Disintermediation has been a strategic driving force impacting and innovating the contingent workforce industry for quite some time now. Technological advances have accelerated the enablement and execution of competitive disintermediation strategies to take hold and begin to flourish in the CW marketplace.
There are numerous examples, big and small, of disintermediation driving innovative change in contingent workforce solutions. Direct sourcing of talent is a perfect example of removing intermediaries in the supply chain delivery of traditional staff augmentation. As a matter fact, engaging an independent contractor is a form of disintermediation of the staffing service provider. In both staffing service engagement examples, the staffing agency is economically removed from the supply chain.
What is disintermediation? Disintermediation is the elimination of intermediaries from a supply chain that supports the delivery of a transaction or service. This type of reengineering a marketplace process has become a commonplace part of our daily personal and business lives.
Brands such as Computerland, Businessland, MicroAge, Entex and other PC computer retail and service entities at one point had been vibrant, ongoing billion-dollar concerns. The internet and direct disintermediation competitive strategies — executed first by Dell Technologies and then others — enabled consumers to bypass these intermediaries/middlemen, and indeed these companies/brands are no longer vibrant. The market strategy here was simple in nature: Go direct to the customer.
The contingent workforce connection. Direct sourcing and on-demand staffing talent sourcing strategies are the disintermediaries in contingent workforce management — they connect the buyer organization directly with the talent and eliminate the go-between (the staffing provider). Incidentally, the on-demand staffing talent channel — think Upwork, Toptal and Fiverr — enables the engagement manager themselves to bypass the staffing provider and potentially also eliminates the CW program’s role and value. This type of disintermediation phenomenon may threaten the core centralization value proposition of today’s CW program.
These alternative talent sourcing channels are emerging rapidly and formally establishing a significant role and presence that today’s CW program managers need to understand and leverage. The key is for them to engage the most optimal talent sourcing channel strategy for the CW talent requirements and applications in their business.
The ongoing evolution of CW program management and talent marketplace access points has established multiple talent sourcing options for programs. This has also led to CW programs recognizing the emergence of these varied talent sourcing channels and establishing a management plan to leverage the benefits and operational requirements of each. Four of the more distinct talent sourcing channels today are traditional staffing partner, statement-of-work services delivery, direct sourcing and on-demand staffing channels.
Intermediation still valued. While disintermediation is gaining a foothold in contingent worker engagement situations, the phenomenon of reintermediation has made its way into the CW marketplace. Specifically, buyers are beginning to require IC engagements to establish a relationship with an employer-of-record firm in order to mitigate expensive misclassification risks.
Proper evaluation. This will mean that a CW program will need expertise in applying and leveraging traditional and alternative talent sourcing channels. Certainly, evaluating the pros and cons of each available talent sourcing channel is a solid first start. But program managers will also need to understand basic comparative performance values for each talent sourcing channel, such as quality, efficiency, costs and risks elements, which SIA calls the QECR Performance Management method of addressing a CW program element, including a talent sourcing channel. The accompanying image represents a potential exercise program managers might run to gauge the current and ongoing understanding of comparative performance values of each talent sourcing channel leveraged.
Disintermediation in the form of marketplace process reengineering is taking place right in front of us every day, especially when technology innovations create a business competitive advantage that can be leveraged. That includes whether that market advantage created is captured by the buyer, solution provider or even the contingent workers themselves. This makes the CW program sustainability element of agility so critical in today’s fast-evolving contingent workforce industry.