Tech/Engineering Staffing Growth Assessment : Market Research Report

Tech/Engineering Staffing Growth Assessment

Published by: Staffing Industry Analysts, Inc.

Published: Jul. 1, 2007 - 67 Pages

SECTION 1: Staffing Industry Analysts’ Perspective; Executive Summary; Essential observations and advice to gain from this report
SECTION 2: Key Tech/Engineering Drivers and Trends; Tech/engineering staffing economic drivers; Tech/engineering staffing growth as a function of U.S. GDP growth and unemployment; Projections for the industry based on U.S. GDP growth; Trend in crude oil prices; Tech/engineering staffing growth and one-year offset U.S. GDP Growth; Trends in tech/engineering unemployment; Number of bachelors degrees in engineering awarded per year by U.S. schools; Selected factors that encourage/discourage use of tech/engineering contingent workers
SECTION 3: Profile and Prospects; Definition of tech/engineering staffing; Trend in tech/engineering temporary help revenue. 1998-2006; Tech/engineering temporary help revenue growth vs. total temporary help revenue growth; Tech/engineering temporary help share; Tech/engineering temporary help revenue growth vs. previous year; Long-term projected growth for tech/engineering temporary staffing; Tech/engineering temporary staffing gross margins vs. other segments; Tech/engineering change in gross margin percent vs. year earlier; Tech/engineering direct hire market; Top U.S. tech/engineering temporary help providers and estimated U.S. tech/engineering temporary help revenue; Number of temporary staffing firms offering tech/engineering skills; Percent of staffing firms offering tech/engineering skills, 2002-2006; Average tech/engineering revenue per firm offering tech/engineering skills,; 2002-2006
SECTION 4: Target Markets and Skills; U.S. tech/engineering employment by industry share; Percent of contingent staffing buyers in selected industries who count tech/engineering skills among top purchases; Percent of contingent staffing buyers by company size that buy tech/engineering contingent staffing; Percent of contingent staffing buyers by top segments purchases who also buy tech/engineering skills; Top metros for U.S. tech/engineering employment; Top metros by highest tech/engineering employment/total employment; Estimated temporary staffing market size, temp employment and forecasted temp employment growth by skill; Fastest growing large employment tech/engineering occupations, ranked by total employment; Unemployment rates by occupation; Architecture and engineering occupations with highest estimated temporary employment penetration
SECTION 5: Tech/Engineering Staffing Buyer Profile; Supplier selection criteria, percentage of companies ranking given criteria among top three; Top reasons CW buyers cite for discontinuing use of particular staffing firms; Supplier evaluation metrics, percentage of companies stating metric among top three; Tech/engineering perception of contingent worker quality vs. regular worker quality; Buyer interview policies with regard to contingent workers; Staffing supplier management strategies in place today; Company contact policies; Number of players with lead role in selecting tech/engineering suppliers; Percent of companies where player play a lead role in staffing supplier selection
SECTION 6: Keys to Success in This Industry Segment; Appendix; Top U.S. tech/engineering staffing firms, ranked by 2006 tech/engineering temporary staffing revenue; Additional tech/engineering staffing firms; Trends in tech/engineering pay and bill rates, 3Q04-1Q07; Tech/engineering job boards; 2007 Staffing Industry Executive Forum panel discussion on “Tech/Engineering; Staffing Trends and Outlook”; Staffing industry strategic research reports

Abstract

Behind every mechanical contraption, creation and device, behind every skyscraper and every cottage, behind practically everything man-made is an army of brains—the engineers who design machines, the architects who draw up plans for buildings and the technicians who support them both. On any given day, about 1.7% of such workers—collectively referred to under the category “tech/engineering”—are employed on a temporary basis, generating $6.5 billion in revenue annually for the staffing firms that place them.

Historically, this has not been a particularly fast-growing or high margin staffing segment. Compound annual growth for tech/engineering temporary staffing revenue over the long-run has been just comparable to that of temporary staffing as a whole, and gross margins have typically ranged in the upper teens, below industry aggregates.

But recent years have been an exception. In the years 2004-2006, tech/engineering growth averaged 12% annually, and margins have been rising as well. This reflects changes in two key economic drivers. First, in 2004 the inflation-adjusted price of oil rose to a level double its long-term average (comparable to the days of the energy crisis) triggering a boom in everything oil-related, including the temporary employment of petroleum engineers and support technicians.

And second, this economically sensitive segment has benefited from broader growth in the economy. The price of oil shows no sign of coming down at the moment, and should remain a stimulant to demand for tech/engineering staffing services. However, we expect that the ongoing slowdown in overall economic growth will moderate the current boom in tech/engineering revenue growth to about 9.5% in 2007 and 9.0% in 2008, lower but still well above industry average.

Despite the attractions of superior growth, this is not a segment to be entered lightly. It is remarkably concentrated—the top 10 firms generate 58% of segment revenue; by contrast, in most other segments, this metric is in the 30%-40% range. Moreover, concentration is increasing. Over the last four years, the proportion of staffing firms operating in this segment has fallen from 13% to just 7%.

The high concentration of revenue among a handful of large firms suggests that a critical mass of business is required to be successful, and the apparent exodus of smaller firms implies that may be increasingly so. Another challenge is recruiting. Unemployment for tech/engineering workers is currently 1.7%, the lowest level since 2000, and shortages in some sought after skill sets are particularly severe; petroleum engineers, for instance, have one of the lowest unemployment rates of any occupation—0.7%.

Staffing firms considering entering this segment may want to approach it from the lower end of the skill range. Penetration rates for technicians and drafters are well above average, suggesting stronger market acceptance, and recruiting is also less of a challenge for these positions. About half of all tech/engineering revenue, roughly $3 billion, is generated from these lower end positions.

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Tech/Engineering Staffing Growth Assessment

Table of Contents

Abstract