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

10/01/2018 By

Welcome to the October 2018 edition of Spend Matters’ monthly feature, “The Contingent Workforce and Services (CW/S) Insider’s Hot List,” available to Plus and PRO subscribers. For those new to the Hot List, each edition covers the prior month’s important and sometimes just plain interesting technology and innovation developments within the CW/S space. Over the last several months, this space has seen both significant change and inertia co-exist, yet the change is not slowing down — quite the contrary.

The September Hot List covered a broad range of developments, ranging from the Ernst & Young acquisition of U.K.-based alternative legal services provider (ALSP) Riverview Law, to the partnership of Jaggaer with Science Exchange, a marketplace for outsourced R&D, all the way to some of the latest blockchain-based work intermediation intermediation platforms, such as Moonlighting. In the meantime, other developments continued to percolate around the innovative edge of the defined CW/S space. Altogether these developments reflect an industry that is undergoing widespread transformation.

A Word From Our Sponsor: Announcing the CW/S SolutionMaps

In early September, Spend Matters introduced its first CW/S SolutionMaps for enterprise technology solutions. The newest maps address workforce sourcing, engagement and management requirements in three categories:

  • Temp Staffing Management (VMS)
  • Contracted Services/SOW Management
  • Independent Contract Worker Management

Spend Matters SolutionMaps distinguish themselves against other analyst firm solution ranking products through data-driven rankings, extensive technology benchmarks and quarterly updates, as well as through their use of carefully tailored “buyer personas.” The next update to these SolutionMaps will be in December 2018.

To learn more, head over to the SolutionMap homepage.

Coupa Acquires DCR Workforce

On Sept. 4, Coupa acquired the technology-related assets of the VMS provider DCR Workforce.  The transaction should enable Coupa to accelerate its entry into the “services procurement” spend segment, which it started about two years ago with its Services Maestro solution. We are not going to provide analysis of this development here, because Spend Matters has already done so in several briefs:

The only additional observation we will make here is that this acquisition has provided an unexpected twist in the CW/S solution space. In some ways, it mirrors SAP’s acquisition of Fieldglass several years ago, yet it clearly cannot be reduced to that. Coupa had already set its strategic sights on addressing the enormous complex services/SOW spend category, and–in this area, at least–the company seems more driven by addressing customer needs and the potential of the services spend segment than it is about gaining parity with SAP Ariba and Fieldglass.

In any case, the VMS solution market and competitive dynamics have been altered in one fell swoop. But we will need to see what happens in terms of market response over at least the rest of the year.

Upwork Going Public

Three days after Coupa’s acquisition of DCR, another momentous event occurred in the CW/S industry: Upwork, the largest global online freelancer marketplace and technology/managed services provider (Upwork Enterprise), announced it would be pursuing an IPO.

Amended SEC filings from late September revealed a $10 to $12 per-share price range. Net proceeds from the IPO (after repayment of $16 million of notes) could range between $64 million and $74 million and would be used for working capital and other general corporate purposes, including product development, general and administrative matters, and capital expenditures. Based on the filings, Upwork’s IPO valuation could range from $1 billion to more than $1.25 billion.

According to Upwork, its online marketplace consists of 375,000 registered freelancers and 475,000 client businesses in more than 180 countries, with fiscal year 2017 gross payment volume (GPV) of nearly $1.4 billion, up 19% over the prior year. Upwork disclosed that in 2016 and 2017, a total revenue of $202.6 million in 2017, up 23% over the prior year.

The company, which has been investing heavily sales and marketing, research and development, operations, and personnel, reported a net income loss of $4.1 million in 2017, an improvement of over minus $16.2 million in 2001. In the second half of 2017, Upwork reported a positive net income of $1.4 million and an adjusted EBITDA $7.9 million.

We will be providing further coverage of the Upwork IPO, including additional in-depth PRO analysis, in the coming days. But at this point, we would say that Upwork’s prospective IPO constitutes a significant marker in the steadily evolving contingent workforce and services procurement space, as well as the overall human capital management space.

Averatur CWM Gets Noticed

Averatur, a talent acquisition and management solution provider well-known for many years in the HR/Talent Acquisition solution segment, recently received some acclaim for its contingent workforce management solution offering. According to an article in Recruiting Trends, Avertur CWM was voted a Top HR Product of the year by editors of Human Resource Executive magazine.

Avature CWM was launched in December 2017 and we mentioned the company’s debut in our January 2018 Hot List. We also invited Avature to participate in our 2018 Q3 SolutionMap, but the company declined for the time being.

The article states that employers using Avature CWM “can create a curated talent marketplace wherein contractors make profiles and apply for open projects. Additionally, an agency portal keeps all communication and activities with outside staffing agencies in one location. A portal for hiring managers allows users to submit and approve project requisitions, review candidates and schedule interviews, as well as rate contractors on skills and project deliverables at the end of an assignment.”

Andrew R. McIlvaine, a senior editor for talent acquisition at Human Resource Executive added: “With predictions of a 50 percent contingent workforce by 2020, employers will need a total-talent solution to manage gig workers, and Avature CWM has created a talent-acquisition function that traditional vendor-management systems were missing.”

Wait a minute — what did he just say?

Yes, Avature CWM appears to be part of an early trend among some human capital management (HCM) solutions to begin to address the contingent workforce sourcing and management requirements of their clients. Several years ago, SAP acquired the VMS Fieldglass, a follow-on to its earlier acquisition SuccessFactors. And earlier this year, payroll and HCM giant ADP acquired the freelancer management system (FMS) WorkMarket. VMS companies, however, have so far done little in this direction, except to “talk the talk” of total talent Management and acquisition (probably for some very good reasons). In any case, it will be important to note these sorts of developments in these two workforce solution segments.

For further details, visit the Avature CWM website.

LTG Sorts Out PeopleFluent

In September, U.K.-based Learning Technologies Group (LTG) announced several organizational changes at its PeopleFluent business unit. LTG acquired PeopleFluent, a U.S.-based provider of learning management, talent management and VMS software, in April 2018.

In past years, the largest and fastest growing part of PeopleFluent’s business has been learning management. But in contingent workforce management circles, PeopleFluent has been mainly known as one of the larger tier-2 VMS players, and it has been the only workforce solution provider with a VMS and a TMS under one roof (except for SAP, which harbors SAP Fieldglass and SAP SuccessFactors).

According to the announcement, LTG has appointed PeopleFluent veteran Stephen Bruce as the new managing director of PeopleFluent. In addition, LTG will be merging NetDimensions into PeopleFluent to become key component of PeopleFluent’s learning suite. Finally, PeopleFluent’s Workforce Compliance and Diversity division will be spun into a separate LTG business, called Affirmity.

That leaves just one open question: What will happen with the PeopleFluent VMS? LTG also announced “plans to extract PeopleFluent’s successful vendor management solution to form its own standalone business.” This could mean a number of things, so we’ll have to see what unfolds. Yet more developments to come.

ZeroChaos Files for SOW Patent

ZeroChaos, the global workforce management solution company, announced in a recent press release that it has filed for “a new patent related to its proprietary, permissions-based, automated statement of work (SOW) workflow.” According to the company, the patent-pending SOW workflow technology is “new” and currently available within the ZC WebSM vendor management system (VMS). The functionality reportedly  “automates the SOW creation process and centralizes data collection, enabling greater collaboration between clients and vendors and increased visibility into project costs, milestones and deliverables.”

All that said, we still need to understand more about what is new and being patented here.

Many VMS providers, including a hybrid VMS/services provider like ZeroChaos, have been adding SOW capabilities to their solutions for a number of years now. Complex services/SOW spend is many times larger and growing much faster than temporary staffing spend, but only a relatively small fraction of it is under management within VMS or other systems. Addressing Complex Services/SOW spend is viewed as a major opportunity by VMS and some other procurement technology providers, but it has been slow going, with some providers saying that solution adoption by organizations has been disappointing.

Kelly Services Invests in Business Talent Group

Kelly Services, another global workforce management solution company, recently announced it has made an equity investment in Business Talent Group (BTG), which describes itself as a “leading marketplace for on-demand consultants, experts and executives.” In the press release, Kelly Services is said to be the lead investor in BTG’s Series C funding and assumes a minority stake in the company.

BTG blends proprietary technology and talent data with a dedicated in-house team to select and deliver the right specialized independent talent to the Fortune 1000. “By delivering curated, vetted and legally compliant talent and by advising firms on how to launch their own on-demand talent programs, BTG leads the market in helping companies integrate high-end independent talent into their business strategy, planning and execution,” the company said in the press release.

“Companies adapting to the new world of work know they need to understand how skilled talent actually want to work if they are to compete successfully in their specific marketplaces,” said Teresa Carroll, executive vice president of Kelly Services. “This made BTG a natural fit for Kelly, as they have pioneered new ways to connect highly skilled independent talent to top global companies.”

Will Freelancer Payments and Financial Management Be the Key? 

An early September TechCrunch article reported that the French startup Shine was raising a $9.3 million (€8 million) Series A round on top of a $3.3 million (€2.8 million) seed round in July 2017. The company, which was founded in 2016, “is building an alternative to traditional bank accounts for freelancers working in France.” But Shine is not simply a “bank” offering with an app and some type of payment card; in many ways, it appears to be what one might call a “freelancer enabler.”

In France, freelancers must register a “micro-company,” and would-be freelancers need only download the Shine app, which will guide them through that process. Freelancers can
send and receive money from their Shine account, “just like in any banking app,” the article states.

Shine allows freelancers to “receive payments and pay using direct debit” while a Shine debit card is being sent. Freelancers that work through online marketplace platforms can easily receive with Shine. And for freelancers who work directly with their own clients (not through a platform), “Shine has an “integrated invoicing system,” which generates a web page and a PDF that freelancers can send to their clients. Shine also reminds freelancers when they have to pay their taxes and provides a customer support team to help through all of this.

According to TechCrunch, “the company plans to launch a premium plan in the coming months with advanced accounting features.” And so far, “25,000 freelancers are using Shine in France. And 10% of new freelancers (“micro-entrepreneurs”) register their company through Shine.

Shine is basically a specialized type of so-called “challenger bank.” Scores of challenger banks have become fintech phenomena, using technology to efficiently provide innovative banking services, often on a mobile-only platform. The freelancer, self-employed or micro-entrepreneur markets segments are natural targets for “well-established” challenger banks in many countries such as N26 and Revolut, as well as others like Seed, Tide, Coconut, and Starling.  Revolut entered the US market recently, and N26 is on the verge of doing so.

In September, another challenger (or “neo” or digital) bank in France that serves freelancers and SMEs, Quonto, was reported to have $23 million in funding from its existing shareholders, bringing total investment since the company’s founding in 2016 to $37 million. According to an article,  as a “neobank for SMEs and freelancers, Qonto provides payment services and other financial services. The young company offers a 100% online and mobile current account, a smooth and modern interface, a stellar customer support, at a fair and transparent price.  Since its public launch in July 2017, Qonto has reached the 25,000 business customers mark and the transaction volume has exceeded 2 billion dollars.

Payments and financial services for freelancers have become a hot topic for the giant payroll and human capital management solution provider ADP, which acquired the freelancer management system (FMS) WorkMarket in January 2018. ADP has since launched a payment and financial management solution, Wisely, that in part seeks to address freelancer needs and those of the businesses that pay them. To learn more about ADP, freelancers and Wisely, refer to Highlights from ADP Analyst Day: It’s Not All Permanent, It’s Also Contingent

Freelancer payments have become an insanely hot area — a blaze (or conflagration) that traditional banks may not be able to extinguish. For years, the CW/S industry has been focused on freelancer/independent worker marketplaces and other intermediation platforms for arranging gigs and engagements. But it is becoming clearer that we must also start to focus on innovative payments and service platforms as enablers of the so-called “gig economy.” These may well be the much needed lubrication for the work arrangement machinery that has become overheated–or the fuel that feeds the freelancer fire.

Until November

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