Global
The Rise of Freelancer
Management Systems
Review of an emerging technology
October 17, 2014
David Francis, Research Associate
[email protected]
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The Rise of Freelancer Management Systems | October 17, 2014
The Rise of Freelancer Management Systems
Methodology
• A freelancer management system (FMS) is unique among contingent workforce
technologies in that it combines the disintermediating power of online staffing (enabling
direct engagements with talent through the platform) with the HR tools/management
functions/compliance solutions required by large enterprises, in one seamless platform.
A detailed questionnaire was
sent to five firms operating in
the FMS space in August/
September, 2014. The firms that
participated in the survey are
(in alphabetical order):
• Elance-oDesk
• Field Nation
• MBO Partners
• OnForce
• Work Market
After the results were submitted,
conference calls were held with
the leadership of each firm to
gain additional insights.
El
Key Findings
•
•
Field services/“local” worker deployment model – physical worker sent to some
physical location
Professional/“high end” worker model – focus on high level workers with key skills,
professionals, consultants
Knowledge/“online” worker model – focus on content creation and work that can
be completed remotely
s
De
-o
•
ce
an
• While the technological components of the FMS offerings are roughly similar for the five
companies, they appear to compete in different niches and have one or a combination of
three different market strategies, in terms of both the occupations/verticals served, and
whether the services of the independent worker are performed onsite or online:
• While these are not mutually exclusive categories, we feel this is a generally accurate
characterization of the respondent firms.
In addition to the survey, several
external sources and references
were used.
We acknowledge there are other
FMS providers not covered in
this report.
k
• While FMSs offer a wide variety of pricing models, the most common model is to charge a
percentage of spend through the platform (ranging from 2.5%-10%) which can be paid by
either the independent worker or the client (or sometimes both). Clients with larger
volumes of business may qualify for volume based pricing/licensing.
• On average, (with one notable exception), the FMS providers in this report noted a
substantial share of their revenue came from client organizations with greater than $500
million in annual revenue.
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The Rise of Freelancer Management Systems | October 17, 2014
Definitions
What are Freelancer Management Systems?
El
• A freelancer management system (FMS) is a category of
contingent workforce management technology that enables
enterprises to self-manage their engagements with
independent workers and freelancers. To fall within the FMS
category, a solution provider must provide a complete, end-toend technology system that can allow users in an organization
to search for and find a particular worker and activate,
complete, and pay for the work engagement within the system.
At the core of these FMS model offerings is a viable platform
technology (an enterprise/SaaS system) that a business can use
to initiate, manage, complete, track and analyze engagements
with individual independent workers who can be identified
through their profiles on the system as approved members of
that business’ (independent worker) talent pool.
independent contractor or freelancer, for the following
reasons:
-o
ce
an
• Independent contractor, although often used informally to
describe any independent worker, is in reality a statutory
legal classification. In the U.S. for example, firms can and do
truly engage with 1099 independent contractors, but the
independent workers they engage are in some instances not
independent contractors, but rather are W-2 employees of
either the FMS provider or some other 3rd party, in some
type of an agency/employer-of-record (AOR/EOR)
arrangement. Thus, the term independent contractor does
not encompass the entire “independent” workforce that an
FMS engages.
k
• Throughout this report we will use the term “independent
worker” (IW) to refer to any individual (or group of)
independent contractor(s), freelancer(s) or other individual(s)
who directly contract with enterprises through an FMS to
perform work on a contract/project basis, regardless of the
particular tax status they are classified under (i.e. 1099 or
W-2*). We use the term independent worker, as opposed to
• Freelancer is a non-technical term generally used to describe
a person (historically in journalism and other creative
verticals, nowadays used to describe someone in almost any
vertical) who works “freely” for different organizations on a
contract basis. While independent contractor is too specific a
term, freelancer is too informal and colloquial, and may still
be interpreted by some as only referring to certain “creative”
verticals**
s
De
What are Independent Workers?
*In the U.S., “self-employed” workers are required by the IRS to file a 1099-MISC tax form, hence these workers are often referred to as “1099 workers”. Those deemed as “employed” (by an employer) file
a W-2 tax form. The distinction is important as to whether income taxes are withheld or not, but does not necessarily determine whether one is an “independent worker”. Although we use 1099 and W-2
workers of the United States as an example, this principle holds true for other countries where there may be similar statutes regarding tax classification.
**Some have suggested the acronym “ICWS” (independent contractor workforce solutions) or the more encompassing “IWMS” (independent workforce management solutions) as alternatives to “FMS”.
Although these proposed acronyms may be more accurate as literal definitions of the technology and workforce that the technology covers, they are awkward to say and cumbersome acronyms at best. FMS,
being shorter and easier to recall, has gained traction among both users and providers of the service to describe these technology platforms. Although FMS is the acronym for the technology, we will refer to the
workers an FMS engages as independent workers as opposed to freelancers.
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The Rise of Freelancer Management Systems | October 17, 2014
Evolution of online staffing to enterprise FMS
El
To the right is an illustration that shows how the FMS
model is evolving from online staffing and other services
in the “human cloud”. The dimensions of evolution are:
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k
We note that while Elance-oDesk has developed a full
FMS offering (Private Talent Cloud), it still derives the
majority of its business from online staffing.
s
De
• Enterprise Risk: Online staffing presents risks
(misclassification, rogue spend, quality of talent) to
organizations as they do not have the same system of
controls that an FMS has; FMS has evolved to minimize
the various risks associated with engaging independent
workers.
-o
ce
an
• The Purpose of the Technology: Online staffing
platforms are talent marketplaces primarily used by
small to medium sized businesses, while FMS has
evolved to become a talent management system
targeted at enterprise clients. Online staffing matches
buyers and sellers, while an FMS provides matching
and the tools to manage IW engagements after the
match has been made.
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The Rise of Freelancer Management Systems | October 17, 2014
FMS vs. online staffing platforms
Although the FMS has been likened to (and in certain cases have grown out of) online staffing platforms, they are different in several
respects:
El
an
• Unlike online staffing platforms, which facilitate direct one-to-one or “one-off” engagements between an individual buyer and an
individual worker, FMS facilitates an enterprise-wide engagement and deployment model. This arrangement still allows for direct
engagements between buyers and workers, but the key difference is that the rules and processes of the FMS platform will be
uniformly enforced across an organization. In other words, with online staffing platforms, each engagement is a one-off experience;
with an FMS, although the engagement is still “direct”, it is managed under the enterprise’s rules and system of controls.
-o
ce
• A key difference from online staffing models, which are at their core a marketplace to bring individual buyers and suppliers together, is
that there is less emphasis on “sourcing” talent with FMSs. Online staffing is more of a marketplace (like eBay for buyers/suppliers of
labor), while an FMS is more of a workforce management platform (handling various aspects of the independent worker engagement
such as compliance services, curation, worker pool management, etc.) Often, an organization already has the talent it regularly
interacts with, and simply onboards that talent onto the respective FMS platform where the independent worker can then be engaged
and managed effectively.
s
De
• In online staffing, there is typically little (if any) IC compliance support, while FMS platforms offer varying degrees of independent
contractor (IC) compliance services (in some cases, being the “crux” or “cornerstone” of the platform around which the rest of the
model revolves).
k
• FMSs have tools/modules and reporting functionalities built into the platform which provide a great deal of visibility, analytics, and
insight into an organization’s scope and spend on its IW talent. This is in contrast to online staffing in which engagement of IW talent is
typically performed by line managers (end-users of talent) who may work around existing corporate policies/processes in an effort to
obtain that talent. This arrangement can make it difficult for companies to gauge/track total IW exposure and spend, increases the
possibility of overspending on IWs, and potentially increases the risk of IC misclassification. FMSs provide consolidated management
of these processes for greater visibility, control, and reduction of spend by hiring managers outside the system (rogue spend).
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The Rise of Freelancer Management Systems | October 17, 2014
How does FMS fit into a contingent workforce program?
• In some cases an FMS acts as the only workforce
management technology for an enterprise (a likely
scenario for small to medium sized business clients),
whereas all five providers reported that they also
work in an integrated fashion with vendor
management systems (VMS) in larger organizations
with sophisticated contingent workforce (CW)
programs.
Enterprise
El
s
De
k
• VMS and FMS are both technology platforms; the
distinction is that they are designed to manage
different parts of the contingent workforce.
-o
ce
an
• The illustration to the right describes the relationship
of the CW program, VMS, and FMS in an organization
where all three are integrated. An enterprise either
runs its CW program internally or retains the service
of a managed service provider (MSP). A VMS is the
technology used to manage vendor/supplier
relationships, and an FMS is the technology used to
manage and engage directly with independent
workers (IWs).
Temporary
agency staff
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SOW
consultants
Independent workers
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The Rise of Freelancer Management Systems | October 17, 2014
The FMS and VMS supply chain
The FMS supply chain
• An FMS provides service and support to both enterprise
users and independent workers, whereas a VMS is
primarily used to manage vendors, with few (if any)
services provided to the independent workers.
All users in a global
organization
El
• An FMS allows enterprise users to engage directly with
independent workers by connecting both clients
(enterprise users) and providers (independent workers)
through the same technology platform, and providing
the tools to manage the complete engagement on the
platform.
an
Independent workers in
the “the cloud”
-o
ce
The VMS supply chain
s
De
Vendors/ suppliers
k
HR/ Procurement
Temporary
Staff
*Statement of work: A contingent work agreement/contract which is characterized by the fact that it is billed based on the achievement of milestones as opposed to being billed
based on the number of hours worked.
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The Rise of Freelancer Management Systems | October 17, 2014
Components of an FMS platform
Some of the components that are characteristic of an FMS (but not
necessarily all-inclusive to any FMS) are:
El
• Ability to find, view the credentials/profile/work history, hire and pay a
specific independent worker
an
• “Sourcing” and “Grouping” technology, which can include talent pools,
online talent marketplaces, and “preferred provider networks”
• Vetting, credentialing, and curation of talent (including drug and
background checks)
ce
• IC compliance tools and services, including automated
recommendations/work limits/structures to ensure compliance. Some
FMS providers offer full misclassification indemnification
-o
• AOR/EOR (agency of record/employer of record) and payrolling
• Payment processing, tax withholding, automatic W-2/1099 issuance
• Contract, documentation and workflow management
• Enterprise management tools including bulk upload capabilities
• Client and supply side reports/analytics
These various features are typically bundled together as modules in one
comprehensive online platform, with a separate user interface for
enterprise clients and independent workers.
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k
• Performance ranking, feedback system, rating system
s
De
• Web and mobile real time communication
Enterprise
IW Cloud/
Talent Pool
FMS bundles together several disaggregated solutions from the IW supply
chain and channels them into one cohesive end-to-end solution to allow
enterprises to engage directly with IW talent.
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The Rise of Freelancer Management Systems | October 17, 2014
The process of an end-to-end FMS solution
El
• Below is a graphic representation of the typical end-to-end process that an enterprise might use to search for independent workers,
verify their credentials, onboard them, pay for their services and then rank their performance, along with the technologies that are often
built into an FMS to support each part of the process. The bullets below were aggregated from the responses of the five providers; thus,
any particular provider may not offer every single functionality listed below. The platforms are usually broken into “modules”, which
enable users to dive into whichever portion of the process they desire. Enterprises can further establish user entitlements and enable/
disable access to various modules depending on specific roles/functions. An FMS is hosted “in the cloud” - in other words it is a webbased application. Enterprise users and independent workers alike log in through a computer or web-enabled device to access the FMS.
an
• The independent workers have their own process and set of modules (not displayed here), which includes functions to find assignments,
manage their profiles, complete vetting requirements, update job progress, receive payment, and communicate with the enterprise.
•
•
•
•
•
•
•
•
Verifying
the talent
•
•
•
•
Algorithm based
job/IW
matchmaking
Geographic
mapping to match
supply/demand
Real time
communication
(online, mobile,
and video)
Request For
Proposal engine
Automatic, rulesbased dispatch
Engaging
the talent
•
•
Document
management
Private company
forums
Task assignment
and workflow
automation
Work templates
Time, expense,
and milestone
approval
•
API integration
with 3rd party
payment
processors
Invoicing and
transaction status
Hourly billing or
milestone billing
1099 generation
•
•
•
•
•
k
Sourcing
the talent
•
IC compliance
Background checks
and screening of IWs
Learning
management
software
Automatic W9/TIN/
EIN verification*
Training modules
Insurance and
credentialing
Skills testing
Work history
s
De
•
•
•
•
•
-o
•
Talent Marketplaces
Managed/private
contractor clouds
Preferred provider
networks
Talent pools
Profile management
and classification
Automated routing
ATS
Recruitment
(usually an “add-on”
service)
ce
•
•
Managing
projects
•
Paying
•
•
•
2 way feedback
loop
Performance
ratings and
history
Ranking
Rate/rank
performance
*TIN = Tax Identification number. An Identification number used in the U.S. by the Internal Revenue Service (IRS) in the administration of tax laws to individuals.
*EIN = Employer identification number. An identification number used in the U.S. by the IRS in the administration of tax laws to businesses (or independent contractors).
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The Rise of Freelancer Management Systems | October 17, 2014
The curation of talent: “talent clouds”, “private talent networks”, “gated talent
communities”, and “preferred providers”
El
One of the unique features of an FMS is its ability to organize an enterprise’s
independent workers (IWs) into groups, sometimes referred to as “talent
clouds”, “preferred” or “private” networks. This type of structure makes the
process of matching an IW to a particular project or job much more efficient
(and even supports its automation), especially in larger organizations that may
manage thousands of IWs. Enterprises can further specify which groups of
workers are authorized to work for a particular job (for example, an IT
organization may have a particular group of “security-cleared” contractors who
are authorized to work at a high-security government site). They can also
specify which IWs can be “shared” with other organizations*, or which IWs get
first notice when new jobs become available.
Call center
Alumni
Graphic
designers
ce
an
Vetting/Curation Processes
s
De
-o
Examples of groupings that are particularly common are by alumni status (has
a person ever worked for this particular company, yes or no?), specialized skill
sets, and location. Others could include language, industry verticals, or
performance rating. To get into a “group”, there is often a specific vetting
process for that particular group which can consist of skills assessments,
licensing verification, or some other process, which depends on the nature of
the group. Once grouped, the FMS facilitates communication to these IWs via
the web and mobile devices, can perform automatic matching and dispatch
functions, and hiring managers across the organization know that any IWs
found in the “group”/talent cloud are already vetted.
k
*One of the challenges with any contingent workforce program is making sure the talent that organizations regularly work with actually have enough work to stay engaged. If IWs are “on the
bench” too often, they will likely seek their fortunes elsewhere, and the organization can lose future use of the IW. Organizations can try to retain their talent and decrease IW “bench time”
by allowing their IWs to work with other companies on an FMS provider’s platform when the organization doesn’t have enough work to keep them continuously engaged. This increases the
talent pool available for all organizations using the FMS, decreases the “bench time” for all IWs in the FMS ecosystem, and keeps the IW available on the system for future use.
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The Rise of Freelancer Management Systems | October 17, 2014
The FMS value proposition
We asked respondents: “What is the problem that your FMS will solve?”
El
Answers varied among the participants but there were a few common themes:
ce
an
• Access to talent: Independent workers often have some type of expertise, knowledge, specialized skillset or other characteristic which
has strategic importance to the enterprises that want to engage them. Whether it is at the high end of the IW spectrum, where an IW
possesses a highly specialized skill such as a C++ developer, or at the low end where organizations may simply need someone to
perform a series of small tasks (assisting at a marketing event, repairing an ATM machine), FMSs seek to provide the method/platform
to find, organize, and engage this source of non-traditional worker. In addition, firms may eventually use FMS platforms to gain access
to talent around the globe, especially if doing so presents significant cost saving opportunities over domestically sourced resources (a
practice known as “labor arbitrage”).
s
De
-o
• Reduce risk and increase compliance: Although enterprises are increasingly seeking to engage more independent workers, it can be
costly to do so due to the risk of misclassification expenses. Unlike temporary staffing/VMS engagements, where the staffing firm acts
as the employer of the temporary employee, that is not always the case with independent worker engagements. FMSs, by the very
nature of their technology, encourage proper reporting to tax authorities by automatically generating auditable paper trails, and in
some cases offer enterprises full indemnification from misclassification. An FMS platform can also enable organizations to enforce
various sets of “rules” (around onboarding, level of oversight, insurance/credentials, work hour limits, etc.) that help to manage
misclassification risk.
k
• Increase efficiency, visibility, and control: Enterprises have traditionally used a number of disaggregated tools, networks, and services
(i.e., Excel spreadsheets, job boards, project management software, 3rd party payment systems and HR solutions) to manage their
independent worker supply chain and work flow. These engagements were often handled in a “one-off” fashion, making consolidated
reporting and compliance with uniform policies difficult. FMS providers seek to consolidate the management of independent workers
onto one enterprise-wide platform so that spend can be analyzed and optimized, and so that policies can be implemented uniformly.
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The Rise of Freelancer Management Systems | October 17, 2014
Characteristics of the five FMS providers in this report
El
• Elance-oDesk started as two online staffing companies (Elance
and oDesk), each with a broad marketplace focus. Once
merged, it had more than eight million independent workers
around the world on its online platform. This number does not
reflect the smaller number of independent workers completing
work through its FMS offering, Private Talent Cloud, but does
reflect the vast pool of workers available to its enterprise-level
clients as a result of its roots in online staffing.
an
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k
• Field Nation, OnForce, and Work Market all grew their FMS
platform out of a specialized vertical, IT field services, and
focused on filling assignments that required a physical worker
to go to a physical location to perform work. They each
reported less than 100,000 independent workers on their FMS
platform. We should expect the number of independent
workers to grow as these companies attempt to penetrate new
industries.
s
De
-o
ce
• In contrast, MBO Partners, which has between 20k-25k active
independent workers on its platform at any given time,
historically focused on IC compliance and back-end support
services for a specialized group of professional and highly paid
independent workers, which is reflected in the smaller number
of independent workers on their platform, relative to ElanceoDesk. The company reported that the average billing for its IW
engagements is upwards of $80k, far higher than any of the
other players.
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The Rise of Freelancer Management Systems | October 17, 2014
Independent contractor compliance
El
• One of the dangers of engaging with independent contractors
(ICs)/workers is the risk that they will be reclassified as employees by
the tax authority, resulting in fines, penalties, and back taxes. Firms
that may have been shocked by the large lawsuits/settlements that
have occurred at Microsoft (and more recently FedEx) in the United
States certainly have reason to be cautious.
an
• Elance-oDesk and MBO Partners reported that they
offer full misclassification indemnification. In other
words, they promise to pick up the tab if the tax
authority audits and assesses any penalties/back taxes
on organizations that were fined due to classification
recommendations made by the FMS.
• FMS providers offer technology to reduce the risk of misclassification,
and some providers, such as Elance-oDesk and MBO Partners, fully
indemnify the client organization from such risk.
ce
s
De
-o
• In the U.S., the IRS uses a 20 factor test to determine whether a
worker, regardless of how a company classifies him, is a true
independent contractor or an employee of the organization. Among
the most important factors is the level of control an organization
exercises over how the work is actually performed. Other countries
adopt a similar approach. FMS technology seeks to “automate”
compliance in regard to these factors, to varying degrees.
• At a minimum, FMS providers offer a technology generated paper trail,
which can prove useful in an audit to prove there was no intentional
deceit.
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k
• OnForce reported that it used a 3rd party IC compliance provider
(ICon) to offer IC compliance services.
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The Rise of Freelancer Management Systems | October 17, 2014
Industries with greatest use of FMS
El
• We asked respondents, “Has there been a particular industry where your
FMS use was entirely or very highly concentrated for some time?” Not
surprisingly, Elance-oDesk has historically derived much of its business
from “knowledge” verticals (verticals in which workers could complete
projects online), specifically in IT and marketing.
an
ce
• Field Nation, OnForce, and Work Market all have been historically
concentrated in some form of IT field services, although each has
expanded and now offers its FMS to a broader range of industries.
Biggest Vertical
Company
Elance-oDesk
Knowledge workers in IT and Marketing
Field Nation
IT Hardware and POS
MBO Partners
OnForce
Professional Services ICs who generate
more than 100k in annual billings
IT and consumer electronics work
s
De
-o
• MBO Partners has historically been an independent contractor focused
firm and has developed relations with “professional/high end” service
consultants and independent workers of various sorts. The company
described its “vertical” not in terms of a given industry, but in terms of the
pay level of the independent worker (“more than $100k in annual
billings”).
Most common industries that use FMS
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Work Market
Technology & Communications
k
• We also asked: “What is a rough percentage breakdown of the number of
client organizations you are now serving according to their industry vertical
types?” Although it is not displayed in the chart, respondents reported a
wide variety of industries served. In addition to technology, other client
verticals included construction, consulting, consumer products,
government, healthcare, manufacturing, media and advertising, technical
services, telecommunications, and transportation.
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The Rise of Freelancer Management Systems | October 17, 2014
Most common occupations engaged through FMS
• We asked respondents, “What are the two most common occupational
categories that are served by your FMS?”
El
an
• OnForce, WorkMarket, and Field Nation reported some variant of IT
service professional as their top occupational category, reflective of
their histories in IT field services.
• MBO Partners reported that project managers and software
engineer/designers were the most common occupations for its FMS.
Most common occupations engaged through FMS
Company
Top Occupational
category
2nd Top Occupational
Category
Elance-oDesk
Content Creators,
Curators, Moderators
Technology (developers,
testers, administrators)
Field Nation
IT Hardware Technicians
Telecommunications Field
Engineers
Project Manager
Software Engineer/Developer
IT Service Technicians
Educators
Technology Services
Personnel
Retail Marketing
MBO Partners
• It is notable that all five firms reported some form of technology
occupation as either the 1st or 2nd most common occupation served by
their FMS.
OnForce
-o
ce
• Elance-oDesk reported that content creators and technology
occupations were the most common occupations on its platform.
Work Market
s
De
• It is important to keep in mind that although these may be the most
common occupational categories, they are by no means the only ones
served by these providers.
k
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14
The Rise of Freelancer Management Systems | October 17, 2014
Location of independent workers and client organizations that use FMS
% of independent workers in U.S./Canada versus other
countries
El
• We asked the respondents: “Roughly what percentage of independent
workers are currently engaged through your FMS inside U.S./Canada versus
elsewhere?”
ce
an
• OnForce, MBO Partners, and Field Nation reported that only a very small
percentage of the independent workers who performed work through their
FMS were located outside of the U.S./Canada (less than or equal to 5% for
each, represented by the red portions of the bar chart to the right). Though
OnForce reported 0%, the company anticipates expanding outside of North
America.
-o
• Work Market reported that 30% of the IWs performing work through its
FMS platform were located outside of the U.S./Canada, while Elance-oDesk
reported 40%.
s
De
• We also asked respondents: “Roughly what percentage of your clients are
headquartered in the U.S./Canada versus other elsewhere?”
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k
• Although it is not shown in the chart, every firm but Elance-oDesk reported
that 95% or more of client organizations are located in the U.S./Canada
(although OnForce anticipates expanding internationally, fuelled by its
acquisition by Adecco in August of 2014). Elance-oDesk reported that 15%
of its FMS clients were headquartered outside the U.S./Canada.
15
The Rise of Freelancer Management Systems | October 17, 2014
Mix of work settings: onsite vs. online
We asked respondents: “Currently, what types of work engagements is your
FMS supporting, and what is the percentage breakdown of each?”
% of work performed at customer place of business,
designated physical location, or online/remote
El
Respondents noted support of the following work arrangements:
an
• Onsite work arrangements
• Work performed at client’s “place of business” (POB)
• Online/remote work arrangements
ce
• Work performed at a physical location (i.e. back office, marketing
event, offsite client location, data center, etc.)
-o
The chart to the right shows the percentage breakdown of work performed
either at a client’s place of business, an offsite physical location, or online.
s
De
OnForce, Field Nation, and Work Market reported a high concentration of
onsite work engagements. This may be due to their historical background in
the IT field services vertical, where part of the value is the ability to deliver a
person to a physical location virtually anywhere in the country.
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k
Elance-oDesk reported the highest concentration of remote/online workers
with 75% of its FMS-engaged independent workers performing work
remotely/online. MBO Partners was the most even, reporting 60% of its work
arrangements as performed onsite and 40% of work arrangements as
performed remotely/online.
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The Rise of Freelancer Management Systems | October 17, 2014
Size of client organizations that use FMS
% of revenue by client size
• In general, FMS providers generated a substantial share of their
revenue from organizations with more than $500 million in
revenue. Field Nation is the exception with only 5% of its revenue
coming from such clients. On the other extreme, Work Market
reported that only 10% of its revenue came from client
organizations with less than $50 million in revenue, and 80% from
clients with more than $500 million in revenue.
El
• We asked respondents: “What approximate percentage of your
revenue comes from client organizations within the following size
ranges: Less than $50 million in annual revenue, between $50-$500
million in annual revenue, and more than $500 million in annual
revenue?”
$50-$500
million
$500
million+
Elance-oDesk
41%
9%
50%
Field Nation
50%
45%
5%
MBO Partners
10%
20%
70%
OnForce
15%
30%
55%
Work Market
10%
10%
80%
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ce
an
0-$50
million
Company
k
Confidential Report – NOT for Distribution | ©2014 by Crain Communications Inc. All rights reserved.
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The Rise of Freelancer Management Systems | October 17, 2014
FMS pricing models
El
FMS providers offer a variety of pricing models, as is evident from the chart below. The two most common pricing models are to
license the software for a period of time or to simply charge a percentage of the “spend” that goes through the platform. Licensing
fees are often negotiated on a company by company basis and can vary based on the expected level of spend and also on the level
of services provided. Reported percent-of-spend fees varied from 2.5%-10%, and are either paid by the client or the independent
worker (IW). In cases where the IW pays the fee, an enterprise will contract with the IW and agree to pay a certain amount for a
project. Upon completion of the project, the organization will authorize and send payment, at which point the FMS deducts its
percent-of-spend fee from the contract amount. In cases where the client pays the fee, the fee is added to the contract amount and
charged to the client after the work has been completed. In addition, platform providers often offer add-on services, which are
typically charged for on an ad hoc basis (or negotiated as part of the licensing fee).
an
In general, the pricing models try to encourage more business by lowering their cost share as spend rises.
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Various pricing models of FMS providers
Who
pays?
Alternative pricing
model(s)
(% of spend)
Who
pays?
Elance-oDesk
Monthly/annual license
Varies
Client
% of spend1
8.75%1
IW 1
Field Nation
% of spend
8-10%
IW
SaaS Lease2
Per Ticket fee w/
monthly cap
Client
MBO Partners
% of spend
2.5% - 5%
IW 3
n/a
n/a
n/a
OnForce
Monthly/annual license
Varies
Client
Fee-per-transaction
Varies
Client
Work Market
Monthly/annual license
Varies
Client4
% of spend
Varies
Client
s
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(% of spend)
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Primary pricing model
Company
1. Elance-oDesk charges a subscription fee to clients which varies based on the level of services provided. IWs who are sourced through their online staffing platform are assessed an 8.75
percent-of-spend fee. This fee is not assessed to IWs that an enterprise brings onto the platform.
2. Field Nation sometimes leases its platform to clients who use it to manage and dispatch their own W-2 employees. They pay a per-ticket fee for use of the platform.
3. MBO Partners reported that while the IW pays the fee for access to the platform, about 40% of the fees are voluntarily “uplifted” or paid for by client organizations.
4. While clients are ultimately responsible for payment, client companies can configure how the payment is shown to IWs (i.e. billed as gross or net).
Confidential Report – NOT for Distribution | ©2014 by Crain Communications Inc. All rights reserved.
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The Rise of Freelancer Management Systems | October 17, 2014
The future of FMS: convergence of technologies?
Estimated stage of the FMS industry in 2014
El
FMS is a new phenomenon, still evolving as this report is written. This begs the
question: where is the space headed in the future? While the future is difficult to
predict, we note the following possible trends:
an
1. The technology has developed to the point where large, established firms have
started adopting the technology (as in the publicly announced SAP/Work Market
partnership). We should expect the industry to experience growth in the years to
come, as it shifts from an “introduction” phase into a “growth” phase.
s
De
-o
ce
2. The value of the ecosystem as a whole (including the number of enterprises on
the platforms, the number of assignments posted through the platforms, and the
number of IWs available to enterprises) to potential adopters will continue to
grow as worker/organization relationships are nurtured and as more firms adopt
the technology. As with any network technology, the value of the network
increases in tandem with the number of users/adopters. We believe the number
of talented workers seeking non-traditional work arrangements will continue to
increase, which in turn will drive firms to seek ways to engage this component of
the workforce.
3. We expect the continued formation of partnerships and/or acquisitions involving
more traditional contingent workforce players and FMS firms, because:
k
• FMS shares some of the characteristics of existing technologies, i.e. there is
overlap in existing contingent workforce solutions.
• Even where FMS is unique, enterprises prefer a single solution/platform for
all of their workforce needs. Thus, as with the recent Adecco/Beeline
acquisition of OnForce, there may be further convergence in the space as
new and existing players increasingly try to offer a more holistic contingent
workforce platform/service.
Confidential Report – NOT for Distribution | ©2014 by Crain Communications Inc. All rights reserved.
19
The Rise of Freelancer Management Systems | October 17, 2014
About Staffing Industry Analysts
El
Independent Advisory
-o
ce
an
Staffing Industry Analysts is the global advisor on contingent work. Known for its independent and
objective insights, the company’s proprietary research, award-winning content, data, support tools,
publications, and executive conferences provide a competitive edge to decision-makers who supply and
buy temporary staffing. In addition to temporary staffing, Staffing Industry Analysts also covers related
staffing sectors. The company provides accreditation with its Certified Contingent Workforce Professional
(CCWP) program. Founded in 1989 and acquired by Crain Communications Inc. in 2008, the company is
headquartered in Mountain View, California, with offices in London, England.
k
For more information: www.staffingindustry.com
s
De
We provide practical, actionable, forward-thinking advice to help our clients develop their business and
consistently treat them with the utmost respect, honesty and care. In our role as advisors we maintain
strict confidentiality. We deliver research and editorial judgments that are completely objective and
independent of financial considerations.
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