Why staffing agencies should fear Freelancer Management Systems

Jul 29th, 2015
Why staffing agencies should fear Freelancer Management Systems

Freelancer Management Systems (or FMS) like WorkMarket have been in the news lately. Although not a new concept, these companies have gained media exposure and many Procurement Managers are going to be asked by their CFOs if their companies are pursuing these options to save money like their competitors might be. This is going to lead to buyer interest in this space and something staffing agencies ought to think about, because while they may seem complementary to temp staffing now, they can be a Trojan horse- in that once they are inside a client site and embedded into a Procurement organization- both clients and contractors have a strong incentive to leverage these platforms while further disintermediating staffing agencies.

Unlike open freelance marketplaces like Freelancer.com, Freelancer Management Systems (FMS) are online staffing platforms of curated freelancers - used by large enterprise customers. Contractors create an online profile with a portfolio and their availability in a closed (curated) platform so that client companies looking for skills like theirs can directly source, read reviews, engage and pay them on a per project basis. FMS systems engage local workers on a per job or per hour basis where the jobs are sporadic and don't require too much specialization. The top freelancer management systems currently are WorkMarket, OnForce, Leapforce, Lionbridge, Crowdflower, Upwork Enterprise, uTest, and OnContracting.com

So why should staffing companies worry
Client companies are more comfortable in direct sourcing their talent or using shared freelancer marketplaces. Right now there is a clear differentiation in the market between Managed Service Providers (MSP), Vendor Mgmt Systems (VMS), FMSs and staffing companies. Each serves a very specific purpose. However with time friction arises and when there's trouble there will be finger pointing and companies will move to having one agency responsible for everything so they have one relationship to manage. An example was companies moving to an MSP model.

Client companies already engage payrolling companies when they self source contractors. If they are looking for additional ways to reduce their costs, Procurement may decide that once a contractor has been hired by their company (or god forbid even just submitted) to their VMS system, it could register that contractor into their FMS directory automatically. In case of a future need (say 12 months down the road), the FMS pool of workers could become eligible to hired directly through the FMS and with no fees to the staffing agency that initially sourced them. If this sounds far fetched, its not- companies already have defined periods in their contract with staffing agencies (6 months usually) after which they allow clients to hire the contractors fulltime for new fees.

This reduces the talent pool for the staffing agencies and reduces the role of the staffing agencies to simply sourcing fresh candidates. This reduces the possibility of getting repeat business or building longer term relationships with contractors as the clients and the FMS platform would be dealing directly with the contractors now.

VMS and MSP systems leveled the playing field for staffing agencies and took away some of the differentiators like - client relationship management, sales, etc., however these systems were passive and played a supporting role for staffing agencies. FMSs are different in that they offer very similar services to clients as the staffing agencies because they too source, curate talent and offer the compliance that staffing agencies used to do. They have the strongest potential to be the biggest disruptor of temp staffing agencies.




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