FMS and Beyond: Filling in the ‘White Space’ of Sourcing and Engaging the Independent Workforce (Part 1)

Editor’s note: This Spend Matters Plus brief is a refresh of our 2015 coverage of engaging the independent workforce, which originally ran on Spend Matters PRO. 

Freelancer management system (FMS) is a vendor-driven term and concept that achieved buzzword status in staffing and contingent workforce management circles within just a year of its inception. It is a real and important technology solution development, one that has focused attention on an important expanding gap between talent-hungry enterprises and a fast growing, business-critical segment of the modern global workforce. While FMS is one catalyst of this focus and a way of beginning to bridge this gap — a procurement “white space,” if you will — it is also a part of a much larger set of developments, encompassing a range of incumbent and new services and solutions players as well as new technology infrastructures that will unfold and take shape in the coming years.

In this briefing, we cover how a procurement white space has appeared between enterprises and an important growing labor population: the independent workforce. We also provide an understanding of what this independent workforce is and why it is important. In a new three-part PRO series that began in December 2018, we first check on the progress and current state of the independent/freelancer workforce and whether it is overhyped. In Parts 2 and 3, we will focus on the extent to which digitally enabled sourcing channels and work intermediation platforms have effectively bridged the gaps. In other words, to what extent has the white space been filled?

The ‘White Space’

Paralleling the upward trend of enterprise use of contingent and extended workforce, there is a growing part of the labor population worldwide that wishes to or has the need to work independently of an exclusive employer relationship, whether it is a software engineer or a car service driver. Increasingly, these workers are turning to technology-based forms of intermediation as a way of establishing and fulfilling work arrangements. (The Uber platform is one now notorious example.)

There are benefits of turning to technology intermediation, including more flexible control over one’s work and time and avoidance of the overhead costs of working through traditional intermediaries. But there are also challenges, including the absence of certain social benefits connected with employment and dealing with compliance and payment issues that come with independence.

On the enterprise side of things, the understanding of this independent workforce, its growing importance and how it can be sourced and engaged with technology is still nascent. And enterprise services and contingent workforce procurement functions are only just beginning to get a grasp of this situation and what it might mean.

In past years, engagement of the independent workforce has tended to be shoe-horned into the category of “independent contractor” — a kind of necessary evil to be minimized. Correspondingly, most vendor management system (VMS) providers have made accommodations in their systems to deal with and control for independent contractors, but much less to source and engage them. It has not been until very recently that some of these providers have started to look squarely and without bias at the expanding population of “independent workers” and have begun to grapple with how their services can be sourced and engaged. The arrival of FMS players on the scene, with the mission to connect enterprises with some segments of this expanding independent workforce, might well have been a key factor in VMS providers stepping up their game.

Looking beyond temp staffing, statement of work (SOW) and conventional professional services suppliers of labor services, you’ll start to see there is whole white space between enterprise demand, on the one hand, and independent workforce supply, on the other. But that white space is beginning to show signs of blotching. Increasingly, solid areas that represent different developments of technology solutions and related services that are evolving toward the development of digital services ecosystems that will enable new enterprise channels for sourcing and consuming labor services supplied by this next generation independent workforce. FMS is one such solid area appearing in this white space, but there are others that should be noted and understood.

What is the Independent Workforce?

An important part of the overall premise is that there is a growing talent population that has not yet been significantly tapped into, let alone sourced and engaged through traditional services or contingent workforce procurement channels and brought under spend management processes and practices. For lack of a better term, this population is called the “independent workforce.” These are workers – the world over – who do not work exclusively in traditional employment arrangements with a given company or organization, including professional services firms and BPOs, but rather offer their labor services directly as individual “suppliers of one” to a range of companies and organizations. There are really no limits to the categories of workers that one may find in this population: They can be highly-skilled skilled or not, can work within a broad range of domains, can have different schedules and durations of availability, can be incorporated or unincorporated and depending on the use case, now greatly supported by technology intermediation, can be located near or far from whoever needs their services.

Here are some stats to suggest the importance of this population:

• Third-party research conducted for MBO Partners suggests that in the US alone there were in 2014 about 30 million “independent workers.” This includes workers who work only briefly and/or “on-demand” in the course of a week.
• Yet another MBO sponsored study estimated the US population of “full-time independent workers” has approached 18 million, after growing 12% in the past 5 years, compared with only 7% for overall US employment.
• It is a fast growing population that contains highly skilled workers who are vital to enterprise performance.
• An even larger population of often highly skilled independent workers is growing outside of the US, as evidenced by a range of sources — see here and here, for example — as well as the many millions of skilled workers across the world who have joined freelance marketplaces and other online work platforms over the past years.

Other data can be cited, but what is summarized here will hopefully provide an understanding of what this independent workforce is. Its importance should also be understood: In it lies capabilities that enterprises need to source and put to use to accomplish their business missions, and enterprises that can tap into it with different technology-enabled forms, including FMS, marketplaces, on-demand and “as-a-service,” will gain competitive advantages in their industries.

Filling in the White Space: An Emerging Digital Ecosystem

The question that is taking shape is how enterprises will increasingly source and consume labor services from this already enormous and growing talent pool and how those processes will be supported and managed. Beyond temp staffing, SOW and conventional professional services suppliers of labor services, there is today a whole white space between enterprise demand and independent workforce supply.

This white space will be filled by different players and solutions that provide technology-based intermediation between supply and demand. Developments like online freelance marketplaces (OFMs), FMSs and other work intermediate platforms (WIPs) are all just some of the elements beginning to fill in this white space and support and shape this emerging ecosystem. But there are many others, including the critical participation by incumbent players, VMS, managed service providers (MSP) and others.