Temporary employment/staffing spending expected to drive 50% of total HR related spending

U.S. small businesses (SBs) will spend more than $50 Billion in 2002 on human resource (HR)-related services such as temporary staffing, employee training, and other outsourced services, indicating that the SB market will be a significant contributor to the awaited U.S. economic rebound.

The above findings were released today by New York-based Access Markets International (AMI) Partners, Inc., a leading consulting firm specializing in IT, Internet, telecom and business services market intelligence, trends and strategy with a strong focus on global small and medium business (SMB) enterprises.

While the nationís unemployment rate stood at 6.0% in April, AMI-Partnersí study reveals that U.S. small businesses will serve a robust engine of the U.S. economic growth as evidenced by some 3.8 million SBs that plan to hire additional employees.

Alternative Staffing ìThe staffing industry business cycle is extremely sensitive to a downward shift in the economy,î observed Jackie Chan, a Research Analyst at AMI. ìAs the economy accelerates, temporary employment is the first to pick up as companies want to ensure the improvement is sustainable.î AMI estimates that U.S. SBs spend approximately $25.3 Billion annually on alternative staffing options, and projects such spending to grow at a compound annual growth rate (CAGR) of 13% during 2001-2005.

Having employees available on a temporary basis enables SBs to flexibly adjust their labor force, maintain lower operating costs and respond adeptly to changing business demands in a time of uncertainty. Kelly Services, one of the largest temporary staffing companies in the U.S., has expanded beyond placing clerical temporary help to providing industry specialists on a temporary basis. Firms such as Manpower Inc., a leading workforce solutions firm, also recognizes such opportunities and offers both flexible and transitional staffing to accommodate HR requirement fluctuations associated with an uncertain business climate.

Online Recruitment/Purchasing AMI-Partnersí study further revealed an estimated 300,000 SBs have turned to the Internet to recruit employees, while another 200,000 SBs have purchased HR services online. AMI expects these numbers to double in 2002, with the trend reflecting the evolving nature of staffing and an opportunity for SBs to benefit from adopting new models of HR operation. Staffing companies like Kforce Inc. (previously Romac International) and TMP Worldwide (through its acquisition of Monster.com) are both embracing the Internet with a hybrid strategy.

Outsourced Services ìProvisioning outsourced services is emerging as a critical driver of new business activity for many staffing companies,î commented Ms. Chan. ìAs business needs and HR management become more complex, SBs are outsourcing services to staffing companies who offer alternative staffing options as well as full-service HR solutions,î according to Mr. Eric Shuster, Executive Vice President at AMI.

The desire for a one-stop-shop has helped fuel a $17.6 Billion HR-related outsourced services market among SBs. AMI estimates that more than 400,000 SBs outsourced HR services in 2001, including payroll, liability management and compliance, benefits administration, recruiting, employee education, and other miscellaneous services like records management and exit interviews. Market leaders Administaff and Kelly Staff Leasing have already begun to offer such a wide range of services functioning as an off-site full service HR department for many SBs (often referred to as a professional employer organizationóPEO).

Employee Training According to AMI-Partners, the issue of skills development has become a primary concern as employers face increased national and global competition for goods, services, and labor. About 30% of the SB owners in AMIís annual study indicated that employee education and skills enhancement would be a ìvery importantî business focus in 2002 and beyond. This appears to be supported by the half-million U.S. SBs that spent a total of $8 Billion on employee training and development in 2001. AMI forecasts a 14% annual spending growth rate during 2001-2005, indicating robust opportunities for outsourced and online employee education and training services for HR services firms.

Market Segmentation Segmentation of the SB market provides further evidence of the need for HR service providers to deploy a focused marketing approach to find, target and service high-value SBs. AMI-Partners has segmented the U.S. SB market into four highly distinguishable and actionable clusters. AMI has found that there is a direct correlation between an SBís adoption of information technology (IT) solutions and its propensity to utilize alternative staffing and outsourced HR services.

AMIís segmentation framework successfully identified 7% of the U.S. SB market (Tier 1óhigh IT adopters) who spent more than double the typical SB on staffing services, outsourced HR related services, and employee training. By executing a segmented market strategy, HR service providers can target specific small businesses according to their lifetime value with respect to HR services. AMI believes the diversity and sophistication of todayís SBs will drive successful HR service providers to deploy focused campaigns that flex all aspects of the marketing mix, utilizing a segmented market execution strategy.

About Access Markets International (Partners) Inc. (AMI-Partners) AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital and actionable market intelligence, focusing on global small medium business (SMB) enterprises. The AMI-Partners mission is to empower the firmís clients for success with the highest quality data, business planning and ìgo-to-marketî solutions. AMI-Partners was founded in 1996 under the name of Access Media International (USA), Inc. (AMI-USA) by Andy Bose, formerly a group vice president at IDC. Since its inception, the firm has built a world-class management team spanning 10 to 25 years in IT, telecommunications, online communications, and multimedia. The team is comprised of individuals who have formerly built careers at leading companies such as Cablevision, Compaq, IBM, IDC, JPMorgan, McKinsey and other industry-leading companies.

AMI-Partners has shaped the go-to-market SMB strategies of more than 130 leading IT, Internet, telecom and business services companies in the last five years. The firm is well known for its IT and Internet-adoption-based segmentation of the SMB Markets; for its annual retainership services based on global SMB tracking surveys; and for its proprietary database of several thousand SMBs in the U.S., Europe, Asia-Pacific and Latin America. The firm invests significantly in collecting survey-based information with several thousand SMBs globally through the industryís most comprehensive SMB survey instrument, and is considered to be the leading benchmark for tracking SMB trends.