Ask Recruit: Human Cloud Not Staffing’s Death Knell, Helps Legacy Businesses

ThinkstockPhotos-167323951It’s the 5th largest staffing firm in the world. And recently, Recruit Holdings, a Japanese conglomerate with a variety of global HR businesses, announced a string of investments into online crowdsourcing businesses (crowdsourcing is part of our Human Cloud taxonomy). One of these was a lead investment in a $10 million round of fundraising by 99Designs, a crowdsourcing platform for creative design work, announced April 15th. This follows investments it’s made in Gengo, a crowdsourcing translation service company, and Zirtual, a crowdsourcing business for executive assistants.

Human Cloud: An emerging set of work intermediation models that enable work arrangements of various kinds to be established and completed (including payment of workers) entirely through a digital/online platform. In many cases (though not always), the platform also supports “the enactment and management” of the work (to a lesser or greater degree).

This string of investments led me to question: why has Recruit made these investments and what are the implications for the industry?

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Recruit’s roots are in media advertising and HR solutions, and for the past several years it has been expanding by acquiring a variety of businesses around the world. A subset of these acquisitions includes the crowdsourcing businesses mentioned above.

The Reasons
Recruit’s self-stated mission is to become the number one global platform for “matching businesses”  – businesses that match companies with workers (matching here isn’t necessarily limited to online work platforms; they’ve invested in as diverse businesses as job board in 2012 and Germany-based online restaurant reservation website Quandoo earlier this year). Due to the investments they’ve made, a large portion of their business is now comprised of web portals for various services, with design work now being one such available service (after the investment in 99Designs).

Famously, in 2013 Recruit failed at its attempt to acquire Australia-based with a reported $400 million buyout offer ( has since gone public). This hasn’t deterred the Japanese giant; since that time, the company has made a plethora of strategic investments and acquisitions, both inside and outside the human cloud. Given Recruit’s track record (and the recent establishment of two investment offices in Silicon Valley), it is unlikely to slow down any time soon.

The investment in 99Designs was touted as a strategic partnership – a way for 99Designs to bring its platform into the Japanese/Asian market (99Designs founder Patrick Llewelyn implicitly denied needing the funding). Funding notwithstanding, the partnership should serve both sides well. Recruit gets their toes in the door of another human cloud platform (another notch in its proverbial belt) while 99Designs could potentially leverage Recruit’s existing contacts and business experience in Japan/Asia to bring its platform to an entirely new audience.

Recruit is not the only giant staffing firm investing in human cloud/technology companies whose primary purpose is find innovative ways to match workers with assignments (although an argument could be made it is the most aggressive in pursuing such deals). Rather, a growing number of firms have made similar investments.

Randstad has its “Innovation Fund” (through which it has invested in Gigwalk and Twago), while Adecco purchased OnForce (under its VMS brand, Beeline) in 2014. While these human cloud companies originally may have appeared to some in the industry as a harbinger of death (like Godzilla’s egg, harmless while nascent, but one day hatching and reigning down “disruptive” fire and destruction on all not-so-innovative companies), many forward-thinking firms appear to have come to the realization that these platforms, far from killing their existing business, can perhaps make their legacy businesses even better. A case in point is Mitchell Martin’s incubator investing and developing new human cloud businesses.

Investments from seasoned staffing firms validates the online work arrangement business model itself (although there will certainly be many firms that fail). While some pundits have dismissed the rise of these platforms as a passing fad, is it difficult to ignore them when some of the world’s largest and most sophisticated staffing firms are making these kinds of investments in them.

Furthermore, such validation has increased the interest among buyers of contract labor. Already, millions of companies around the world (mostly SMBs) have used hundreds of human cloud platforms to engage workers and complete work. As the models and companies within the human cloud ecosystem mature, the largest enterprise buyers of contract labor will likewise increase their use of these platforms, and may eventually reach the point where utilization of such platforms is a key component of their top-level HR/Procurement strategy.

Lastly, and perhaps most importantly, Recruit’s human cloud investments imply that the world is big enough for coexistence. While online work marketplaces and labor platforms of various kinds may create new ways to find and facilitate a whole host of different work arrangements (and could possibly over time eat some of the staffing industry’s lunch), it’s unlikely that Recruit would simultaneously buy staffing firms (as it has done thrice already this year — Australia-based PeopleBank and Chandler McLeod, and US-based Attero Inc.) and human cloud companies if it believed one would destroy the other.

The Future
Whatever your particular views are on these new human cloud companies in all their wild variations, it’s hard to deny their increasing relevance to the contract labor ecosystem at large (and, it would appear, to staffing firms in particular). The lesson is that Recruit’s strategy is not an anomaly, but a glimpse of what the human capital management firms of the future may look like.

MORE: Where staffing industry tech is heading 

David Francis

David Francis
David Francis is a senior research analyst with Staffing Industry Analysts He can be reached at dfrancis (at) staffingindustry (dot) com

David Francis

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