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Changing Colors

Staffing Industry Review

Changing Colors

Katherine Alvarez
| May 1, 2017

Main Article

Talent marketplaces, online staffing, crowdsourcing, human cloud - they all add up to an ever-increasing collection of terminology to describe the connection of people with work. And then there is the freelancer management system, or FMS, one of the now-venerable terms in this talent lexicon.

Staffing Industry Analysts defines FMS as “a cloud-based workforce management platform that helps businesses initiate, manage, complete, track and analyze engagements with individual independent workers, who may be sourced by the provider of the business itself.” FMS is considered a sub-category of online staffing platforms as it connects specific hirers and specific (typically contingent) workers to enter into, complete and transact work arrangements.

The term has broadened in scope over the years as the platforms themselves evolve.

“I’ve never been a fan of the term. I think it’s a bit of a misnomer,” says MBO Partners President and CEO Gene Zaino, who founded the firm in 1996. “There is a lot of confusion in this whole area - online staffing, marketplaces, FMS - I think people are throwing names out there and it causes some confusion.”

Work Market co-founder and President Jeff Wald says FMS is a “somewhat antiquated concept.” He describes his firm as a provider of cloud-based, labor automation software that enables business to work with and manage a blended workforce, which he says moves away from the traditional description of FMS. “The world is kind of moving very quickly to a convergence of blended workforce management,” he says.

Wald suggests “freelancer” is just one aspect of a true blended workforce, which also may include full-time and part-time W2 employees, temporary agency workers and vendors.

“We view ‘freelancer’ as one aspect of that blended workforce, of that mosaic of labor,” he says. “Could that term evolve? Sure. Or is it a labor operating system that is needed as opposed to a freelance management system?”

Regardless of the semantics debate, FMS providers have proved they can adapt to changing needs.

Riding the Enterprise Wave

Advancements in technology have made it easier than ever for businesses and talent to connect directly. The first wave came in the form of marketplaces - Wald counts 248 labor marketplaces for niche sectors - that served primarily the consumer market before targeting small and midsize companies. Then enterprise business entered the mix.

Labor is a huge expense for enterprise firms, but it is also largely a fixed cost. Corporations want nothing more than to make variable any cost they can, and the prospect of applying this concept to its labor force is powerful.

Wald believes we are seeing the next wave now. “Enterprise companies are saying, ‘Hey wait a minute. We want to Uberfy our workforce,’” he says. “ ‘We want to be able to engage a large number of variable labor assets.’”

However, enterprise firms are hog-tied by issues such as regulatory compliance, internal compliance, intellectual property and trade secret concerns, and business processes, and can’t just enter one of the many online marketplaces without taking those issues into consideration.

“That’s not the way corporations engage,” Wald says. Because they are driven by process, making the direct connection between them and the worker is complicated. “We are seeing places kind of fall away, because they don’t help companies address this complex regulatory concern.”

Stephane Kasriel, CEO of online staffing platform Upwork, says its predecessor Elance was was one of the first to use the term freelancer management system when it launched its Private Talent Cloud product, which at the time was mainly serving small businesses. Last year, Upwork stepped up to the enterprise level with Upwork Enterprise, which bundles FMS technology with talent services and a robust compliance offering and is geared toward companies with 1,000 employees or more. Nearly 20% of Fortune 50 companies now use the enterprise product, Kasriel says.

Upwork does about a billion dollars a year in business, with enterprise growing significantly faster than the rest of the business, he says.

DIY Platforms

Others besides pure-play FMS firms are now dipping their toes into the space.

LinkedIn Corp.’s gig economy offering, ProFinder, launched nationwide last year. The service aims to connect individuals and small businesses looking for services - such as design, writing, editing, accounting, real estate and career coaching - to freelancers that provide them.

PwC introduced Talent Exchange, which essentially enables freelancers to submit their profiles for use by PwC teams seeking outside talent; Ernst & Young is rumored to be readying a product called GigNow, which essentially does the same thing. IBM and Accenture have also built software.

Risky Business?

Not surprisingly, FMS providers laud their service as a way for employers to reduce risk. They can help prevent problems with issues such as independent contractor misclassification, payroll tax collection, employee discontent and onboarding. They can also take responsibility for any problems that do occur under their watch.

Field Nation’s marketplace has about 100,000 contractors throughout North America and a “couple of thousand” buyers. More than a million work orders are processed through the platform on an annual basis.

Field Nation puts a tremendous focus on quality as well as guarantees to the buyer and worker alike, CEO Mynul Khan says. The buyers are guaranteed the work will be done according to their satisfaction; for the workers, that they will get paid.

“If anything,” Khan says, Field Nation’s customers “have less risk with us because we are managing that insurance for them, we are doing a lot of quality assurance checks for them.”

Upwork’s Kasriel agrees and calls the issue “critical” and one that a good FMS program can mitigate. Upwork’s Enterprise solution offers compliance services to determine the correct classification for each worker and provides indemnification from mislcassification risk.

He notes a strong need for companies to have a complete view of their workforce in order to avoid potential security or compliance risks.

“At an executive level, companies are completely underestimating how much contingent work they are doing, what people are doing, and what is the risk to the company,” he says. “You are giving a badge to somebody, you are giving them access to your system, and you don’t know who they are, you don’t know where they worked, you don’t know if they are classified properly.”

Work Market’s Wald looks at the issue as one of continuum of risk. “Companies need to decide where they want to be on a risk profile,” he says. Use the “Three Ds: Determine where you want to be on the risk continuum; document policies; and deliver results (and an audit trail).

“If the program makes it impossible to defy documented policies and makes sure all policies are followed, your risk is massively reduced because now you know nothing can happen outside the parameter that you have established,” he says. “And that is a huge, huge peace of mind to our corporate customers. That is huge when they think of the complexity of this labor landscape and how it is they are going to be able to win.”

The Crystal Ball

So, what can we expect to see from the FMS market down the road? Look for firms to invest in mobile technologies and work on expanding their sector footprints into additional categories. Integrating their systems within their enterprise customers’ operations will also be key, as will workflow automation and the utilization of artificial intelligence to improve systems. Consulting firms and staffing companies may also see some disruption as well.

Will more industry alliances be on the horizon? Yes, if recent history is any indication. Keep in mind recent deals: Upwork is the result of the Elance-oDesk merger; Work Market and VMS provider IQN in early 2015 formed an alliance; VMS provider Beeline acquired online staffing firm OnForce (later IQN and Beeline came under the same ownership); Field Nation acquired Freelance Solutions.

“It is an exciting time and I think the industry is recognizing it is at a point of pretty extreme change,” MBO Partners’ Zaino says. “I think we’ve got several years ahead of us of seeing this all flush out, but I do think there is a lot of value being created because it is making the industry more efficient.”

Upwork’s Kasriel says, “The Holy Grail for us is one where every job that is posted gets exactly one candidate who happens to be the dream candidate that the client wanted, and that the candidate is actually available to work immediately - meaning the jobs get filled within a few minutes 100% of the time and it’s always a great candidate. … That is kind of the goal post that we are going towards.”