Beeline Acquires OnForce, Setting Up A Divergent Talent Philosophy to SAP, Fieldglass and Ariba (For Now)
Categories: Breaking News, M&A, Services and Indirect, Services Procurement & Contingent Labor | Tags: General News, L2
Earlier today, Beeline announced it had acquired OnForce, one of a select group of vendors on the periphery of the vendor management system (VMS) market targeting the recruiting, on-boarding and management of what are best known as “freelancers” in the global talent market. Terms of the deal were not announced, but we expect it was a strategic rather than a financial-led acquisition (i.e., the transaction was not just a question of adding accretive revenue) which would suggest a premium multiple on revenue.
Beeline’s customers are increasingly recognizing that managing freelancers and independent contractors not affiliated with a staffing firm (or consultancy, outsourcer, BPO or other services provider) is both an art and science and, by way of direct procurement analogy, is as different as managing the sourcing of fasteners or motors from an MRO distributor as it is sourcing a basket of custom engineered parts from small machine shops.
Whether you call them freelancers or independent contractors, it is clear this group of unaffiliated workers is becoming more strategic in the extended workforce. Companies are beginning to realize that they will be a permanent – and likely growing – fixture as part of the corporate, non-employee talent equation. OnForce got its start managing IT-centric freelancers – perhaps the group largest in demand in the past decade (and a group of often rugged individualists who chose to freelance rather than being pushed into the role out of necessity). In fact, within the IT universe among millennials, freelancers where a certain badge of honor that they are in fact “too good” to work for a company on a permanent basis.
At Google, among other tech companies, we have heard about inflationary wage pressures for top talent in part to convince certain freelancers to “come in-house” permanently. This type of approach will certainly cascade, eventually, to other industries as well, such as skilled manufacturing trades (e.g., welders) and oil and gas workers. Such compensation-driven recruiting tactics for permanent workers who would rather freelance is about as strong a vote of confidence in the future of specialist providers like OnForce.
OnForce and its competitors like WorkMarket and FieldNation – and to a lesser degree talent marketplaces and firms like MBO Partners which cater to different segments of the freelancer/small firm market – do much more than a VMS for this segment of workers. For example, on-boarding is not just “on-boarding” with this group. Background checks and screening are required, and the processes around provisioning access to systems and information are important, given the freelance approach (individuals or dynamically assembled small groups/firms) since individuals may work for a range of clients on an overlapping basis. Moreover, at later stages in the freelancer management lifecycle, payment must occur, which is often different in this case (e.g., cash flowing directly into PayPal accounts).
With OnForce, Beeline is catering to an extension of the services procurement market where specialized capability is required. Moreover, the vendor (freelancer)-facing side of these solutions is different. How freelancers communicate and their expectations (mobile accessibility) are very different from larger staffing or consulting firms (many of which still live on the desktop). The acquisition is also setting Beeline up in opposition to SAP, Ariba, and Fieldglass – unless they acquire WorkMarket or a competitor – as a more comprehensive provider of talent management for more elements of the extended workforce. This is a position that, if successful, will help Beeline and perhaps other services procurement vendors carve out their segment of the market from broader procurement.
Moreover, from a VMS or tech provider perspective, the revenue is greater on a basis point transaction level compared with traditional staffing revenue (it can be as high as 700-800 basis points based on other metrics we’ve heard). This may sound extremely high, but it doesn't have to be if you consider all the services involved and the arbitrage between typical freelance pricing and larger consultancy or staffing firm pricing, making it, at least on paper, a highly attractive segment to pursue.
Longer-term, it also positions Beeline, if it can build a disruptive model to the traditional staffing world -- something we think Adecco wants, in fact, even while remaining under the corporate umbrella -- to help clients rebalance their extended workforce talent and move away from staffing-led models to models that consider the broad spectrum of non-employee talent without preference for any one group over another. This could also dovetail nicely with creating independent talent networks (or pools) through a model that blends talent marketplaces with the end-to-end lifecycle management tools to administer both sides of the buy- and sell-side equation.
Granted, this is likely a long-term move as in the next few years, Beeline is simply positioning itself to serve a segment of the market which has already articulated an existing need for freelancers (especially within IT) alongside other types of third-party services and service providers. Whether Beeline succeeds in taking OnForce materially into other categories beyond IT with significant scale remains to be seen, but even within the technology talent market, Spend Matters believes the opportunity is significant enough to make the transaction strategic to existing and future Beeline clients.
We look forward to covering the acquisition in more detail in the coming weeks on Spend Matters Plus/PRO. But in the meantime, here are some of the more pithy quotations from the press release:
“This is a perfectly complementary merger on every level—business, technical and cultural,” said Beeline President Doug Leeby. “There is very little overlap between companies, and together we solve a massive business problem in a unique way. Beeline and OnForce will deliver the first integrated solution that offers customers multiple channels for sourcing talent. Combining Beeline VMS with OnForce FMS gives customers unprecedented access to both their trusted supply chain and their network of highly skilled, carefully vetted and correctly classified independent contractors (freelancers) through one cloud-based solution.