A User’s Guide to the Gig Economy for Procurement Practitioners

The gig economy has been talked about so extensively that the term has become nearly meaningless. Yet contingent workforce and services procurement practitioners know there is something going on beyond the buzzwords, something that is beginning to matter to the work they do. It is difficult, however, for many practitioners to distinguish what is essential and of importance in the context of their procurement goals. To aid in that effort, this Spend Matters Plus brief explores how practitioners can make the gig economy work for them.

Deconstructing the Gig Economy

It may be surprising to see that the gig economy, as a descriptive term, is still relatively new. Based on a cursory look at Google Trends data, it is clear the interest in the gig economy has risen consistently since the summer of 2015. No such increase occurred for terms like contingent workforce or temporary labor since 2004.

Definitions of what constitutes gig economy work range from:

Any contingent work — past, present, future (Staffing Industry Analysts definition)
Work performed by independent workers (sometimes loosely referred to as independent contractors)
2 plus work performed in untraditionally short intervals (projects, tasks) and sometimes initiated “on demand” (essentially, faster than we’ve been accustomed to)
3 plus work arranged and coordinated using technology (especially configured as platforms) in new ways

At this point, definitions vary to the point that the gig economy has become a conceptually useless category. Yet whatever definition is used, most would agree that, over the past several years, a significant shift has begun. New ways of sourcing and arranging work and services are emerging and making their presence felt. With respect to the contingent workforce supply chain that has worked so well for so long, there is a new kid on the block who is presenting a new set of options for enterprises, contingent workforce managers and internal business users.

From our perspective, three features define this new set of options:

Engaging (independent) workers outside of traditional employment, staffing agency and consulting and business services labor and service contracts
Sourcing and arranging work and services that can be initiated and performed in short time frames (relative to traditional approaches/models), potentially in geographic locations independent of where the work or service is being sourced, contracted and managed
Leveraging a range of new technology-based solutions (complementary or disruptive) for sourcing, procuring and managing external workers and services on behalf of our enterprise business users and key stakeholders

The more we stop talking about the gig economy and start focusing on this new set of options, the more effective we will be at identifying opportunities and extracting value out of the real developments unfolding behind the buzzwords. What we are talking about are new digital supply chains for work and services. This is how contingent workforce and services procurement practitioners should be thinking about the gig economy.

Building New Digital Supply Chains for Work and Services

When thinking about exploiting this new set of options, there are at least three questions contingent workforce managers should ask: What are they? What are the potential value, risks and challenges? How can it be done?

What Are They?

Put simply, digital supply chains for work and services consist of end-to-end integrated digital components that directly and efficiently connect business users in an enterprise to resources they actually need, whether in the form of someone’s work or the output of a service provider.

End-to-end, integrated digital components: Cloud-based platforms and ecosystems seamlessly integrated (networked); big data capture and storage; AI, machine learning and other specific algorithms. For more on cloud-based platforms and ecosystems, see The Digital Evolution of the Contingent Workforce Supply Chain: (Part 2A) Work Intermediation Platforms and Ecosystems, (Part 2B) A Simple Typology for Work Intermediation Platforms and (Part 2C) Platform Ecosystems.
Connect business users to needed resources: Enterprise business users can more directly, efficiently and rapidly source, engage and utilize the specific resources they need from a network of platform-based labor/talent pools and platform-based services providers. Today, this process is often referred to as self-sourcing. For more on self-sourcing see: Self-Sourcing Contingent Workforce: What it is and Why it Matters Now and Contingent Workforce Self-Sourcing Technology: Past, Present, and Future.
Someone’s work or the output of a service provider: Enterprise business users can flexibly consume previously inaccessible work and services through alternative digital sourcing channels — for example, new platform-based labor/talent pools (e.g., a vetted population of software developers accessible on a talent platform like Hired) or providers (e.g., a provider of “in the wild” distributed-software testing services like Applause)

When the procurement of work and services becomes digitally intermediated and independent workers become the prime source of labor/talent, the long-standing, separate categories of contingent workforce and services not only begin to dissolve and bleed into one another but also give rise to new forms of work and services, including work sourced from a global talent population across an online freelancer marketplace or project outcomes sourced through one of various kinds crowdsourcing platforms.

This set of conditions presents contingent workforce and services procurement with a new set of potential value opportunities, risks and challenges.

What are the Potential Value, Risks and Challenges?

This set of conditions presents contingent workforce and services procurement with a new set of potential value opportunities, risks and challenges.

As with pushing ahead with most innovative approaches, achieving value means confronting, evaluating and, where possible, addressing risks and execution challenges.

Potential Value	Potential Risks	Potential Challenges
Access to new external, flexible labor/talent and services Savings from lower transaction costs, price arbitrage and algorithmic process automation/rationalization Increased business user satisfaction from More (even better) sourcing options, Reduced cycle times (even on demand) More autonomy, control Increased buying, spend and supplier visibility and analytics	Compliance failures Misclassification Security and safety Other legal Corporate policy Intellectual property theft Information systems vulnerability from hacking and intrusion Data corruption/theft Viruses, malware Service outages Mismatch to business user needs and stakeholder requirements	Inadequate time/resources beyond existing program management and expansion Inadequate competencies to build digital supply chains Select, onboard and manage “suppliers” (i.e., platforms) Insure alignment with business user requirements in a direct, self-sourcing context Inadequate fit-to-purpose enterprise technology tools and internal integrations Evangelizing vision and rationale and gaining stakeholder buy-in

But moving forward is not a binary choice of go or no-go; rather, it is a gradual calibration of readiness and opportunities. It depends upon the state of an organization and numerous related factors, including industry vertical; perspectives and knowledge of business users, other stakeholders, and contingent workforce and services procurement practitioners; internal technology capabilities; and the goals, milestones and performance expectations of the business. In other words, there is no one truth, no one way — but for each organization, there is an incremental path forward.

How Can It Be Done?

While there are real opportunities to achieve new value in many forms (as seen above), there are also real risks and challenges. The components of potential digital supply chains for work and services are mostly in an immature state — some more-or-less mature than others. Some platform-based work and services suppliers have gained little traction, while some have done so, but with adoption by individual business users or departments. There are gaps in enterprise technology that have not yet been filled by certain VMS players that are trying to do so, FMS players that have tried and are evolving, and some upstream platform-based work and service suppliers that are taking it upon themselves to try to make it happen.

Nonetheless, there is ample evidence of a significant number of large, mainstream enterprises across multiple industries that have found their trailheads and have started down their own paths. These include companies like GE, Thomson Reuters, Procter & Gamble, The Washington Post and Southwest Airlines — each on different stages of its journey.

Enterprise contingent workforce and services procurement practitioners face a “practitioner’s dilemma,” caught between being locked into old processes for satisfying well-established internal customer needs and being able to shift organizational resources and mindsets toward new approaches, sources and enabling technology. But there is a way out and a model for finding your organization’s path forward.

Spend Matters research and analysis points to the following model and process:

The process should be incremental and span years, not months — there should not be the expectation of a sea change. It is a process of transformation of organizational learning and change, starting small and progressively expanding scope and depth all the while reducing the risk of a blind-side disruption and progressively increasing the capability to respond to opportunities and threats.

All of this can be guided by a nine-step process:

Seriously get to know the external landscape
Poll your business users on current and desired consumption use cases
Stringently assess and identify best-fit VMS and MSP
Confer and Collaborate with Trusted Peer Companies
Invite plausible platform providers to do presentations, demos, Q&A
Develop an initial pilot and adoption program plan
Engage and present to senior management (Including CTO and CFO)
Move forward with pilots and record what happens
Analyze what has happened, document in a report for all stakeholders and proceed as appropriate (e.g., repeat).

This whole cycle or parts of it may be repeated any number of times, occurring over a time frame measured in years. Instead of a “Big Bang project,” this process moves the organization in the appropriate direction, gradually and incrementally.

Some key advantages are:

Allocation of time and resource are held in check and manageable for the organization (the program never becomes “too big to fail”).
The gradual progression makes it possible for the organization to absorb information and to learn in many different ways, including understanding the most valuable opportunities, assessing new procurement processes, technologies and management methods (e.g., in strategic sourcing, category management, supplier management, etc.).
The stepwise and iterative nature of the process makes course corrections possible as learning occurs.
The process ensures organizational involvement and change across all stakeholder groups (avoids problems like the “not invented here syndrome”).
The process progressively increases organizational capabilities to respond to opportunities when they arise and avoid being blindsided by disruptive developments. In fact, the process could mitigate disruption by bringing parts of the organization together and avoiding a widening misalignment between internal customer needs/expectations and the gradually increasing capability of the procurement organization to deliver new labor/talent solutions.

For further details of this model and process, consult “9 Things Contingent Workforce Procurement Can Do to Prepare for Online Talent Platforms.” For recent related research on innovative technology solution adoption practices, see “Best Practices: How Enterprises are Adopting the Latest Contingent Workforce & Services Technology Solutions.”

Conclusion

In this Spend Matters Plus brief, we have not only taken the stampeding gig economy by the horns. We have also tried to dissect it and frame its real anatomy for contingent workforce and services procurement practitioners — to put it into their perspective and make it real and exploitable. For practitioners, the gig economy is like superficial advertising for new good and services — it tells you nothing about the practical matters of how to source and manage the procurement of those goods and services.

As noted at the outset, practitioners understand that there are significant, real developments taking place behind the buzzwords. But it has been difficult to get a practical grasp of them from their own procurement standpoint, understand where their organizations stand relative to these developments and other organizations, and determine what to do in some rational way. This user’s guide to the gig economy is intended to be at least a starting point.

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