SThree - Fee rates hold in tougher times

(By Anthony Miller - Friday,6th March 2009 9:15am). Multibrand (mainly IT) recruitment player, SThree, is managing to keep average permanent and contractor fee rates broadly stable even though volumes are plunging. In the concall after today’s IMS (see here) I asked CEO Russell Clements whether he has seen any changes in the types of skills still in demand; generally the answer was ‘no’. Technical skills associated with governance, risk and compliance are still hot both in permanent and contract positions. But where SThree has an advantage over many other ITSAs (IT staff agencies) is that they mainly play to the SME market, which has much smaller IT shops. So if an SME CIO loses a relatively common skill, such as a database administrator, chances are they are the only guy - or part of a very small team - and therefore have to be replaced. In large IT shops with bigger DBA team they would probably just make do.

On the competitive front, and for much the same reason, SThree usually doesn’t usually come up against the likes of Spring and Hays, who are far more corporate focused. SThree mainly sees “low-rent, sell-on-price” players who are becoming ever more desperate. Clements told me they are losing a little business at the fringes as the small ITSAs (usually privately held) cut prices, but SThree either encourages their contractors to drop their fees, or they walk away from the business. The fact that SThree has some of the highest margins in the industry (FY08: 35% gross, 9% EBIT) suggests that the strategy is indeed sound.