It’s a New World: Margins Stable
Congratulations. Buyers of staffing services pat yourselves on the back. You have won. Margins have declined significantly over the last decade, thanks to VMS. The penetration/adoption of the tool by large companies has lowered margins and created an efficient market place. However, for those of you who have been used to seeing declining margins, please hit the reset button.
The days of putting the squeeze on the supplier are over. Be happy with the fact that today thanks to the VMS you have a contingent workforce marketplace that is well-organized. When an efficient market exists, the quality of the information available is highly accurate. In this case, the pricing of contingent workers have been analyzed thoroughly, broken down in a manner that allows both the supplier and buyer complete visibility into how they are engaged and used. (Gross margin is the finder’s fee -- the amount that is billed to the buyer/company for the temporary worker minus the worker’s pay and benefits.)
Stable gross margins are not bad for suppliers obviously. They are not losing ground any more. This is due to the fact that the percentage of buyers using the VMS has topped out in the last three-four years. In my opinion, the VMS is a mature product and has penetrated the large corporations as much as it’s probably going to.
As the dust settles, more than ever buyers need to be reasonable. Take the ACA for instance. The recent Staffing Industry Analysts Buyer Survey (currently open) asked companies in North America who’s going to pay the ACA costs. Roughly one-third still expect to pay no part of the ACA. Stable margins, notwithstanding, if you think that the staffing suppliers are going to bear the brunt of these costs, think again.