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IT Recruitment - Market AssessmentPublished by: Key Note Publications Ltd Published: Jan. 1, 2005 - 95 Pages Table of ContentsExecutive Summary 1. Introduction THE IT RECRUITMENT MARKET DEFINITION 2. Strategic Overview MARKET DYNAMICS AND SEGMENTATION The Good Times Came to an Abrupt End Strong Indicators of Recovery Table 1: The Number of People Employed in ICT Industries and Occupations (000), Third Quarter 2003-First Quarter 2004 Table 2: The Number of Quarterly IT Vacancies Notified to Jobcentres by Type, May 2002-August 2004 Salary Rates Rise But Lag The Growth In Demand The Market Rollercoaster Table 3: The IT Recruitment Agency Market by Invoiced Sales at Current and Constant 2000 Prices (£m), Years Ending December 2000-2004 Staff Retention Becomes An Issue Again Skill Shortages Remain Table 4: Vacancies by Type in the Computing and Related Industries (number and %), 2003 Table 5: Actions Taken by the Computing and Related Industries to Combat Skill-Shortage Vacancies (%), 2003 The Legislative Environment Becomes Tougher The Conduct of Employment Agencies and Employment Business Regulations 2004 IR35 The EU Agency Workers Directive The Data Protection Act of 1998 Money-Laundering Legislation Contractor Rights - A Hot Topic Permanent Contractors CHANNELS TO MARKET Table 6: Channels Other Than the Internet Used to Look for Jobs by Cwjobs Website Visitors (%), Summer 2004 Table 7: Preferred Channels Including the Internet Used to Look for Jobs by Cwjobs Website Visitors (%), Summer 2004 Contacting Clients The Growing Use of the Internet COMPETITIVE STRUCTURE Table 8: The IT Recruitment Market by Estimated Share of Revenue (%), 2003 and 2004 Table 9: The Major UK IT Recruitment Agencies by Estimated Market Share, Ownership and Country of Ownership (% of total revenue), Year Ending 31st December 2003 Productivity Improvements Move Up The Agenda THE CONSUMER Business Customers Individual Customers MARKET FORECASTS 3. Contract and Temporary Staff BACKGROUND MARKET SIZE Table 10: The Market for Contract and Temporary Staff by Invoiced Sales at Current and Constant 2000 Prices (£m), Years Ending December 2000-2004 CONSUMER TRENDS Business Consumers Changing Client Base The Contract Jobs In Demand Table 11: The Skill Requirements of Contract Jobs Advertised on Internet Jobsites (% of job advertisements), 3 Months to 19th October 2004 Table 12: The Proportion of Contract Jobs Advertised on Internet Jobsites by Job Title, 3 Months to 19th October 2004 Individual Consumers ADVERTISING AND DISTRIBUTION 4. Permanent Staff BACKGROUND MARKET SIZE Table 13: The Market for Permanent Staff by Invoiced Sales at Current and Constant 2000 Prices (£m), Years Ending December 2000-2004 CONSUMER TRENDS Business Consumers The Permanent Jobs In Demand Table 14: The Skill Requirements of Permanent Jobs Advertised on Internet Jobsites (% of job advertisements), 3 Months to 19th October 2004 Table 15: The Proportion of Permanent Jobs Advertised on Internet Jobsites by Job Title, 3 Months to 19th October 2004 Individual Consumers ADVERTISING AND DISTRIBUTION 5. An International Perspective Market Developments Global IT Services in Growing Demand COMPETITIVE ENVIRONMENT CONSUMER BEHAVIOUR 6. PEST Analysis POLITICAL FACTORS Government Policy Affects The Labour Market New Employment Laws Skills Task Force The Staff Hire Concession E-Government Promotion of IT Terrorism ECONOMIC FACTORS Economic Growth Impacts on IT Budgets Different Sectors Are More Vulnerable Than Others A Long-Term Influence SOCIAL FACTORS The Growth of Part-Time and Flexible Working Candidates Must Be Able to Work in Teams Changing Demographics The Growing Importance of Women and Childcare Facilities The `Sandwich' Generation `Portfolio Careers' Human Resource Outsourcing Business Environment Drives Demand Businesses Lack Internal IT Skills Exploiting Computer Resources is a Key to Business Success TECHNOLOGICAL FACTORS IT - A Competitive Weapon Software Solutions The Internet - a New Media Opportunity The Internet - A Potential New Media Threat The Internet Changes How Agencies Must Operate The Technology Cycle The Technology Upgrade Cycle Influences Demand New Technological Trends Shifts in IT Budgets E-Business a Driver of Demand 7. Consumer Dynamics EMPLOYERS The Recruitment Process Recruitment Responsibilities The Growing Importance of Vendor Management IT Workers Improve Elasticity THE JOBS DEMANDED BY EMPLOYERS Table 16: The Geographic Location of Jobs Advertised on Internet Jobsites (% of job advertisements), 3 Months to 19th October 2004 Table 17: The Proportion of Jobs Advertised on Internet Jobsites by Job Title, 3 Months to 19th October 2004 IT WORKERS Table 18: The Occupational and Vacancy Profile of Employment in the Computing and Related Industries (number and % of employees/vacancies), 2003 Table 19: The Profile of Visitors to the Cwjobs Website (% of visitors), Summer 2004 8. Company Profiles SPRING TECHNOLOGY STAFFING SERVICES Corporate Strategy Strengths and Weaknesses of Company Product Developments New Business Profitability Table 20: Financial Results for Spring Technology Staffing Services Ltd (£000), Years Ending 31st December 2001-2003 Future Company Developments COMPUTER PEOPLE Corporate Strategy Strengths and Weaknesses of Company Brand Development Profitability Future Company Developments ELAN IT Corporate Strategy Strengths and Weaknesses of Company Profitability Future Company Developments HAYS INFORMATION TECHNOLOGY Corporate Strategy Strengths and Weaknesses of Company Demerger Brand Development Profitability Future Company Developments STHREE LTD Corporate Strategy Strengths and Weaknesses of Company Profitability Table 21: Financial Results for SThree Ltd (£000), Years Ending 30th November 2001-2003 Future Company Developments MODIS INTERNATIONAL Corporate Strategy Strengths and Weaknesses of Company Profitability Table 22: Financial Results for MPS Group International PLC (£000), Years Ending 31st December 2000, 30th December 2001 and 29th December 2002 Future Company Developments ALEXANDER MANN GROUP LTD Corporate Strategy Strengths and Weaknesses of Company Brand Developments Profitability Table 23: Financial Results for Alexander Mann Group Ltd (£000), Years Ending 30th September 2001-2003 Future Company Developments XANSA RECRUITMENT LTD Corporate Strategy Strengths and Weaknesses of Company Profitability Table 24: Financial Results for Xansa Recruitment Ltd (£000), Years Ending 30th April 2002-2004 Future Company Developments VEDIOR Corporate Strategy Strengths and Weaknesses of Company Profitability Future Company Developments LORIEN RESOURCING Corporate Strategy Strengths and Weaknesses of Company Profitability Table 25: Financial Results for Lorien PLC (£000), Years Ending 30th November 2001-2003 Future Company Developments OTHER COMPANIES 9. The Future A POSITIVE ECONOMIC ENVIRONMENT THE FUTURE DEMAND FOR IT WORKERS Table 26: Employment Projections in the Computer and Related Industries (000), 2002, 2007 and 2012 Table 27: Employment by Occupational Group in the Computer and Related Industries (000), 2002, 2007 and 2012 A Major Fly in the Ointment - The End of the IT Department? Future Recruitment Problems FORECASTS Table 28: Breakdown of the IT Recruitment Market by Sector at Current Prices (£m), Years Ending December 2005-2009 10. Glossary 11. Further Sources Associations Publications General Sources Government Sources Bonnier Information Sources AbstractThe IT recruitment market has experienced a rollercoaster journey in the past 6 years, from the peaks of demand in 1999 through the dips of 2000 to 2003, rising again to a partial recovery in 2004. If the late 1990s were the good times, with sales growing by more than 20% per annum, the 2000 to 2003 period was undoubtedly the opposite, with sales in current price terms dropping by 33.4%. During this period, the ending of work associated with the year 2000 (Y2K), the worldwide retrenchment in the IT industry and the consequent slump in new project work collectively plunged the industry into depression. If coping with one of the deepest recessions to hit the industry were not enough, recruitment agencies have also had to live through 4 years in which legislative changes have increased both operating costs and bureaucracy. The Conduct of Employment Agencies and Employment Business Regulations 2004 (which are widely known as the EAA regs in the industry) came into effect in 2004; they are the latest of a series of enforced and proposed legislation, which is making it more difficult for agencies to operate in the contract market. EAA regs mean that agencies have lost their automatic right to charge additional fees to end users wishing to offer permanent jobs to contractors or to re-engage them through other agencies. This has led to a wholesale shift in contractor legal arrangements away from contractors being employees, towards contractors operating as limited companies. The slump in the IT recruitment market is over. 2004 saw positive signs of a recovery, sales have been growing strongly and Key Note forecasts that the 2005 to 2009 period will see the industry stage a recovery from the worst of the 2000 to 2003 period. However, recovery will only be partial, despite growth of 20.1% in 2004. Not until 2007 does Key Note expect industry revenue to again reach the peak of sales seen in the 1990s boom, when revenue reached £5.1bn in 1999. By 2009, sales in current price terms will be over 20% higher than they were in the late 1990s. If inflation in the UK remains around current levels for the next 5 years, in constant price terms, the market in 2009 will be just 7.3% higher than the market in 1999, implying a decade of annual average growth of just 0.7%. The future will bring many challenges for the industry, key of which will be to target their recruitment towards women and older workers. Skills shortages will grow in the next 5 years to 2009, as the demand for IT professionals increases at the same time as the flow of younger workers into the industry fails to keep pace with demand. Agencies will need to become more creative in their recruitment and must convince clients of the value of older workers. Agencies will also face the problem of their client base transforming away from end-user companies towards large outsourcing operations, which have stronger buying power and will increasingly look for a wider range of services from agencies. As outsourcing becomes more popular, so employment in in-house IT departments may well shrink, leaving the agency customer base increasingly dichotomised between small clients and very large clients - e.g. the large IT services-outsourcing operations. In this environment, agencies will have to respond by improving the range of services that they offer to their largest clients and by improving their productivity to protect their margins. This implies increased investment in contractor databases and back-office operations. At the same time, agencies will have to develop a broader portfolio of services to complement their core job-placement operations. Their larger clients increasingly want end-to-end human-resource (HR)-management services, including complete outsourcing packages. In moving to offer the new services, agencies will be focusing a lot of their energies on their key accounts with managed services and preferred supplier agreements of growing importance. Moreover, as the demand for IT skill intensifies and companies search globally for the best resources and for new markets, so agencies will need to be able to operate across international markets. This opens up new service areas, such as international recruitment and employment consultancy. Key Note Market Assessments
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