Contingent Workforce Trends for 2016: A Conversation with Andrew Karpie

services procurement

I recently sat down with Spend Matters research analyst Andrew Karpie on the trends happening in the contingent workforce space now and his predictions for 2016. Andrew is our in-house expert on trends in contingent workforce management and writes extensively on this topic. Andrew also was recently interviewed by Forbes about the rapidly changing workforce and was featured in a podcast by The Art of Procurement.

An edited version of our conversation is below.

Kaitlyn McAvoy: What do you see as some of the key trends in the contingent workforce space?

Andrew Karpie: There are three fundamental underlying trends, with the first being digital transformation. There is a whole new set of technologies that are flooding into the contingent workforce space at this time.

The second underlying trend would be that of the continuing talent gap, labor and skills shortage, which is definitely causing difficulties among companies today and reinforcing the already established trend of using more contingent workforce

And the third, somewhat related to the last one, would be the emerging trend of contingent workforce management and procurement groups turning to more customer-centric models, attending more to the needs of internal customers, particularly providing support in accessing talent.

These are the fundamental underlying trends, but they are driving three additional trends.

The first, I would say, is an ongoing transition from the model that is built around vendor management systems (VMS) and specific suppliers, which is somewhat limited and does not live up to the standards of source-to-pay (S2P) solutions that we find in other areas of procurement. So I think we are seeing and will see a trend toward broader S2P models and technology.

The second trend is that of direct sourcing. Up until this point in contingent workforce management, sourcing has been indirect through suppliers, and now with a new technology, and also with the rise or availability of more and more independent workers and technology-based work, we are seeing a trend toward more direct sourcing of labor.

Finally, I think we are seeing a trend toward work as a service. Once again, this is technology-driven and supported, and it’s based on the increasing availability of independent workers. What this means is there are different categories for consuming work, not just in effect “renting bodies” but now also procuring and consuming work as services through online freelance marketplaces, crowdsourcing platforms and other kinds of work intermediation platforms.

KM: You mentioned independent workers and direct sourcing. Can you speak more about that?

AK: At this time, the model for contingent workforce in procurement is really based on VMS and specific suppliers of temporary workers and statement of work (SOW) projects. But what has been happening is a combined trend of people increasingly working independently, all of them freelancers, independent workers, or what you will. They are workers who are not employed by a single company but rather working on their own and providing their labor services directly, in various forms, to more than one business. Businesses will increasingly directly engage these resources as opposed to going through traditional processes. What we are seeing is direct sourcing made possible by technology solutions like freelance management systems (FMS), online talent pools, clouds, networks, etc.

KM: Let’s talk about about WIPs — something you cover extensively on Spend Matters — as well as the independent worker solution space. What are the emerging solution and services ecosystems in that space?

AK: Yes, this is a big deal. I have started to talk about something called the independent workforce solution space, or IWSS for short. We have talked about direct sourcing, independent workers and the new technologies that can support that — but I think what we are starting to see is a whole new model for workforce engagement and procurement that is developing alongside traditional VMS-based model of procuring temporary talent and SOW services.

If you think about it, the traditional model and technology that supports it is at least, if not more than, 15 years old, and technology has changed a lot. We have an opportunity for a whole different technology-based infrastructure that can develop and allow business to procure and consume work in different forms, including work as a service. I think in this independent workforce solution space, we are now seeing a whole different set of delivery mechanisms emerging. We have talked about work intermediation platforms (WIPs) as a way of intermediating work arrangements based on technology and organizing work differently. Indeed, we now have platforms that range from freelancer marketplaces like Freelancer.com to a range of other platforms, including microtasking platform — and then, of course, FMS, which is a kind of digital bridge between enterprises and the independent workers enterprises select to work with. Just as important as the emergence of these platforms is the fact that they are not going to be islands but rather embedded components of large, digitally connected infrastructure — technology like cloud, integration platform as a service (iPaaS) and what comes next.

So, procuring work across the independent workforce solution space will be different from the traditional way of procuring work with suppliers. Rather than having uniform suppliers — for example, tier or two-tier temporary suppliers, which are all more or less the same — in the independent workforce solution space, we are going to have different digital ecosystems of platforms and other solutions that enable accessing different segments of talent and work across a range of different modalities. In effect, supplier management will become ecosystem management — every company will manage its own portfolio of different work-as-a-service ecosystems.

KM: What are your thoughts about what will be happening with the contingent workforce in 2016?

AK: I think the trends that we talked about so far are going to be continuing. But I don’t think we are reaching a major tipping point or inflection point where there would be a major acceleration of these trends or the establishment of the types of procurement models or contingent workforce models that we have spoken about. I think instead it will be pretty steady in 2016 for the most part, with the above trends continuing. What I do think will be different is these trends will be more visible to more practitioners — the folks who are part of the contingent workforce management and workforce space. What is taking shape will start to emerge from the mist and will be thrown into sharper relief.

I think this developing independent workforce solution space is going to become clearer and we are going to start see adaptations of some players in the traditional staffing supply chain — some VMS solutions, some staffing suppliers, some MSPs. We will also start to see how different components of the independent workforce solutions space will begin to fit together and offer businesses a new set of channels for accessing talent in a whole range of different ways.

Voices (4)

  1. Brian Hoffmeyer:

    Interesting comments Andrew. I agree with most of it but think that you’re missing the mark with this statement: “The first, I would say, is an ongoing transition from the model that is built around vendor management systems (VMS) and specific suppliers, which is somewhat limited and does not live up to the standards of source-to-pay (S2P) solutions that we find in other areas of procurement. So I think we are seeing and will see a trend toward broader S2P models and technology.”

    I think the issue here is not with the VMS and its abilities but is that companies – broadly – haven’t fully adopted VMS (and related MSPs) to the extent that they should for reasons that are, mostly, internal (change management, procurement’s ability to influence the business, etc.). I see VMS as the center of all of these sourcing strategies, clients need centralized visibility and control and a VMS – integrated with FMS, direct sourcing suppliers, WIPs – is the only way they can get it.

  2. Andrew Karpie:

    Brian, Thank you for your comments. I’m in agreement for the most part on what you say, but my assertion was that the the current VMS-Supplier model is not on par with e-Procurement-Supplier model outside of contingent workforce procurement., was not saying that some VMS solutions, such as IQN aren not evolving and closing that gap. We’re actually working on a paper now on the gap between VMS and other e-Procurement solutions and how that gap might be bridged or closed in the future. Happy New Year, Andrew

    1. Brian Hoffmeyer:

      Ah, that makes sense. I agree with that and look forward to that paper! Happy New Year to you too.

  3. Mark:

    Andrew,
    You mention the trend of moving more toward a direct sourcing model. While I cannot disagree with what you are seeing in the marketplace, I personally would not recommend this approach to my clients given the current climate. If we cite recent litigation such as the class action against Uber, it is clear that there is a material level exposure with this approach.

    It could make for an interesting debate, but couldn’t direct sourcing start to disappear as quickly as it appeared?

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