The Contingent Workforce and Services Insider’s Hot List: June 2018

Welcome to the fifth edition of Spend Matters’ monthly feature, “The Contingent Workforce and Services Insider’s Hot List,” available to Plus and PRO subscribers.

In the CW/S space, new developments are observable every month. These can include:

1. New innovative, technology solutions (sometimes hybrid technology and services)
2. New entrants (some self-styled disrupters) which have typically–but not exclusively–been the originators of 1.  
3. Established  supply chain players responding to 1. and 2. (some of them more effectively than others)  

On a month-to-month basis, the stream of these developments does run hot and cold, but the spigot never shuts. Every month there are at least a few developments (e.g., a new technology-solution provider; a supply chain player or an enterprise trying something new; an alliance with, investment in, or acquisition of a still young and innovative provider).  If we were to go back 10 years, we would find an entirely different world where truly innovative, technology-driven developments were rare. But today the CW/S space is continuously percolating with new concepts, applications of technology, supply chain participants responses and other developments that go largely unnoticed. Something is definitely brewing.

So it’s time to wake up and smell the coffee and have a closer look at some of the developments we picked up on our radar this past month.

Fiverr Tackles the Numbers by Publishing a New Study on Specialized Freelancers

Last month Fiverr, the online freelance services marketplace, published a sponsored study produced in collaboration with research firm Rockridge Associates. For those not in the know, Fiverr was launched in 2010 as a kind of “dollar store” (actually, $5 store) of the online freelancer marketplace/retail space.  Since that time, Fiverr has (a) moved up-market (the $5 limit was lifted long ago), (b) narrowed its focus on creatives, (c) increasingly addressed freelancer needs and (d) sharpened its unique model that emphasizes pre-priced service outputs. And–oh yes–along the way, Fiverr raised $110M in 5 rounds and acquired 2 companies.

But back to the point. The Fiverr/Rockridge study maps out and quantifies the highly skilled independent/freelance worker population.  While there are already several studies focused on this population, there are number of reasons why this study is notable, including

• Fiverr’s study focuses on high-end “freelancers” (i.e., not Uber drivers nor staffing temps).
• The study took an original non-survey-based approach to analyzing and quantifying this population which included a number of breakdowns of the results (e.g. by major cities)

We won’t go further into the results here. But if you are interested, refer to our analysis “Fiverr Delivers A New Slant on Independent, Specialized Knowledge Workers,” where you can also find a link to the actual detailed report.

The Legal Services Supply Chain: Can Old Dogs be Taught New Tricks?

Legal services spend goes largely unmanaged in large enterprises. But procurement is beginning to gradually increase it now limited or non-existent role in legal services sourcing and supplier management. This comes at a time of unprecedented change and innovation in the legal services supply chain, where “NewLaw” models, new technology solutions and alternative legal services providers (ALSPs) have been emerging.

One recent announcement about Lawyers on Demand (LOD) provides a great window into what is happening in this category:

U.K.-based Lawyers on Demand (LOD), a provider of “flexible legal services” (i.e., contact/freelance lawyers), was in the news this month because of the law firm Berwin Leighton Paisner (BLP). BLP initially owned 100% of LOD, and spun-off it in 2012, while retaining ownership stake. Recently, the company sold its equity position in LOD to Bowmark Capital (now the majority shareholder). BLP recently merged with another large law firm. To what extent the merger and the sell-off stemmed from financial challenges is not known — but it would not be surprise given the concentration trend among “Big Law” firms.

As for LOD, which was founded in 2007, it seems to be growing, expanding internationally and profitable (2017 profits were $2.7 million). Now it is backed by a private equity firm that has a track record of taking younger businesses to the next level. But change appears to be the only constant in legal services today. While LOD may have been the pioneer in “flexible legal services,” it is now not alone in this segment. There are a number of competitors that have cropped up over the past several years (e.g., Axiom, Riverside Law, et al). This year, PwC even got into the game.

In other news, two recent developments pertaining to UpCounsel provide another view into the complex, evolving state of the legal services supply chain today:

At the end of April, online legal freelancer marketplace UpCounsel closed a Series B round of $12 million to bring total equity investment to $26 million since its founding in 2012. One of the first specialized online legal freelancer marketplaces initially focused on the SMB market, UpCounsel now has competitive company in this segment.  UpCounsel now seems to be trying to move up-market with what it calls UpCounsel Enterprise, and the company claims larger enterprises clients like twilio and Airbnb.

But nothing is ever simple, especially in a market with too many lawyers and law firms.  Perhaps provoked in part by its movement up-market, a lawsuit was filed against UpCounsel (along with another platform, LegalZoom).

The plaintiff, LegalForce RAPC Worldwide P.C., is an intellectual property law firm (founded in 2005) that uses artificial intelligence software to process trademark applications globally. According to a recent Bloomberg Law article, LegalForce alleges that UpCounsel is “violating ethics rules and unfair competition laws to gain an edge over traditional legal service providers.” The founder of LegalForce told Bloomberg Law that the “lawsuit will shine a light on regulatory inequities that have allowed nontraditional legal service providers to gain a competitive edge in the marketplace.”

That should give you an adequate taste of the change that is happening (and the complexity) in the legal services supply chain. It turns out that “digital transformation” can be a very messy process. To dig in deeper, check out our recent three-part series, Cutting BigLaw Down to Size: New Alternatives for Legal Services Procurement, where we provide a more comprehensive, bird’s-eye view of what is changing in the legal services supply chain.

Does Blockchain Have a Real Role to Play in the CW/S Supply Chain?

The short answer is that it’s much too early to tell. As we have started looking into this question over the past several months, it has become striking how many blockchain-based “freelancer marketplace” startups have emerged over a relatively short period of time — and they continue to pop up. Has the next generation of these platforms started to emerge? Over the last 10 years, we went from just several non-blockchain online freelancer marketplaces to more than 1,000 worldwide, and now we have a new wave of blockchain-based upstarts that seek to “disrupt the disruptors.” A recent CoinCentral article notes that Upwork has become the object of target practice for the blockchain-based upstarts (a statement that can be verified aross many of the new startups websites and “white papers”)..

Indeed, most of these startups seem fueled by their initial coin offerings (ICOs) and their desire to disintermediate the disintermediators, many of which started out with same mission to disrupt (the estabslished staffing industry). The blockchain startups, some of which we’ve mentioned in past Hot Lists, assert that non-blockchain platforms impose excessive transaction fees and many onerous or unfair conditions on freelancers, and that blockchain platforms will cut transaction costs by 90%, giving freelancers much more control over their business relationships and activities.

It is true that these blockchain startups would seem, in theory, to offer some appealing models and capabilities (e.g., smart contracts). However, these startups are basically at an experimental — if not only ideation — stage of development. So there is much that can go wrong–but we can also not get it right and be nay-sayers.  In our business, as industry analysts, we always keep an open mind when new technology enables better or radically different ways of doing things–so this will be interesting to watch.

That said, there are not only new, blockchain-based “online freelancer marketplace” platforms taking shape in the CW/S space. There are also other kinds of platforms. We’ll close this June Hot List by looking at the most interesting platform that we came across this past month.

New York-based aXpire is a 2017 spinoff of LSG LLC. It appears that industry innovation takes place within a small world network.  Established in 2005, LSG describes itself a legal services company that provides procurement management solutions. Its website further specifies: “Our solutions now provide electronic business process management tools that focus on planning and performance measurement of the client’s legal and non-legal professional service providers. We specialize in procurement, enterprise legal and supplier management.”

Now back to aXpire, which completed its fully-subscribed, $20 million ICO this January, is developing a blockchain-based, end-to-end services procurement and supplier network solution. aXpire is initially trageting hedge funds and other investments firms, which are highly regulated businesses that have antiquated back-office processes for handling service provider invoices and payments. However, aXpire intends to go after other verticals in the future

In a Forbes article published in May, aXpire Co-Founder, Gary Markham provides a helpful overview:

“aXpire currently has two products, one available and one in development — Resolvr and MatchBX. Resolvr is a cloud-based spend management solution that handles invoice approval and allocation using machine learning, a form of Artificial Intelligence. Businesses are able to receive invoices through Resolvr’s billing platform and then assign them around the mid and back-office electronically prior to approval. AI provides a score on each invoice, allowing accountants and attorneys to quickly determine if the invoice they’re handling is viable for payment, without the need for extensive manual checking. Resolvr also has an RFP portal, currently in development, which will allow intelligent services procurement and response sorting for capex intensive services, such as enterprise-wide software. For smaller tasks, such as website design, Blockchain advisory services, or marketing initiatives — enterprises can procure services from niche businesses and freelancers on MatchBX, which offers a services marketplace for both peer-to-business (P2B) and peer-to-peer (P2P) use cases. We have created a network of preferred providers to supply these services which is called the Preferred Provider Network. We will continue to add businesses to it with time.”

Boiling it down, it appears that Resolver is a purchase-to-pay, supplier/spend management solution for services, while MatchBX is a spend analysis and demand prediction solution, as well as a supplier network of service providers. Clearly, aXpire is aspiring to be more than just your ordinary blockchain-based online freelancer marketplace. We’ve only scratched the surface here, but you can sure we’ll be keeping an eye on this very hot startup.

That brings the June installment of “The Contingent Workforce and Services Insider’s Hot List” to a close. We’ll be back with more in July. In the meantime, remember: when you’re hot you’re hot, when you’re not you’re not.