SI Review: January 2011

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Analyst Take

Interview with:
Sona Sharma Senior Research Analyst, Staffing Industry Analysts

Sona Sharma covers information technology (IT) staffing, among other topics. We interviewed her regarding recent research on the subject.

Q:First, will the strong IT growth we saw in 2010 continue into 2011, or are we running out of steam?
SS: We actually see it accelerating into 2011, with probably 12% growth. Healthcare IT and a general backlog of projects are two of the factors supporting this. I should mention, however, that this growth is disparate - some companies are contracting even now, others are seeing good expansion.

Q: In the 2010 list of fastest-growing staffing firms, about 60% were in IT. Are IT firms just generally faster growing?
SS: No, among IT staffing firms there is just greater variance in growth. Basically, if you have access to the right talent for the right client you can really take off. IT is an area with many skill niches, so you see a lot of small firms get traction in a niche and suddenly they're doing quite well.

Q: If you were to pick just one IT niche as having the best prospects which would you choose?
SS: OK, you're really putting me on the spot! Well, I'm not saying that there aren't other good ones but I do like healthcare IT especially. It's like Y2K in 1998-1999 or what Sarbanes-Oxley was to finance staffing. There are deadlines - healthcare organizations have to be compliant by a certain time, which is driving demand.  Plus, there is funding - I think $19 billion or so in the stimulus package for this.

Q: Any other niches you like?
SS: Anything wireless is really doing well these days. Compliance-related work, of course, is still hot.  And networking is another area that seems to be getting some traction. Web development - I'm not even sure that ever slowed down. High-level infrastructure skills and project management skills are also in demand.

Q: Recently you interviewed CEOs from some of the fastest-growing IT companies. What's their secret?
SS: It's all about implementation, choosing the right niche in terms of technology and/or customer, and also excelling at the ultimate core competency that's at the center of it all - recruiting. In this business you really have to excel at recruiting, and that means having the right internal staff and the right incentives, too.

Q: Should firms that are not currently in IT think about entering this area?
SS: Sure, but not as a sideline - to win in this area, you need to put some focus on it. Certainly this is a big and growing area of temporary staffing, and long-term IT employment prospects are well above average, so a serious push into IT is not a bad idea at all for companies that have the resources to pull it off.

Q: IT staffing firms often end up going into IT solutions. Do you recommend that? 
SS: Transitioning to IT solutions requires a significant investment in terms of expertise. It's basically time and money. You can't just decide you're going to do it. You have to know what you're doing. While you do get higher margins with solutions, there are also higher risks - you have to remember it's payment on delivery, not on time and material.

Q: I assume in the current environment that IT recruiting is not as difficult as it once was.
SS: In general that's correct, but we are starting to see some tightening up in a couple of areas; in particular, database administrators and network administrators.  Also, our Pulse Survey indicates that just generally staffing firms are reporting that recruiting is getting harder. 

Q: How have the new H-1B regulations affected IT recruiting?
SS: For the sake of the readers, H-1B is a visa that enables foreign workers to come to the United States for employment purposes. However, to your question, my observation at the moment is that most staffing firms are managing to find the people they need anyway, though as demand heats up that will change. The ultimate effect of all this I think will be to encourage offshoring work. Basically, either the skilled people come here or the skilled jobs go there. Take your pick.

Q: As I recall, IT buyers have the highest rate of VMS usage. Do you think ultimately all IT staffing companies will have to work through VMS?
SS: They pretty much already do. Large companies tend to use VMS, and most of the IT staffing business comes from large buyers. So I think in this segment, it's just unavoidable. If you don't like VMS, then you need to look at other segments.

Q: What's your outlook for IT for the next 10 years?
SS: Certainly the outlook is superior. IT employment, particularly in certain niches, will do well. We expect IT to grow 12% in 2011 and 2012. If those projections play out, IT will be a $21.8 billion market, surpassing for the first time the last high water mark, of $21.5 billion in 2000. It will be nice to finally get past that.

If you would like to receive Sharma's reports on IT staffing, contact memberservices@staffingindustry.com or call 1-800-950-9496 and ask about corporate membership. If you are already a corporate member, such reports are included in your membership.

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