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Direct Sourcing of Independent Professionals: What Enterprises Need to Know in 2018 (Part 2)

01/31/2018 By

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In Part 1 of this four-part series, we traced the development of the current generation of technology-enabled direct sourcing solutions from the first online freelancer marketplaces prior to 2005, through the rise of the on-demand gig economy and the rapid growth in the number of business-oriented talent marketplaces, to the more recent emergence of technology-enabled direct sourcing solutions for enterprises.

In 2018, this new technology-enabled direct sourcing space can be viewed in terms of two high-level (now sometimes overlapping) groupings of solution providers:

  1. On the supply side, online marketplace platforms through which businesses can directly source various types of workers (e.g., low-high skill/expertise) to perform some broad range of different categories of work (e.g., warehouse picking, software development) in a variety of forms (e.g., at a specific location or remote; brief, narrowly-focused task/project or longer, multifold/complex engagement).
  2. On the enterprise side, direct sourcing solutions — ranging from “pure technology” to technology and value-added services — enable enterprises to engage independent workers from various sources, organize them into private talent pools from which they can on-boarded into projects and facilitate payment for work completed.

In this second part of our series, we focus on the emergence of these enterprise-grade, fit-for-purpose technology-enabled direct sourcing solutions over the past few years.

Technology-Enabled Direct Sourcing Solutions for Enterprises

As discussed in Part 1, in the face of the potential to directly source independent workers to perform many types of work from various sources (ranging from alumni populations to external work marketplace platforms), enterprise corporate and functional executives are challenged to sort through and identify a direct sourcing solution that is fit for purpose and will satisfy enterprise requirements. This task is complicated by a number of factors, including the fact that these solutions are being brought to market in a number of different forms by a range of providers: some VMS providers (e.g., Beeline), new software/technology providers (e.g., WorkMarket, recently acquired by ADP), specialized independent contractor services providers (e.g., MBO Partners) and even some of the online talent marketplace platforms (e.g., Upwork).

Some would argue that, several years ago, the freelancer management system (FMS) represented the first attempt by third-party providers to field an enterprise-oriented technology-enabled direct sourcing solution. These FMS solutions were defined by the following capabilities:

  • Independent workers could create and update online, digital profiles (e.g., skills, past projects)
  • Enterprises could create and manage online talent pools of these profiled independent workers (who could be vetted in various ways)
  • Hiring managers could directly select and engage independent workers in the talent pools and onboard them into project assignments
  • Hiring managers of enterprises could maintain a direct connection with independent workers after a project was completed
  • Managers in the enterprise could use the FMS data for reporting and analysis

Though innovative, the FMS never gained traction with enterprises for a number reasons:

  • FMS was a direct sourcing solution only insofar as it allowed hiring managers to directly “source” workers who were already profiled on the platform. While previously known or referred independent workers could be brought onto the platform, FMS did not enable managers to source from external sources of independent workers (e.g., work marketplace platforms). A small minority of FMS players did provide sourcing connections to their own proprietary marketplaces (in particular, field service contractor marketplaces), but not to other marketplaces.
  • FMS came to market as a “pure play” technology solution, absent the means of ensuring that workers were correctly classified, associated with and paid under either an agent or record or employer of record. Effectively, enterprise clients were left to figure out how this and other compliance requirements could be addressed (the only option appeared to be working with third-party services providers with ad hoc, manual processes — an additional “do-it-yourself” burden).
  • FMS solutions sidestepped the central issue of worker classification and compliance — a knockout requirement for large enterprises. While FMS solutions purported to enable enterprises to effectively utilize independent workers directly sourced outside of traditional channels (i.e., staffing suppliers, consulting firms), they provided no material solutions to address the serious risks of misclassification and other forms of non-compliance. FMS providers pointed to their APIs or their AI technology, but that really meant passing the hot potato back to enterprise clients.
  • It was unclear how FMS fit into the already established contingent workforce management and financial accounting processes and systems of the enterprise. For example, would VMS remain the system of record? How would independent workers’ invoices be processed? Where would SOW/contracts be stored and performance against contract be tracked? In many ways, FMS raised more questions than it did answers.
  • Finally, FMS solutions tended to be one size fits all, despite the fact that requirements for different worker population could vary significantly. For example, what would be needed to engage a lower skill gig worker (e.g., for events, peak warehouse demand) would likely be quite different from what would be needed for engaging a self-employed, expert professional (e.g., a strategy consultant, a system architect).

Consequently, for these reasons and others, the FMS model did not gain traction with enterprises. Some enterprises reported that they did not want another technology solution to implement and manage. Some reported that there were too many gaps in the solution model. Some stated that, for them, the ROI remained questionable.

Given the above, FMS is best viewed as a phase in the ongoing development of technology-enabled direct sourcing solutions for enterprises, such that by today other solution models have emerged and are being offered by a range of different providers. Hence, even though FMS did not make the grade, a technology-enabled solution to source and engage independent workers continues to be of interest to enterprises.

In Part 3 of this series, we turn our attention the relationship between technology-enabled direct sourcing and the increasingly important talent population of specialized, skilled, independent professional workforce. To continue reading. click here.