They are no longer the new kids on the block. Online staffing and companies in the human cloud may have been new entrants just a short time ago. But now they have grabbed the attention of the ecosystem. They are not just getting noticed — they are also evolving to the point where they are on the radar of enterprise buyers, the large firms that use a large number of temporary workers through staffing firms.
At the same time, workers have also taken notice of the human cloud and the new, more flexible way of working that can allow them to set their own schedules.
At its heart, the human cloud is defined as online/digital platforms that enable hirers and workers to manage and complete work arrangements. It is firmly part of the staffing ecosystem, continuing to grow and evolve, moving in the direction of serving enterprise buyers. It also continues to go by a number of names, including the gig economy, on-demand economy, etc.
However, the human cloud includes more than online services. It also includes online staffing and crowdsourcing, the latter of which refers to a process in which tasks are broken up into microtasks and farmed out to a large number of online workers.
“The growth of the human cloud has accelerated over the last five years. It has already grown to be very substantial, and I think there’s going to be lots of growth ahead,” says Barry Asin, president of Staffing Industry Analysts, the company that publishes this magazine. “I do think however, the impact on the staffing industry will take time.”
The uptake comes with its own set of challenges. The human cloud includes consumer-facing online services firms, some of which have shut down after their business models didn’t pan out. Homejoy, which connected independent contractor house cleaners with customers, was among the first to close in July 2015. Another more recent example is Shuddle, a ride-sharing service for kids, that closed earlier this year. Some firms have pivoted to other business models. Independent contractor status itself also remains a concern in some quarters — human cloud heavyweight Uber agreed to pay up to $100 million to settle a misclassification suit, and Lyft agreed to pay $27 million to settle its own independent contractor litigation.
Challenges notwithstanding, companies are excited about the space. An SIA survey found 12% of large staffing buyers were using online staffing in 2015, up from 3% in 2012.
“I think the main trend that we see is increasing interest from enterprise companies,” says Stephane Kasriel, CEO of Upwork, one of the larger human cloud firms.
One driver is that companies continue to struggle to attract top talent — particularly IT talent, according to Kasriel. It’s especially problematic for large firms. While the best software engineers are drawn to well-known tech companies such as Google or Facebook, large firms in other sectors such as packaged goods or healthcare can especially struggle to find the top IT talent. Those companies are searching for ways to find skilled workers.
Upwork recently introduced an enterprise product aimed at the large firms. Upwork also works with managed service providers and provides statement-of-work programs as well.
“Ultimately, our goal is to provide talent in the most effective way to clients,” Kasriel says.
For enterprise firms, online staffing also represents a shift — making things less complex and cutting down inefficiencies, says Stephen DeWitt, CEO of Work Market, a provider of online staffing and a freelancer management system.
“The dynamics of the changing nature of the workforce is hitting everybody between the eyes right now,” DeWitt says. “The enterprise right now is looking at every form to get better utilization of its workforce.”
The nature of the workforce, the need to evolve and the availability of cloud-based technology has changed the conversation, he says.
“The whole reason why the entire globe went to the cloud within 10 years is that it eliminated fundamental inefficiencies,” DeWitt says. If you asked a Fortune 1000 company about its utilization of fixed labor costs, the number would likely be pretty lousy, he says. “The promise of the human cloud is a completely different utilization of expenditures of labor and a dramatic reduction in complexity of lifecycle engagement of employers and workers.”
Online staffing’s case is a bit different from online services companies such as Uber or Lyft, says Yong Kim, CEO of online staffing firm Wonolo. Online services firms are well known to consumers, but online staffing firms in the business-to-business space have to educate staffing buyers.
“[With] traditional consumer-on-demand services, you can simply sign up and start requesting a driver or someone to deliver cupcakes, but for Wonolo, in most cases, there is an education, sales cycle with companies to get onboarded onto our platform,” Kim says.
Businesses also have different concerns — consumers tend not to worry about things such as human resource ramifications. However, once enterprises get comfortable around on-demand staffing, then they use it on a recurring basis, he says.
Among online staffing firms, Wonolo works in a category called “just-in-time” staffing, where buyers can order, pay and manage workers online but the workers perform work on site, such as going to a retail store and setting up a display.
Wonolo, which is short for “work now locally,” began in 2014 through the Coca-Cola Innovation Accelerator, now called the Coca-Cola Founders program, where entrepreneurs are brought in from outside the company. The challenge Wonolo’s founders noticed at Coca-Cola was managers had difficult-to-predict job needs, so they often couldn’t find the people on short notice to do the tasks. They aimed to find a way to fix that by letting managers get workers immediately via an online/mobile platform.
Wonolo started as a 1099 platform and continues to provide those workers, but it recently introduced a W-2 option for longer-term engagements as well. Another new offering from Wonolo allows large operations, such as a big-box retailer, to put its own contingent workers on the Wonolo platform. For example, a big box retailer could simply announce a job shift on the platform to a group of its own parttime workers and allow them to sign up online for the work rather than a manager individually calling workers.
Not So Simple
However, SIA Research Analyst David Francis says “yes and no” as to whether he sees a trend of more enterprise staffing buyers turning to the human cloud.
“I think there is a lot of interest among large, forward-thinking enterprises that want to get ahead in their overall talent strategy,” Francis says. “That said, I think right now enterprise buyers are just trying to figure out the nuts and bolts of how to actually integrate these companies into their programs and how they would work with all the other moving parts of their existing infrastructure and talent supply chain. Our research suggests that use of online staffing and other contingent workforce management software among enterprise buyers is — though growing by double digits — still largely siloed among disparate operating units as opposed to being used in a centralized, strategic manner.”
Some enterprise buyers are concerned about risks, whether real or perceived, Francis says. But as online staffing firms do more enterprise business, they are learning more about how to operate in the enterprise environment. And it’s likely we are still in the early stages of enterprise use.
Another trend cited by Francis is traditional staffing firms engaging with online staffing firms.
“There are some global staffing brands that have inroads to large enterprise buyers, either directly or through their MSPs, that have now also cultivated relationships with online staffing firms and seem to almost be acting as a mentor, or at least a partner,” Francis says. “This will be an interesting trend that will develop over the next several years, and I will be curious to see whether online staffing firms become more like traditional staffing firms or vice versa.”
Online staffing can be attractive to workers because it allows them to work anywhere — especially for IT workers using platforms where work can take place entirely online. They can also benefit by working at their convenience.
Upwork’s Kasriel says the drivers for online staffing differ a bit by generation. Millennial workers tend to aspire to a different type of career than Gen Xers or baby boomers. They are more individualistic and interested in income security, becoming less reliant on traditional employers. They are more interested in keeping their own skills up to date and finding meaningful jobs.
Gen Xers may also choose to have a more flexible work environment, Kasriel says. They may need to live in one area — to take care of elderly parents for example — and that location may not be where the jobs are.
For baby boomers, maybe they haven’t saved enough for retirement or are just interested in continuing to work and don’t want a nine-to-five job.
Thomas Fiene is a software developer, but he got involved in working through online staffing firm Wonolo while he was learning new skills to create mobile applications. Income from online staffing allowed him the time to learn the new skills. It also gives him time to find supplemental opportunities in addition to his regular development work, which help him finance his hobbies, such as spear fishing, abalone diving, lobster diving and mushroom hunting.
He has been working through Wonolo from the start, having met company founders Kim and AJ Brustein at an introductory meet-and-greet at a local mall. And Fiene says he has seen how the company and the type of jobs on the platform have expanded.
As for himself, Fiene says he has held a variety of jobs through Wonolo, such as packaging and sending products, delivery and administrative jobs.
“I think initially a lot of its customers were focused on the fulfillment type things but now there’s more delivery, more administrative jobs,” he says. But the variety allowed him to sample many different jobs and companies.
“Overall, not every job is ideal as far as location or timing, but it’s definitely growing and ultimately whenever I have free time and want to do some work there will be something nearby that’s available,” Fiene says.
While Fiene doesn’t have experience working with a traditional staffing firm, he says platforms like Wonolo offer a great deal of convenience. “Basically, if a job pops up this afternoon or tomorrow morning, you can just grab it,” he says. There’s no need to fill out an application.
Fiene says he has met others who are working through Wonolo, and they come from many different backgrounds. They range from students who can’t work full time or don’t have a predictable schedule, single parents, people with full-time jobs but who want to supplement their incomes, and people who use Wonolo full-time as their primary source of income. The age range of Wonolo workers runs the gamut from their 20s to 60s, he says.
A survey by SIA that included more than 5,000 temporary workers in the US found 73% were not aware of online staffing. However, among those familiar with it, 31% were using online staffing and another 26% were considering using it in the next two years.
Independent Contractor Status
The question of independent contractor status also remains an issue for some buyers. However, much of the media attention has been focused on online work services firms such as Uber and Lyft, with each agreeing to settle their misclassification lawsuits. Both deals would leave drivers as independent contractors, but both settlements were awaiting final court approval at press time.
However, not all drivers agreed with the settlements. In addition, the government continues to show interest in tracking down instances of misclassification.
And as far as enterprise buyers, SIA’s Asin says they are very concerned with risk and compliance. On the other hand, enterprises also see that technology is not going away; in fact, it’s the key to the future.
What does this mean for traditional staffing firms? Will every firm be an online staffing firm in the future? Asin says technology will have an impact on firms, but staffing firms have been impacted before and have themselves evolved as a result.
“There are very few staffing firms that don’t use job boards or don’t allow people to apply online,” Asin says. “I think the question is, ‘How integrated will technology be with staffing firms over time.’”
It’s also a mistake to think the market will go to a one-size-fits-all strategy relying only on a certain type of staffing, he says.