When Rogue Spend is Good: The Case for Online Work Platforms (Part 1)

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Let’s face it. We in procurement consider “rogue spend” bad — otherwise we wouldn’t call it rogue. Sometimes, we excuse it as “tail spend,” at least when it’s small and isolated and not worth trying to capture and control. Spend capture and control — especially of bigger or riskier categories of spend — that’s what we do, that’s who we are. Right?

C’mon. Rogue spend is bad, and we are bad: We must capture as much of that spend as we can get our hands on, even when our internal business users/clients must be brought along kicking and screaming.

Can Rogue be Good?

But are there cases where rogue spend can be good? There very well may be.

These special cases can arise where demand is not being satisfied because existing supply sources are drying up and supply is shifting to new sourcing channels that have emerged outside of the spend management program scope. Add to that digital enablement of these channels, their sourcing, supply and consumption processes and the unprecedented volume and types of data that come along for the ride (more on this below). In such situations, your internal business users may already be in adoption mode. And while they might appear to be diverging from the “straight and narrow,” their instincts might be correct and the economics of their buying choices extremely positive.

I believe one of these special rogue cases resides within contingent workforce and services spend, a fast evolving, complex set of categories where there has been a rapid expansion of new technology enabled sourcing channels that rely predominantly on online work intermediation platforms (WIPs).

Sidesteppers or Something Else?

Across many companies, we are seeing rising adoption and use of online platforms to source individual workers (freelancers, consultants, etc.) and a growing range of service/SOW outputs (software development, user testing, creative content (writing, graphic art, video, even voice-overs, etc.). And the growing use of such platforms is mainly initiated occurring in functional/departmental levels of the organization outside of the vendor/supplier management processes of contingent workforce management/services procurement programs (in effect, rogue spend).

But what is interesting is that the internal managers that are making use of these platforms are not “rogues”! They are not trying to engage their consultant buddy or preferred service vendor with puffed-up rates. They are actually smart shoppers/buyers and good corporate citizens that are doing “the right thing.” These smart shoppers/buyers are acquiring the resources and services they need to do their jobs at speed and cost that is much superior to the alternatives offered by the official channels of the organization.

And it is not just a matter of sidestepping the process. In the current environment, many types of talent are in short supply, and the established sourcing channels (e.g., temporary staffing suppliers) are costly, slow, have quality-control issues and do not support short-interval, intermittent engagements. So there is a problem, and business managers are stepping up to solve it, achieve superior performance and save the company money.

Beware the Dark Side

There are no doubt objections that could be raised to reveal the dark underbelly of this seeming utopia.

  • One is compliance risk of various forms, including worker misclassification. These risks can be real and should not be dismissed, but the extent of such risks varies by platform and operating model of the platform. For example, if the platform provides a service output and that is what a manager is buying from the platform, then misclassification risk can be minimal or nil. Or if a worker performs work remotely in another country and is never badged-in on site, a whole set of compliance risk issues don’t arise.
  • Another one is absence of supplier management and the possibility of lock-in, cost increases or loss of intellectual property. Once again many of these concerns can be real and should not be dismissed. However, there are also many mitigating factors. For example, switching from one platform provider to another can be frictionless. In fact, many companies — perhaps this could be a best practice — may maintain service arrangements with more than one platform in a given category (think of it as having both the Uber and the Lyft app on your smartphone). Lock-in is less of a risk, since usually “contracts” are simply “usage-based service agreements." Pricing is typically competitive across these platforms, both because of their operating models and because the platforms tend to enable very efficient markets. Further, many platforms have exceptionally strong regimes to control and protect clients’ IP (one good example is InnoCentive — airtight).

One other big factor that mitigates problems and becomes a potentially huge source of value is, well, big data. Online platforms by their very nature are data magnets. The data — real-time to archival — that platforms can manage and expose (e.g., through APIs) is not even comparable to what other traditional suppliers can do (we’re talking orders of magnitudes). The applications of this data can range from extraordinarily rich and deep spend analysis to close, automatic monitoring of some types of compliance. When it comes to platforms, data is the secret weapon, the power of which is mostly underestimated.

On the Road to Rogue

On the sometimes-crooked path of my research wanderings, I began to adopt this dangerously heretical position — that is, that rogue can be good — by actually speaking with some of these rogues in very large organizations. Let me cite the example of my conversation of the head of marketing content for one of the top global staffing businesses in the world that used a particular platform-based provider for content production (OK, in this case, it was Contently). When I found out about how extensively the platform was being tapped for content deliverables, I was a bit thrown back (a staffing firm?). So I asked why. The response? To almost effortlessly get:

  • the best talent and content,
  • only what you need when you need it,
  • fast,
  • at highly competitive cost,
  • and great talent paid without delay.

I have had similar conversations with other rogues whose identities shall remain protected. And it is clear that a new consumption/buying pattern is emerging. Some technology solution providers —including some VMS providers — are reading the handwriting on the wall and taking steps to try to adapt to this emerging new reality that is, one might say, “coming into rogue.”

So if — just possibly, if — rogue can be good, then what now? In the second part of this series, I’ll be preaching to the converted about how contingent workforce management/services procurement practitioners might think about what is happening and how to approach it. To continue reading Part 2, click here.

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Voices (2)

  1. Pierre Mitchell:

    Andrew, rogue can indeed be good when it highlights problems with the existing sourcing process and technology environment that doesn’t stay in touch with supply markets or stakeholder needs. Here’s the more generic piece on this I did a while back… http://spendmatters.com/2013/05/29/maverick-spending-is-your-friend-dont-chase-it-ride-it/
    and a 12 step program to fix it…

    I love “coming into rogue!” 🙂

    1. Andrew Karpie:

      Thanks, great piece, Pierre. Well,put: “good when it highlights problems with the existing sourcing process and technology environment that doesn’t stay in touch with supply markets or stakeholder needs.” Very applicable to the online/services platform developments.

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