4 Seismic Events for Contingent Workforce/Services in 2018 — A Whole Lotta Shaking Going On

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Based on my discussions with people in the contingent workforce and services (CW/S) industry in the past months, it seems that many are thinking that 2018 was a year in which, relative to past years, something quite different was happening. But it was hard to put one’s finger on it.

Perhaps it was a year when new technology became more of an exciting opportunity to better serve clients and talent and less as something to fear or be cynical about? Or a year when the industry embraced innovation and change more than it resisted it? Maybe even a year that would mark when a seismic shift in “industry structure” began?

By this time next year, we’ll know if 2018 was the beginning of a seismic shift, a year of only evolutionary acceleration or just a continuation of secular trends. But it is clear that fault lines have begun to appear and some tremors have registered on the CW/S industry transformation Richter scale.

In this post, we provide an overview of four seismic events in the CW/S technology-based solution space, with references to corresponding 2018 Spend Matters research coverage. Armed with all this information and a sprinkle of analyst commentary, we will leave it to you to form your own perspective on these events and some of the movers and the shakers in 2018.

ADP acquired WorkMarket as one component of its future of work strategy

In January, ADP made a surprise announcement that it had acquired the non-traditional workforce platform WorkMarket (now WorkMarket, an ADP company). It was probably the most significant acquisition of a technology-based solution business by a CW/S industry outsider since enterprise software giant SAP acquired Fieldglass in 2014.

But Fieldglass, founded in the late 1990s, was a mature solution in the mature VMS solution category, and it filled the services procurement solution hole in SAP’s full enterprise suite offering. WorkMarket, founded in 2010, was a relatively young solution in an emerging solution category (the boundaries of which are still unclear, despite the FMS catch-all label). For ADP, the WorkMarket acquisition was not the filling of an obvious hole, but rather one of a number of coordinated strategic steps into the gig economy and the future of work.

We provided coverage and in-depth analysis of the acquisition as it happened in early 2018:

As we examined the rationale of the acquisition and learned more about about the strategy ADP has been enacting, we understood that the ADP acquisition of WorkMarket was not an isolated, tuck-in acquisition, but part of corporate strategy that was taking the future of work head-on (and with a very unique, outsider's approach). To learn more about this viewpoint, refer to our coverage and recent in-depth analysis:

Of further note, WorkMarket was recommended as a solution in our 2018 Independent Contract Workers SolutionMap. See:

Beeline became ‘One’ with itself, progressed on the next-gen platform and got a growth-oriented owner

In the spring, Beeline reported that it had completed one of the two hard parts of its merger with IQN: the organizational part. It also lifted some of the covers off the second hard part. Beeline reported its progress in its VMS convergence initiative, with the completion of Horizon (the new PaaS/microservices technology platform) and the first steps toward the realization of Beeline One (the company’s user-facing, application-level solution, the real goal of the Beeline-IQN VMS convergence. For further details, see: What’s New on the Beeline Technology Horizon: BeelineOne.

In late July, the company announced its acquisition by the growth-oriented private equity firm, New Market Capital. To get a more complete picture of the deal and its implications, refer to our extensive coverage and analysis here:

Beeline has been on a long journey since Adecco separated the unit from its MSP Pontoon in 2013. Having come through its most recent transitions (IQN merger integration, changes of ownership), Beeline seems to be in a place that should allow it to focus on customer needs, applied technology, maybe some acquisitions of its own. Beeline is now the only major, non-captive CW/S solution that originated as a VMS, and it enjoys massive market share and a global footprint. The question now is: How will Beeline leverage its position and evolve? By developing BeelineOne capabilities on top of the Horizon technology foundation and pursuing a platform (vs. a product) strategy, Beeline's future (of work) could be highly differentiated and something to watch  

Of further note, Beeline was recommended as a go-to solution in the 2018 CW/S SolutionMaps. It distinguished itself as the only industrial-strength, global solution that could serve customers in all three of the CW/S categories, Temp Staffing, Contracted Services/SOW and, lastly, the Independent Contract Workers solution category (where it joined WorkMarket, Upwork Enterprise, Field Nation, TalentNet and other non-traditional contingent workforce solutions). See:

Coupa put its toe into the massive services procurement spend category and then went 'all in' with DCR Workforce

In early 2018, e-procurement suite provider and major SAP competitor, Coupa took its first real step in the services procurement solution segment, with the general availability release of Services Maestro (a contract services/SOW solution and an integrated extension of its broad “business spend management” suite). For more details about Services Maestro, see:

The step into services and the first iteration of Services Maestro were not surprises (Coupa had been clear about this direction for a year or more). But, as was noted in the above, the Services Maestro roadmap was being discussed in terms of being customer-driven evolution, largely services/SOW-focused and possibly taking on contingent workforce further down the road.

But then came what might have been the biggest surprise of the year, Coupa’s sudden acquisition of DCR Workforce (now Coupa Contingent Workforce) in September that put Coupa “all in” services procurement, including contingent workforce (i.e., temporary staffing). Refer to our detailed coverage and analysis of this acquisition for further inisight:

Source-to-pay and e-procurement solutions have long had their eye on the services beast but have allowed siloed VMS solutions to tackle that problem. That changed with SAP Fieldglass and now, over four years later, with Coupa and DCR. But at this time, we know that other procurement solution providers are also thinking about stepping into services procurement.

At this point, there are some suggestions but few details about how Coupa will proceed in addressing the services procurement/contingent workforce spend categories on behalf of its client community. No doubt 2019 will bring further clarity.

In addition to Coupa’s procurement solution being covered in great depth in our SolutionMaps dating to 2017, in 2018, DCR (now Coupa Contingent Workforce) has been recommended as a solution provider in two of the CW/S categories, Temp Staffing and Complex Services/SOW.

Upwork became a public company and a solid citizen

Upwork — the descendent of the early online freelancer marketplaces, Elance and oDesk (both started around 2005) — went public in October. The IPO not only validated the coming of age of the remote online freelancer, it also signaled that Upwork might be interested more that just enterprise access to online freelancers.

If there has been a watershed event in the CW/S industry over the past 20 years, this may very well have been it. Until quite recently, Upwork has been a bit of a black box operationally and financially, and there was always much suspicion and cynicism within the  industry about how successful the company really was or could be. Many in the industry thought the company — with what were thought to be so many perceived deficits relative to the long-standing and successful staffing model — would crash and burn sooner or later.

That has not proven to be the case. On the contrary: Over the past several years, Upwork has grown, evolved, developed an enterprise solution (Upwork Enterprise) blended with various types and levels of managed services. And now Upwork is clearly not only a going concern, but also has a market cap not so far away from $2 billion. In 2018, with annualized revenue over $200 million, and annualized gross services volume on its way to $2 billion, Upwork cannow stand proudly alongside some of largest, tier-2 staffing firms of the world.

We have been covering Upwork for about five years now — and watching closely — and will continue to do so. To learn more about the details of the IPO, refer to our recent IPO coverage and analysis:

To get additional insight on what Upwork's momentum, technology DNA  and different angle of entry into the space might mean, see:

To boot, Upwork Enterprise was also recently recommended as a solution in our 2018 Independent Contract Workers SolutionMap. See:

Upwork Enterprise: What Makes It Great (Independent Contract Workforce Analysis)

Conclusion

2018 was unquestionably a year of significant developments in the CW/S solution space. Certainly, we should not dismiss the significance of the large swarm of much lower magnitude and less perceptible seismic events in 2018. But the developments covered above were impossible to ignore. While those big developments may have shaken some of our cages, their actual magnitude and the potential for landscape-changing aftershocks is not yet clear. At the very least, they have revealed some fissures and potentially emerging fault lines along well-established organizational and solution category boundaries: for example HR and Payroll/HCM versus Procurement and VMS.

Even as procurement solutions try to enable organizations to get their arms around “enterprise-wide” spend (including CW/S), total talent management is emerging in a variety of ways, including the management of all human capital (including CW/S) under a CPO (that is, a Chief People Officer, not the other one). Technology and various kinds of external (non-traditional supplier) platforms now make possible decentralized, direct access to and purchasing of contingent workforce and services in various ways that can challenge traditional centralized governance models.

At the same time, changes are already occurring among CW/S solution providers and merit some further consideration.

  • SAP has been integrating SAP Fieldglass (its CW/S solution), with SAP Ariba (its procurement solution) — in addition to growing tendrils into SuccessFactors, the company's human capital management/talent management solution for full and part-time employees.
  • ADP, which is a competitor of SAP SuccessFactors in the HCM/TMS solution segment, has now begun to address the non-staffing (independent/freelance) segment of the contingent workforce, which SAP Fieldglass and Beeline are addressing with their own new solutions (and which Upwork has been in for over 10 years).
  • Coupa, a major competitor to SAP in the procurement solution segment, has now gone “all in” on services — not only addressing contracted services/SOW spend, but also contingent workforce spend with the acquisition of DCR Workforce (which, incidentally, had been evolving its own answer to independent/freelance workforce).

The observations may provide a useful context to bear in mind, while considering the events in 2018 involving ADP, WorkMarket, Coupa, DCR, Beeline and Upwork. As for how significant (or earth-shaking) they are and what they may mean, we’ll leave that for you to decide (or just wait and see what’s happened over the course of the next year).

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