Procuring outcomes, without limits: 3 takeaways from Upwork’s 2019 Work Without Limits summit

Much like in other spend areas, the contingent workforce and services (CW/S) mega category is being shaped by disruptive forces from multiple angles. The oft-cited talent gap is a major motivator, as businesses look in vain for missing skills — everywhere from IT to operations and even more creative fields like marketing. But also influential are broader economic trends, including the rising importance of business partnering to tap collaborative innovation and the digital transformation of just about every major industry.

The result is a gradual but quickening shift in the CW/S world away from finding placeholders for siloed FTEs toward a workforce and talent strategy focused on outcomes — whether that be training a new set of algorithms for a key software platform, translation and localization for a business’ flagship product, or a set of social media-optimized advertising to bring a major brand in front of a different audience.

This shifting mindset was on prominent display last week at Upwork’s third annual Work Without Limits Executive Summit, held for the first time in Chicago. The two-day conference focused on contingent workforce and HR-focused topics and yielded several insights for procurement professionals, especially for progressive organizations beginning to look beyond the “butts in seats” mentality of managing temporary staffing suppliers. Here are three quick takeaways based on the presentations and our conversations with attendees.

The Alternative Workforce Goes Mainstream — Slowly

The news about skill gaps, increasing preference for flexible work arrangements and technological intermediation of labor sources is hard to ignore. For Upwork, this is the new normal and how it sees the world. But attendees were starting to talk the talk, too, particularly the younger millennial managers, who found it only natural to seek out extra resources on the web rather than through a hiring process or temporary staffing.

Steve Hatfield, a principal at Deloitte Consulting, echoed that thought process in his presentation “From Redesigning Jobs to Recoding Work: Reinvention with a Human Focus,” in which he made the case that the alternative workforce has gone mainstream. Data he shared from the 2019 Deloitte Human Capital Trends report indicated that the alternative workforce, before viewed as a narrow fit for the IT function, today performs a broad range of activities. (For reference, Deloitte uses an “all of the above” definition for the “alternative workforce,” including contractors, freelance/independent workers, gig and crowd workers in its assessment.)

Hatfield said 33% of survey respondents reported extensively using alternative arrangements for IT, 25% for operations, 15% for marketing, and 15% for research and development. (Procurement, regrettably, was the laggard of the pack, with 11% of respondents using alternative labor extensively.)

While these are not dominating proportions, the growth compared with a decade ago would surely surprise many hiring managers. Increasingly, getting work done means bringing external workers and services into the business. And that comes with challenges too: Hatfield noted that more than half of companies surveyed said they either manage the alternative workforce inconsistently or had no/few processes for managing them at all.

Contracted Services: More Than Just ‘Ringer’ Freelancers

The alternative workforce (i.e., freelancers) often dominates the new talent model conversation, with functional leaders imagining a subject matter expert or technical guru contributing sorely needed capabilities to an internal project. But the reality is that finding needed talent skills is less about finding a “ringer” and more about identifying where those needs are concentrated. In creative industries like advertising or technical ones like web development, the required services often can be found at small businesses, or “agencies,” in Upwork parlance.

Indeed, a big theme of this year’s summit revolved around Upwork’s newest update to its Enterprise product, its “agency experience.” As we reported last week, the agency experience makes it easier for businesses to find, hire and engage specialized, boutique agencies on the Upwork platform. This includes features such as curated agency listings, enhanced agency profiles that highlight a business’ unique offerings and a discovery dashboard that helps users evaluate needs for large projects.

Rather than a new area to tackle, agencies already are a major category of spending on Upwork. As VP of Product Bonnie Sherman shared in her presentation on the launch, businesses in 2018 spent more than $250 million with agencies on Upwork. The provider hopes to grow that number with additional investments targeted toward agencies and helping businesses contract them, including further building out the supply of premium agencies on the platform, reducing proposal friction and supporting agency education for how to get the most out of Upwork.

If Upwork manages to keep up that momentum, it figures the platform could attain a dominant portion of the market. Sherman said that within three years, Upwork will by transaction volume be the largest platform for independent contractors and boutique agencies, according to an internal analysis.

Procurement May Not Lead the Shift, But It Still Has a Role to Play

Finally, as a reader of Spend Matters, you may (rightly) be asking, “Where does procurement fit into all of this?” To that we can unequivocally say, “It depends.”

The question of which function owns contingent workforce and services programs is an ongoing one, with perceptions skewing based on the nature of the program. Generally, it seems to be a mix of HR and procurement, with HR perhaps taking a stronger role, as our Research Director for Services Procurement and Contingent Labor Andrew Karpie wrote last week.

Anecdotally, however, we found attendees at Upwork often didn’t consider or talk to procurement when they started their foray into freelance labor or, later, the Upwork Enterprise platform. Instead, they had a need that their current staff or budget couldn’t fulfill, so they went onto the web in search of an alternative. Then, if the project or spend got to a certain level beyond a one-off arrangement, procurement eventually found its way into the conversation.

Upwork sales reps found a similar pattern. If their conversations started with a procurement professional trying to bring the Upwork product into the business as a common tool for finding freelancers, stakeholders often bristled and pushed back against the suggestion. If the stakeholders found Upwork first, however, and brought procurement in as a collaborator for the tech selection, the odds of adoption were typically higher.

This has an interesting implication for procurement. The above scenarios sound “bad” because they look a lot like “rogue spend,” creating risks for the business in terms of missed savings, unreliable outcomes and compliance errors. But in this case, one could argue that rogue spend may actually turn out for the best, and it might even give procurement a chance to be the good guy for once. Ultimately, rogue spend can be reconceived as not out-of-compliance behavior but a signal from stakeholders of an unmet need, one that procurement can effectively and collaboratively address.

At first, a world of work without limits may seem in opposition to sound procurement policy, which inherently includes limits on spending, appropriate suppliers to select and the like. But if the world is changing, procurement may benefit more from asking not how it can combat the changes but how it can unlock and manage the value hidden within that new world.

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