following: |
| to reach a wide global and national audience at low cost |
| to ease the process of placing job seekers |
| to improve their own operational efficiencies by improving their back-office operations |
| to develop a `clicks-and-bricks' style of operation, thereby lowering back-office operating costs while retaining the personalised services offered in the front office. |
| However, e-recruiting is also a potential threat to agencies. In particular, it raises the prospects of disintermediation in the IT recruitment market. The Internet and the new breed of software available to HR departments allow employers to better handle their staffing needs directly via the Web and to bypass agencies. Moreover, many job boards are becoming more sophisticated and are extending their services through the human resources process, from job advertisements to training and through to the job offer. |
| This threat from e-recruiting is forcing many agencies to develop their own e-recruiting services and is re-emphasising the need for agencies to expand the range of services they offer. No Internet jobsite can compete with an IT recruitment agency that combines a strong office network — offering face-to-face contact with job seekers and clients — with a strong online presence and the ability to offer a comprehensive range of HR services. |
| A Future of Opportunity |
| The next 5 years will prove to be a time of both uncertainty and major opportunity. During this period, the business environment will be characterised by stable market growth. The boom of the late 1990s will not return. In order to survive and prosper in this new sober business environment, agencies will have to: |
| work hard to restore their profitability through staff cutbacks, the sale of non-core assets and possibly mergers and acquisitions |
| put more emphasis on higher-growth sectors such as the public sector and permanent staff |
| The main opportunity of the agencies is to broaden their product offering by moving into the areas of HR outsourcing and management. The use of Internet technologies and the exploitation of Internet jobsites will be important elements in offering value-added services to major clients. |
TABLE OF CONTENTS
| Executive Summary | 1 |
| Reality Bites | 1 |
| Agencies Adapt to the Brave New World | 1 |
| The Internet: Opportunity and Threat | 2 |
| A Future of Opportunity | 2 |
| 1. Introduction | 4 |
| The IT Recruitment | |
| Market | 4 |
| Definition | 5 |
| 2. Strategic Overview | 6 |
| Market Dynamics and Segmentation | 6 |
| A Dramatic Reversal of Fortunes | 6 |
| Table 1: The IT Recruitment Agency Market by Invoiced Sales at Current and Constant | |
| 1997 Prices (£m), 1997-2001 | 7 |
| Table 2: The IT Recruitment Agency Market by Invoiced Sales by Sector by Value | |
| at Current Prices (£m and %), 2000 and 2001 | 8 |
| Figure 1: The IT Recruitment Agency Market by Invoiced Sales by Sector by Value | |
| at Current Prices (£m), 2000 and 2001 | 9 |
| Lower Wage Inflation | 9 |
| UK Legislation | 10 |
| IR35 | 10 |
| Table 3: Actions Taken in Response to IR35 Rules (% of respondents), March 2001 | 11 |
| Quarantine Rules | 11 |
| Employment Agencies and Employment Business Regulations | 12 |
| European Legislation | 13 |
| Market Trends | 13 |
| Long-Term Survival | |
| Assured | 13 |
| Consolidation and Retrenchment | 14 |
| A Shift to Value-Added Services | 14 |
| Competitive Structure | 15 |
| Table 4: The Major IT Recruitment Agencies by Market Share (%), 1999 and 2000 | 16 |
| Figure 2: The Major IT Recruitment Agencies by Market Share (%), 1999 and 2000 | 17 |
| Advertising an | |
| Distribution | 18 |
| Media Used for Job Advertisements | 18 |
| Contacting Clients | 19 |
| The Rise of E-Recruiting | 19 |
| Table 5: Number of IT Job Advertisements Appearing Online and in Print, | |
| March 2000 to July 2001 | 20 |
| E-recruitment | 21 |
| The Major E-Recruiter Sites | 21 |
| Table 6: The Largest UK IT Jobsites by Share of IT Jobs Available (%), August 2001 | 22 |
| Figure 3: The Largest UK IT Jobsites by Share of IT Jobs Available (%), | |
| August 200123 | |
| Advantages of | |
| E-Recruiting | 23 |
| The Impact of E-Recruiting | |
| on IT Recruitment | |
| Agencies | 24 |
| From Jobsite to Career Networks | 25 |
| Disintermediation | 25 |
| Table 7: Methods Used to Recruit Staff (% of companies), May 2001 | 26 |
| Figure 4: Methods Used to Recruit Staff (% of companies), March 2001 | 27 |
| The Consumer | 28 |
| Individual Clients | 28 |
| Business Clients | 28 |
| Market Forecasts | 29 |
| 3. Contract and | |
| Temporary Staff | 30 |
| Background | 30 |
| Market Size | 30 |
| Table 8: The Market for Contract and Temporary Staff by Invoiced Sales at Current and Constant 1997 Prices (£m), 1997-2001 | 31 |
| Consumer Trends | 31 |
| Individual Clients | 31 |
| How Contractors | |
| Find Work | 31 |
| Table 9: Current and Future Preferences of Contractors for Finding Work | |
| (% of contractors), February 2001 | 32 |
| Figure 5: Current and Future Preferences of Contractors for Finding Work | |
| (% of contractors), February 2001 | 32 |
| Why Contractors Use an Agency | 33 |
| Table 10: The Reasons Contractors Use an Agency (% of contractors), February 2001 | 33 |
| Figure 6: The Reasons Contractors Use an Agency (% of contractors), February 2001 | 34 |
| Business Clients | 34 |
| Table 11: The Proportions of Organisations Using Contract Staff by Sector (%), 1999 | 35 |
| Why Use Contract Staff? | 35 |
| Table 12: The Benefits to Organisations of Using Contract Staff | |
| Rather Than Permanent Staff (% of organisations), 1999 | 35 |
| Figure 7: The Benefits to Organisations of Using Contract Staff | |
| Rather Than Permanent | |
| Staff (% of organisations), 1999 | 36 |
| Advertising and | |
| Distribution | 36 |
| 4. Permanent Staff | 37 |
| Background | 37 |
| Market Size | 37 |
| Table 13: The Market for Permanent IT Staff by Invoiced Sales at Current and Constant | |
| 1997 Prices (£m), 1997-2001 | 38 |
| Consumer Trends | 38 |
| Individual Clients | 38 |
| Business Clients | 38 |
| Advertising and | |
| Distribution | 39 |
| 5. An International Perspective | 40 |
| Market developments | 40 |
| Competitive Environment | 41 |
| Consumer Behaviour | 42 |
| E-Recruiting on the Rise | 42 |
| 6. PEST Analysis | 44 |
| Introduction | 44 |
| Political Factors | 44 |
| Economic Factors | 44 |
| Social Factors | 45 |
| Technological Factors | 45 |
| 7. Consumer Dynamics | 47 |
| Individual Clients | 47 |
| Attitudes | 47 |
| Use of the Internet | 47 |
| Business Clients | 48 |
| Usage of IT Recruitment Agencies | 48 |
| Table 14: Usage of IT Recruitment Agencies in the Public and Private Sectors | |
| (% of organisations), | |
| 1999 | 48 |
| Who Are the Clients? | 48 |
| Table 15: Jobs Available in IT by Industry Sector (%), 2000/2001 | 49 |
| Figure 8: Jobs Available in IT by Industry Sector (%), 2000/2001 | 50 |
| Where Are the Jobs? | 50 |
| Table 16: IT Jobs on Offer by Location (%), | |
| 2000/2001 | 51 |
| Figure 9: IT Jobs on Offer by Location (%), 2000/2001 | 52 |
| How Important is Recruitment? | 52 |
| Table 17: IT Directors’ Top Management Challenges (% of directors/managers), 2001 | 53 |
| Figure 10: IT Directors’ Top Management Challenges (% of directors/managers), 2001 | 54 |
| The Value of IT Recruitment Agencies | 54 |
| Table 18: Attitudes to IT Recruitment Agencies, (score out of five), 1999 | 55 |
| 8. Company Profiles | 56 |
| Computer People | 56 |
| Corporate Strategy | 56 |
| Profitability | 56 |
| Future Company Developments | 57 |
| Hays IT | 57 |
| Corporate Strategy | 57 |
| Profitability | 58 |
| Future Company Developments | 58 |
| S-THREE GROUP | 58 |
| Corporate Strategy | 58 |
| Profitability | 59 |
| Future Company Developments | 59 |
| Spring Group PLC | 60 |
| Corporate Strategy | 60 |
| Profitability | 60 |
| Future Company Developments | 60 |
| Modis International | 61 |
| Corporate Strategy | 61 |
| Profitability | 61 |
| Future Company Developments | 62 |
| Elan Computing | 62 |
| Corporate Strategy | 62 |
| Profitability | 63 |
| Future Company Developments | 63 |
| MSB International PLC | 63 |
| Corporate Strategy | 63 |
| Profitability | 63 |
| Future Company Developments | 64 |
| Parity Group PLC | 64 |
| Corporate Strategy | 64 |
| Profitability | 65 |
| Future Company Developments | 65 |
| Select/Vedior | 65 |
| Corporate Strategy | 65 |
| Profitability | 66 |
| Future Company Developments | 66 |
| Lorien PLC | 67 |
| Corporate Strategy | 67 |
| Profitability | 67 |
| Future Company Developments | 67 |
| 9. The Future | 68 |
| Slow but Steady growth | 68 |
| Table 19: The Forecast IT Recruitment Agency Market by Invoiced Sales | |
| at Current Prices (£m), 2001-2005 | 68 |
| Profitability is Key | 69 |
| Permanent Staff: The | |
| Main Growth Sector | 69 |
| Table 20: The Forecast IT Recruitment Agency Market by Invoiced Sales by Sector | |
| by Value at Current Prices (£m and %), 2001-2005 | 69 |
| Value-Added Human Resource Services | 70 |
| IT recruitment Agencies go Online | 70 |
| 10. Glossary | 71 |
| 11. Further Sources | 73 |
| Trade Associations | 73 |
| Company Annual Reports | 73 |
| Trade Journals | 74 |
| General Sources | 74 |
| Bonnier Information | |
| Sources | 75 |
| Government and Official | 76 |
| Other Sources | 76 |
| Key Note Research | 78 |
| The Key Note Range of Reports | 79 |
Text © 2001 Key Note
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Last updated by Amanda Porteous 2001
