What Procurement Needs to Know About the High-End Gig Economy

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Do you have a clear idea of what the gig economy is?

That was the question that Andrew Karpie, research director of services and labor procurement at Spend Matters, posed on a recent webinar that he hosted with Jody Miller, chief executive of Business Talent Group (BTG). This is how the webinar attendees answered:

As you can see, there’s quite a range of understanding, and I would wager that it reflects the wider population. Sure, the term “gig economy” is pretty self-explanatory, but it is also a broad term, covering everyone from seasonal warehouse workers to consultants.

“Whether you understand it or not, the gig economy has arrived, particularly for enterprises,” Karpie said. “Most of us know about the Ubers, the Grubhubs … There is some aspect of the gig economy that has begun to appear in any area of the workforce, of the economy.”

And the gig economy is changing how employers and employees view work. Instead of thinking of work as paying for a worker per se, companies are becoming more focused on outcomes. Many of us have taken a ride with an Uber or Lyft driver, for example, for the purpose of getting to our location. “You’re not renting the driver,” Karpie said, “You’re buying an outcome, a trip to a particular destination. The driver and the car put together is like a project.”

These projects — and we’re talking about contingent work in general — can be lengthy, but more and more often now they are quite short, down to minutes or even seconds in the case of microwork. And they are often done remotely.

“You have a lot of different value propositions available in this market now,” Miller said. “You’ve got platforms that are really superb at global labor arbitrage, where what you’re doing is finding a way to access work anywhere in the world, maybe at a much different price point than in the U.S. On the other end of the spectrum, [you can access] hard-to-find or really in-demand skills and knowledge.”

Miller continued: “This economy of freelancers spans everything from your Uber driver to the TaskRabbit person you have help build your Ikea furniture, to all of the designers, marketing people and web developers, [to] what BTG looks at, [which is] consultants from any consulting firm you can think of — McKinsey, Deloitte, Booz, IBM. That’s really the next frontier.”

95, 50, 64

In order to understand what the U.S. gig economy looks like, you need to know these three numbers: 95, 50 and 64. Since the Great Recession, 95% of new jobs were in alternative work categories. “This is a very significant fact that is often overlooked,” said Miller. “All the movement in the job market is coming in new ways.”

As for 50, that is the percentage of the American workforce projected to be working independently in the coming decade, though studies differ on when we will reach that point. MBO Partners projects that by 2020, more than half of the private workforce will be independent. Upwork’s recent study projected 2027.

But the statistic that Miller finds most exciting is this: since 2011, there has been a 64% increase in people earning more than $100,000 a year working independently. “This is in fact the fastest growing segment of the independent workforce,” Miller said. And it is also the segment most relevant for the procurement sector, which needs high-skilled talent.

Problem or Opportunity for Procurement?

Karpie brought up the most common concerns voiced by procurement organizations. These include the worry that the independent workforce is too risky, or that the trend is still in its infancy. Companies also question the value of using independent contractors. Would it be another problem to be dealt with?

“But if you jump out of that perspective, you see the opportunities,” Karpie said. “The gig economy offers you access to a new pool of talent. They don’t come on as a fixed cost that may be hard to ramp down. This is economical. It gives a company tremendous flexibility.”

Even if a procurement organization recognizes the importance of jumping on this opportunity, how should it go about it? Someone in the audience asked the question of whom procurement should collaborate with internally in bringing on contingent workers.

First and foremost for Karpie was working with business users. Finance and legal also came to mind, as there are investments involved in the case of labor platforms, and contractual relationships can “make or break” such an undertaking, Karpie explained.

Miller suggested three phases of adoption. “Phase One is enabling your organization to test and try these alternative solutions. Phase Two is going to be understanding where your organization derives value. And then Phase Three is going to be literally redesigning your organization so that it is optimizing all these different labor sources and information sources. If you look out five to 10 years, I think you’ll see we’re in the early stages of a massive shift in the way organizations are structured and managed.”

Notable Quotables

On the new wave of contingent workers: “These are highly skilled people. They’re people who can come in and have impact right away, who will do things like create your strategy for a business unit. They’ll look at your innovation and product development. They’ll look at your marketing approach and social media strategy.” — Jody Miller, CEO of Business Talent Group

On time to fill: “The majority of businesses that need talent in this world of increased velocity can’t wait two weeks to get it. So [the contingent workforce] really collapses that time in significant ways. Rather than the traditional time to fill, which could be weeks, they could get someone up and running in days, even in the same day.” — Andrew Karpie, research director of services and labor procurement at Spend Matters

On how companies will look in the future: “John Chambers, the recently departed CEO of Cisco, was quoted in Fortune not too long ago saying that in the future all companies are going to be a CEO and a CTO and that’s it. I don’t know if I agree it’s going to be that dramatic, but I do think organizations are going to look more like puzzles.” — Jody Miller

On the importance of innovation: “[One of the] most important trends is developments in workforce marketplaces. This will become the most important driver of value. Innovating labor will be more important than product innovation or service innovation.” — Jody Miller

Want to learn more about the high-end gig economy? Check out the webinar recording for yourself!

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