Ann Swain- ATSCo at Recruitment2000
Ann Swain spoke to the conference on the issues of the rise in 'Client Power' in the recruitment industry and the features that make IT contractors profitable 'products'.
"The [proposed agency legislation] is overwhelmingly important and will be an external influence that makes a big difference to the IT industry. External factors are making us change the nature of our business. Some of the business in the IT recruitment market has fallen backwards this year… compound growth has been pretty slow. The industry's having a hard time."
Citing the Hollway Report, she quoted that: "There has been only '7% growth last year, focused into a small amount of highly successful, well organised companies - whereas a lot of others have either seen zero growth or have stepped backwards."
"The average share price in IT dropped last year to –53%: a nosedive! Now there are around 2,000 IT recruitment companies - the top 10 companies actually make up 40% of the industry's turnover. That's an amazing situation for a very specific industry! The top 20 make up 64% of the turnover. This is making a lot of smaller companies merge with each other so that they can compete with the bigger companies. Share prices are up now 34% - slow growth but things are beginning to pick up."
"Contractor rate growth has been booming for years and it actually ended up at about 3.4% - pretty much on inflation ie. No-one was going to grow their turnover on hoping that contractors were going to get paid more. Permanent rates have flatlined - in the IT market salaries were going hugely over the skills shortage - frankly salaries have come down or levelled out. That is odd for an industry like IT."
"What happened in the IT recruitment industry in the run up to 2000 was that people spent a lot of money on contractors in order to get loads of different staff - they gave loads of golden handshakes and then they got rid of any contractors that were there, they had overspent and they couldn't do other projects that they had wanted to do so the potential for us to earn was made less."
"The 'client power shift' that has happened in the IT market over the last two years is one of the biggest threats to the recruitment industry. It has affected our business and will continue to affect our business. Who's to blame for it? We are, because we have allowed client organisations to dictate rates and margins to us… within IT it has become a case of telephone auctions for deals… contractors are being treated as a product… the only way to grow your business is to have more product than your competitors: they must be different, cheaper, more unique and more deliverable products than your competitors."
"IR35 has impacted this market but it's more panic than reality. The difference could be only 8% if you manage your accounts properly. There has been an increase from contractor to permanent and now permanent business is growing."
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Richard Powell