The Ship of Theseus is a thought experiment that raises the question of whether a ship is still the same if all its parts are replaced over time. While it may be a stretch to say that staffing services are becoming unrecognisable vessels, the lines between different workforce solutions are blurring more and more as the industry evolves.

SIA’s Convergence in the Workforce Solutions Ecosystem details how formerly separate services are changing within the industry to become more alike. While the six industry segments shown in the accompanying chart have always been interconnected, their components are becoming more intertwined and harder to differentiate. Four business drivers are pushing this convergence: blending business models, digitalisation, complementary fits and one-stop shop multi-platforms. Understanding how these convergence drivers impact the industry will help you determine the future shape of the market and the competitive pressures your businesses are likely to face.

Blending Business Models

Previously distinct service categories are melding as business models evolve, bridging the gaps between them. For example, increasing automation within traditional staffing brings the service closer to a platform model. It is becoming increasingly difficult to determine which category they fall into since the various emerging models must be assessed across multiple characteristics.

We are even seeing these twin services implemented as part of a multi-channel strategy, enabling clients and candidates to engage either online or in person. This approach may become the norm, with platforms fully converging with traditional staffing.

There are also examples of blending that aren’t related to a function but rather to the pricing models. Online job advertisers have recently begun offering results-based pricing, including pay per candidate. Basing the pricing on candidates accepting the job offer takes this much closer to a direct hire/permanent placement service.

Digitalisation

Digital transformation occurs across all industries, and staffing services are no exception. Many staffing firms are automating core parts of client and candidate interactions through robotic process automation companies or investment in third-party products such as recruitment chatbots. A limited number of staffing firms have even fully transformed their businesses to provide staffing via platform models.

The proliferation of artificial intelligence primarily drives these developments, but other technology advancements, such as augmented and virtual reality, could make a significant impact as well. While the staffing industry may never reach a level of “O-O convergence,” when a person cannot differentiate between differing information environment dimensions, we can already see examples of merging the online and offline in recruitment.

Complementary Fits

Services that complement each other naturally exist across the workforce solutions ecosystem. As such, it has become common for vendors in niche segments to broaden their services with complementary fits. This is convergence at the brand level, not the service level, as the services offered by the company remain distinct.

Some of these are already well established, including the most obvious example: temporary staffing and direct hire. Clients naturally source these separate services together, and so it is prevalent for vendors to supply both.

This type of convergence also includes services that can be offered independently but are commonly found within a wider service. For example, while interviewing platforms exist on their own, the functionality is also typically provided within engagement platforms.

More aspects of the workforce solutions ecosystem that go hand in hand are in the accompanying table.

*While still available as a standalone product, recruitment chatbots are now prevalent within many adjacent sectors, such as staffing platforms, engagement platforms, programmatic job advertising, job boards, interviewing platforms and workforce analytics.

One-Stop Shop Multi-Platforms

The final driver of convergence is vendors broadening the scope of their services to become one-stop shops across a range of segments. Some companies are built to offer multiple services, while others branch out into other segments through organic initiatives. However, it is very common for companies to break into new sectors of the workforce solutions ecosystem through mergers and acquisitions.

Through our Staffing and Workforce Solutions Mergers and Acquisitions Database, SIA has recorded 883 transactions by talent acquisition technology firms or involving other workforce solutions since 2014. As detailed in the database, the transactions show extensive activity across various segments. More than 20 firms have made at least five deals, including two that have made over 10 (Bullhorn and Recruit/Indeed).

A critical aspect of the “one-stop shop” type of convergence is the presence of large software firms from outside the workforce solutions ecosystem. These include Microsoft, Apple and Alphabet (Google), all of which have market caps that exceed even the largest staffing firms by more than $2 trillion.

Presently, no dominant player is operating across all segments of the ecosystem. However, there is potential for one to emerge, especially if one of these larger tech companies decides to become more strategically involved.

Although convergence is happening across the workforce solutions ecosystem, it is vital to acknowledge that it is not quite all-encompassing. Distinct point solutions, each with clusters of convergence, still characterise the current broader market. There are also examples of certain brands diverging, such as Impellam separating its international staffing and managed service provider/recruitment process outsourcing services.

However, for the most part, convergence is occurring at a growing rate, with emerging platforms, models and technologies changing the arsenal of weapons available in a competitive landscape. Furthermore, we can expect increased convergence since it is doubtful any of the four drivers discussed will decelerate. While Theseus’ staffing ship may still be on the distant horizon, the lines between staffing services will become progressively blurred as the workforce solutions ecosystem evolves.