The percentage of the workforce that is engaged in some form of contingent work is growing, with estimates of more than one-third of American workers engaged in some form of on-demand, freelance, or contingent work.
Looking ahead one or two years, here are a few ways that the “on-demand” or “gig” economy is directly and indirectly transforming how the staffing industry operates.
The on-demand economy is spawning an HR tech arms race. The on-demand economy affects one part of the staffing business — typically shorter-duration contingent jobs or freelance work. But the new tools and processes that are being developed by on-demand and gig economy companies are changing the way we think about engaging labor, and are decreasing the “friction” of matching people to work and executing work.
Right now, HR tech is still in early days. Solutions for managing internal employees are relatively mature, having been pioneered by PeopleSoft in the 90s, and then reinvented by WorkDay, and later SAP and Oracle. Technology for managing external contractors (e.g., vendor management systems) is in its adolescence and is evolving rapidly. And now staffing firms, worried about the emergence of the potentially disruptive gig or on-demand economy, are beginning to invest so that they can benefit from this new model, or at least minimize disruption by it.
Technology is evolving fast – early adopters win. The on-demand economy is driving rapid evolution of software tools for HR. As Marc Andreeson has said, “Software will eat the world, ” and the HR and staffing industry is a huge smorgasbord of a meal. Smart companies will force internal process change by partnering with new, agile technology providers, implementing cloud-based SaaS solutions.
Larger players that fail to adopt tech will pay the price in the form of compliance, workers comp, and efficiency charges, and we have already seen this in some earnings announcements.
For companies that are investing, some are turning to proprietary solutions – a hard-coded version of the business process – as a competitive weapon. Early in any technology life-cycle there is a tendency to build technology in-house – the same thing happened with financial and manufacturing ERP systems in the 80’s. The perceived benefit of this approach is that system customization provides a competitive advantage. However, by the time you build your own customized solution, it will be obsolete. (Ask yourself how many internally developed tools you have that are out-dated, but still in use because it is too much trouble to replace them.)
Building your own customized solution is a bad approach, but experience is the best teacher, and some staffing companies are in for an expensive lesson.
Desktop is old school. Mobile is the new cool. The on-demand economy is based on mobile. The desktop and the internet changed the way we worked in the 80s and 90s. But millennials, the largest demographic in the U.S. workforce, now make up 44 percent of the on-demand workforce, and are increasingly comfortable with much more distributed work environments, and with mobile and other technology that enables a much more fluid work/life balance.
Apps for desktop will be fine for much of the professional and freelance staffing market, where the work itself requires a desktop or laptop computer, but for many contingent, clerical, IT and light industrial jobs, especially involving remote field tasks, staffing applications must be mobile first.
Large staffing firms trying to stay ahead of the curve are already making significant investments in mobile technology to engage and assign workers more quickly to jobs, and we have seen evidence of this in recent public earnings announcements.
New tools give an edge to smaller players. Larger players may have the advantage of economies of scale, but technology can give smaller, more agile staffing companies an edge by adopting technology at a faster pace than their larger competitors.
In the technology industry, large software companies used to have a competitive advantage because of the high barriers to entry for creating enterprise software. The advent of a significant number of on-demand software development tools has made it much simpler for small companies to quickly build enterprise-grade solutions. Similarly, small staffing firms, armed with some of the emerging tools inspired by the gig economy, will find it easier to develop targeted solutions for their customers.