In January, SIA published its latest report on blockchain: “The Impact of Blockchain in Talent Acquisition.” Our first report on this topic, published in December 2017, identified seven blockchain initiatives in the freelancer and/or job board category, while this report covers 26 — and there may well be many more operating in pre-launch stealth mode.
This growth illustrates the strength of interest in trying out these new blockchain-enabled services, though 12 months later, we are no further forward in having talent acquisition-related blockchain businesses with a proven track record.
Blockchain is a distributed, decentralized peer-to-peer ledger system. A ledger system is a database of transactions; thus, a blockchain can be thought of as a decentralized database where anyone has write access and no one maintains centralized control. It can be used to create many kinds of decentralized applications and has implications for any industry that is transactional in nature, relies on intermediaries, or is reliant on data (that is, virtually all industries, including staffing).
The blockchain projects related to staffing appear to fall into one of five broad categories: credentialing/identity management, payrolling, freelance/on-demand marketplaces, job boards/candidate sourcing, and community/governance/DAOs (decentralized autonomous organizations).
The rise of blockchain has created incredible — and growing — demand for blockchain developers. These individuals are well-paid, in short supply and more likely to be willing to work in an alternative work arrangement — a cocktail of attributes that should appeal to staffing firms interested in supplying such talent.
In its first and second quarterly skills indexes of 2018, Upwork reported that blockchain was the fastest-growing in-demand skill (measured by growth in freelancer billings) in the US freelance market. Meanwhile, high-end online staffing platform Toptal recently launched blockchain as a vertical after experiencing robust demand, with some sources pegging growth at 700% in 2017.
Should demand continue, staffing firms that build blockchain practices early should find themselves positioned for success. Though blockchain is a new technology, individuals with a foundation in computer science or full stack development should have an easy time picking it up. Thus, one potential source of new talent might be offering existing developer contacts blockchain training.
One of the most active areas of blockchain activity is in credentialing/identity management. Here, a number of initiatives are essentially attempting to create a decentralized system for validating skills, identity, reputation and other candidate and/or client credentials. For example, Shocard (a company in which Japanese staffing giant Recruit has invested) enables users to create an identity and save it to their mobile app, and then validates identification documents, such as a driver’s license or passport. Once this is done, the information is stored crypto-graphically, and the user can seamlessly interact with various enterprises that use the Shocard protocol, and share only information that is needed to complete a transaction.
In terms of overall impact, this category could have the largest positive effect on the staffing industry, as there is a great deal of inefficiency and duplication in validating credentials, skills or even basic CV information. Considerable effort can be wasted validating credentials of candidates who subsequently fail one or more checks.
Having an agreed-upon protocol and blockchain database of candidate information means that data could be efficiently pulled from the blockchain to populate individual staffing firm databases. Furthermore, multiple firms would not have to pay multiple times for the same candidate information, and the speed of background checks/onboarding should be greatly increased since work wouldn’t have to be repeated.
The recruiting category with the most blockchain initiatives is “freelancing/on-demand,” which is essentially a variant of the online staffing model, with contracts determined and administered algorithmically, payments made in some kind of cryptocurrency (which can typically then be converted to fiat currency such as US dollars), and of course with the whole transaction recorded on a blockchain. In this model, candidates and hirers find each other online in a self-service marketplace, with the entire work arrangement completed online.
The big difference between incumbent freelance platforms — such as Upwork, Fiverr, Freelancer, Toptal or Catalant — and blockchain alternatives is that there is no controlling intermediary and services are provided for significantly lower fees (or in some cases, no fee at all). While these firms position themselves as disruptors, substantial challenges remain. First, all these firms are tiny in comparison to their more mature counterparts, and many have not finished launching a fully functioning product. Second, it is notoriously difficult to create a self-sustaining two-sided marketplace, and merely having a service, cheap though it may be, does not success guarantee.
Nevertheless, Upwork recognized the threat from new blockchain competitors and highlighted it as a risk factor in its recent prospectus for its 2018 IPO. It stated: “In the future, we may also compete with companies that utilize emerging technologies, such as blockchain. … These competitors may offer products and services that may, among other things, provide automated alternatives to the services that freelancers provide on our platform or change the way that businesses engage service providers so as to make our platform less attractive to users.”
While some solutions seem promising, it remains to be seen whether these firms will be able to deliver a superior candidate experience and superior candidate traffic than their nonblockchain-based cousins.
Where is the staffing consortium approach? Many industries have created their own collaborative consortia to explore and create blockchain applications, such as banking (R3), insurers and reinsurers (B3i), investment funds (FundChain), healthcare (Hashed Health) and shipping and logistics (the Global Business Shipping Network), each focused on exploring blockchain applications relevant to their own specific industry.
Notably, the staffing industry does not have such a consortium — or, at least, has not announced one publicly — nor does it appear that any leading staffing firms are involved in a multi-industry blockchain consortium.
Given its acknowledged potential to disrupt supply chains, the MSP and RPO models are obvious targets for future disintermediation alongside the technologies that support them, VMS and ATS. Perhaps the creation of a low-cost talent supply chain built on blockchain could also provide the much-needed impetus for an uptake in total talent solutions, a transformative initiative currently held back by siloed service delivery and technology.
Skepticism and Trepidation
Because blockchain apps provide a mechanism for easy and unregulated funding (ICOs or “Initial Coin Offerings”), any initiative should be approached with an extra dose of scrutiny. Though blockchain has much promise, most initiatives are still very early in development, use cases are few, and the majority of initiatives related to the staffing industry do not even have a fully developed product. Not surprisingly, there is a healthy dose of skepticism and trepidation around blockchain, despite some speculators’ and investors’ willingness to throw money at it. That said, decentralized models that charge little or nothing for their services are certainly worthy of attention, even if they currently remain unproven. We expect blockchain to be a net positive for the staffing industry in the near-to-midterm, as we expect initiatives that might provide some benefits to staffing firms (credentialing, job boards, etc.) will likely scale faster than those seeking to disrupt the industry.