More Trends...

I make it a habit to regularly meet with folks in the IT staffing industry on a regular basis. It is always good to keep up with what is happening around town, and to discuss ideas on dealing with the challenges we all face. In fact, I estimate that on average, I talk to anywhere from two to ten sales people, recruiters, branch managers, or senior consultants every week. These are one on one conversations, not networking events.


It's no secret that the economy is tough and that there are changes happening in the business. We saw this back in 2001 - 2003 when the economy was soft. Formal procurement practices really took hold in most companies with large IT services spend. Off shore competition from the likes of TCS and Infosys have found a nice niche and will only continue to grow their market share. We are seeing a similar (although I feel more systemic) change today as companies evolve their "procurement" to more of a "human capital supply chain" type of model.

(As an aside, I despise terms like "human capital". We are talking about PEOPLE, not widgets!)

What really surprises me is the reaction of my peers and colleagues to this change. It ranges from subtle resistance to outright denial. Per my previous post, IT is a typical industry on a product life cycle, and IT services are following the product life cycle. Given this, should anyone really be surprised that margins are going down, the supply chain is consolidating, costs are being reduced in the supply chain (or profits depending on perspective!), and labor rates are being impacted? Particularly in a down economy?

I suppose I can understand how a person that has been insulated inside the walls of a large corporation for 20 years or so might be unnerved by these changes. You dedicate your career to a company, put forth a good effort, and drink from the company fountain. Then, one day you see your colleagues laid off and jobs go out the door, only to be replaced by lower cost labor. I can understand how a person might have some resentment.

At the same time, it surprises me that my contemporaries and competitors who are out in the market in front of customers and companies every day resist and deny the changes happening. How can a person be in an industry for 15 or 20 years in a sales capacity and not understand the trends and adapt their business to the direction the customer base is headed? Or, decide to target another market with their services?

Can there be anyone that's unaware of what has happened to the manufacturing base in the US and not see the same thing in the services sector? It boggles my mind. In the technology field, we like to point out how innovative we are and that we serve as change agents for our clients and business at large by providing better solutions and tools to facilitate commerce. But when it comes to change that impacts us, we are among the worst at dealing with it!

One of my sayings is, "I'm not that smart, and even I can figure this out!" For whatever reason, I tend to try and step back and look at the big picture. I can thank my parents and upbringing for the inquisitive and analytical nature, and my education from The Ohio State University and University of Dayton for providing the framework for looking at the macro picture. I've been fortunate to meet get to know people along the way that provide other ways of looking at things, and additional perspectives. There are reasons that companies do what they do, and my job as a services provider is to understand and acknowledge these reasons.

It's pretty simple, really. Be aware of what is happening in your market space, adapt and evolve, or move on.

Staffing Industry Trends

As noted in my description, I lead a branch of a IT services firm in central Ohio. We help clients who are challenged by new technology, who are struggling to get projects done, or need help finding the right people to fit in their environment. It is a great company led by smart people who get the business.

Note that my thoughts and opinions here are mine only and do not reflect those of my employer, its management, or its employees.

Information Technology at large is a maturing field. While there will continue to be technology advances that will change how IT is levereaged to help people and business, it is unlikely that there will be revolutionary changes similar to those of the past 15 or so years (the Internet, Distributed Technology, etc.).

Much of what I am seeing is that the IT services sector is following a traditional product life cycle:

• Market introduction stage: Costs high, sales volume low, no/little competition, demand has to be created, etc.
• Growth stage: Costs reduced due to economies of scale, sales volume increases significantly, profitability, competition begins to increase, etc.
• Mature stage: Costs decline as you are well established in market and there is public awareness, sales volume peaks, increase in competitive offerings,
  prices tend to drop, etc.
• Saturation and decline stage: costs become counter-optimal, sales volume declines or stabilizes, prices and profitability diminish, profit becomes more a challenge of production/distribution efficiency, etc.

Depending on what segment within IT services that you look at, the sector is somewhere in the mid to late Growth stage or early in the Mature stage.

Why is this noteworthy?

Virtually all of the people employed in the IT services sector - Developers, Analysts, Exectives, Project Managers, Engineers, Sales people, etc. - joined the industry when it was in the heart of the growth phase. We have enjoyed great careers, significant compensation growth, and job security. However, our world is changing and we aren't used to it.

This is causing discomfort for many:

• People used to 6 figure incomes are faced with a potential decline or adjustment.
• Companies accustomed to traditional profit margins have to reengineer the way they do business as well as adjust their mix of services to stay vibrant and growing.
• Customers for IT services are changing how they have to buy these services as formal procurement and supply chain practices are applied to what is a significant expenditure for companies.

What we are seeing is more fundamental than a temporary drop in demand like we saw early in this decade. It is a major realignment of the sector.

Now, more than ever, it is critical that IT services providers:

• Have 100% clarity and definition as to what business they are in.
• Understand how their business and target markets are evolving.
• Adjust their operational models and tactics to align with the direction in which the sector is moving.

Some thoughts on the implications of this later.

What's Happening?

I am not quite sure what to say for my first post. Several thoughts and observations today.

There are so many things happening in the micro and macro environments that it is difficult to make sense and cope with it all:

• Friends, colleagues, and family members are being terminated from their employment for all sorts of reasons.
• Folks I know well are struggling with serious health issues, or are support providers for family members with serious health issues.
• The volatility in our economy and the noise about it leaves a person not knowing what to think.

And so on.

It is interesting how we react to this. We take granted that we live in a secure environment and when things happen that shake and even crack the foundation, we don't know what to do.

For me, I have found that focusing on the good in the world and in people at large makes a tremendous difference. I can't change the world, but I can change my corner of the world, particularly the part that exists within.