A Primer on Labor Clouds: Everything Procurement Needs To Know

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Procurement needs to know the world of work is changing — fast.

In 2017, many companies have gone beyond experimentation to actually adopting on-demand labor models and platforms for sourcing and engaging specialized knowledge workers. Companies as diverse as Walgreens, The New York Times, P&G, Walmart and Nokia are moving forward with the digital transformation of their workforce.

But just as companies are changing their approach to contingent workforce management, the talent landscape is changing, too. As the market for specialized talent becomes increasingly fragmented, companies are looking for new ways to integrate this talent into their total workforce. To do that, they’ll need a tool that allows them to go beyond traditional models — W2 employment, temporary staffing — to more agile, technology-enabled approaches that will support the use of a highly skilled, flexible workforce to increase productivity, boost customer satisfaction and improve the bottom line.

That's where the concept of a labor cloud comes in.

What are Labor Clouds?

The easiest way to define a labor cloud is as a curated network of talent. Essentially, it’s a tool that organizes a group of people in one system that can facilitate worker engagement, payment, reporting, dispatching and more.

More than a mere record of workers a company can use for a project — like a spreadsheet filled with hundreds of freelancers — a labor cloud is a dynamic database of vetted talent that uses automated enforcement to ensure quality and compliance. Companies can set up labor clouds to fit only the requirements needed, whether that’s desktop repair techs in Arizona, cabling installation professionals who have passed a background check or Cisco techs with a CCIE certification.

Labor clouds empower you to bring your own talent (BYOT), allowing managers to directly source new workers from a range of different sources, including alumni populations and specialized online marketplaces. They also enable an innovative, integrated approach to total workforce management, allowing you to access and manage skills and expertise from all of your talent all sources — contractors, freelancers, vendors, employees — on one platform.

This stands in contrast to another related technology, known as talent pools. These offerings are curated by a managed service provider (MSP) or staffing firm, providing qualified candidates for a job sourced by a third party. While this approach relieves the workload of contingent workforce managers, it also gives the procurement organization less direct control over the sourcing and management of the labor pool. Both talent clouds and labor clouds enable self-sourcing of the contingent workforce, but each technology takes a different approach to talent management.

Why Use Labor Clouds: The Benefits

In addition to to the broad and strategic benefits associated with an integrated approach to workforce management, labor clouds also offer several immediate benefits.

First and foremost, higher levels of flexibility and speed can be achieved because labor clouds entail direct sourcing from organized groups of specifically qualified, pre-vetted workers under the control of hiring managers, such as dispatching an AV tech to an office to rescue an executive meeting or engaging a top-notch freelancer for a time-sensitive creative project.

Second, with labor clouds, much of the qualification and vetting is performed upfront — with a high level of automation — when when workers are sourced and on-boarded into a company’s labor clouds. The automation of the vetting process also ensures that non-qualified candidates are excluded from list of recommended workers.

This points to another major benefit: increased accuracy and risk mitigation.

The historical data and predictive analytics built into a labor cloud allow procurement to determine who the best person for the job is more accurately than with traditional, staffing-based approaches. Currently available solutions can recommend with a high degree of accuracy who the best person is for an assignment based on the location, the deadline, the skills required and the budget, evaluating all relevant factors to secure the highest quality work output at the best price.

Alongside accuracy, the degree of control offered by labor cloud filters ensures talent that progresses to the interview stage is actually qualified, lowering the probability of a non-compliant hire. And when talent becomes disqualified, whether from loss of certification or poor quality ratings, workers are automatically removed from the cloud, readmitted only when they can prove the discrepancy has been addressed.

Labor clouds allow you to recruit the best of highly specialized professionals with extensive experience in a particular talent area, and with built-in quantitative and qualitative ratings, contingent workforce managers can evaluate talent based on the work they’ve done to ensure consistently high quality. Finally, self-sourcing talent directly through a labor cloud can save companies between 20%–30% in cost savings compared with a traditional staffing firm — to say nothing of costs avoided from preventing worker misclassification or insurance-related compliance issues.

Accordingly, and last but not least,, labor clouds are a win for procurement, because their use in an organization not only drives efficiencies, higher quality outputs and more satisfied business users but also provides unprecedented data and visibility into how labor and services are utilized, the spend on different types of labor of services, the costs of those supply channels and the degree of compliance being achieved.

Curious about how to get started using labor clouds for yourself? Stay tuned for Part 2 of this series, in which we explore how companies have built and used their own labor clouds, the benefits they realized and recommended best practices for your own initiatives.

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