IT Staffing Report: May 3, 2018

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Outlook stable for IT staffing firms

As market forces continue to pull demand and supply in opposing directions, we project US IT staffing revenue growth to remain largely unchanged. In SIA’s US Staffing Industry Forecast: April 2018 Update, we project IT, the largest professional staffing segment, to maintain a 4% annual growth rate in 2018.

US temporary staffing revenue growth (%): IT segment

Our research indicates the segment experienced robust activity trends through the first quarter of 2018 and into April. Accelerating IT spend and expanding contract lengths serve as tailwinds. Yet, feedback from staffing executives on bill rate growth has been mixed. Recent responses have ranged from seeing some acceleration on mostly junior-to-mid level IT roles to even a flattening in bill rate growth. Although we anticipate some improvement, our sense is there has not been a material acceleration in bill rates this year through the month of April.

Even as muted bill-rate growth persists, we view supply constraints as the primary impediment on revenue growth. The shortage of IT talent with sought-after skill sets has led to increased competition among suppliers and ratcheted up recruiting difficulty (e.g. longer time-to-fill and higher submittal-to-hire ratios). More restrictive immigration policies threaten to exacerbate these challenges. On a positive note, there has been a meaningful shift in H-1B visa awards away from the large India-based IT outsourcing companies to US-based technology companies (a portion of which include visa holders working through staffing firms), such as Amazon, Microsoft, Intel, and Google, in more specialized roles where the skills gap is generally most acute. 

Disciplines exhibiting strong demand include cyber security, cloud computing, data science and analysis, and application development. These occupations have become increasingly challenging to fill as unemployment rates for many of these roles have fallen below 2.0%. Occupations exhibiting weaker demand, due in part to rising automation pressure, include help desk/PC support, software QA testing, and technical writers.

We anticipate secular tailwinds to continue to provide uplift on IT staffing growth beyond 2018. However, we project a slight deceleration to 3% growth in 2019, largely due to broader cyclical pressures as reflected in current consensus GDP forecasts. Corporate members have access to SIA’s semiannual forecast updates, which include analysis of the US staffing industry economic backdrop along with historical and forecasted growth rates and market sizes of individual segments.

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