CWS 3.0: August 26, 2015

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The million-billion-dollar question: What’s next for the human cloud?

There is great interest in the emerging human cloud market for a variety of reasons. The million-billion-dollar-question is what will happen next?

From an economic, social and talent perspective, there is great interest in the emerging human cloud market because of the huge amount of power and choices it brings to talent engagement. The million-billion-dollar-question about human cloud companies is what will happen next?

But first, are they staffing companies or are they suppliers to staffing companies and CW buyers? Most human cloud companies market their services primarily to buyers of contingent labor, while a select few are also being used by staffing firms to source workers. Proper classification of these businesses is going to be tricky, but companies should plan now on how they will treat these businesses moving forward and how they will engage them.

Staffing Industry Analysts has defined the human cloud as:

An emerging set of work intermediation models that enable work arrangements of various kinds to be established and completed (including payment of workers) entirely through a digital/online platform. In many cases (though not always), the platform also supports “the enactment and management” of the work (to a lesser or greater degree). Job boards (like Monster) and social networks (like LinkedIn) do not fall within our definition of human cloud; while those two types of talent exchange platforms may support the sourcing and recruiting part of work arrangements being established, such platforms do not further enable or support work arrangements through to their completion (including payment of workers, tax filings, etc.).

Further, Staffing Industry Analysts has identified three types of human Cloud platform models: “crowdsourcing,” “online services” and “online staffing.” The Human Cloud Landscape report, published by Staffing Industry Analysts this summer, specifically looks at the human cloud as an emerging set of online/digital platforms that enable hirers and workers to manage and complete (typically contingent) work arrangements in those three categories. With approximately $11 billion in spend in 2014, the human cloud is big business. Currently, 50% of buyers are now aware of online staffing according to our 2014 CW Buyer Survey compared to 20% in 2012.

The Human Cloud Landscape report refers to “independent workers,” “contingent workers,” “freelancers” and “talent,” to describe individuals who complete work through human cloud platforms, regardless of their tax classification — the same worker categories that go through your MSPs or program management offices.

Usage to grow. Currently, 4% of buyers use the online staffing component of the human cloud, which is similar to the usage levels reported in 2012 and 2013. However, 10% of buyers are considering using online staffing within the next two years, up from just 1% in 2012, according to the report.

When we asked contingent workers about their familiarity with online staffing services, responses varied directly as a function of both hourly wage and age, and 66% were not yet familiar with online staffing services. Thirteen percent are currently earning at least some income from online staffing, and 7% are considering using it within two years

CW buyers are still leery of the human cloud space because of lack of familiarity and potential risk, but spend threshold levels are enabling hiring managers to use them. Many of these firms are sure to be cropping up on expense reports from hiring managers who use these work arrangements as a way to get outsourced work done quickly, efficiently and in a cost-effective way that may not have to go through typical procurement channels because of the program’s spend threshold. So be sure to track expenses for all outsourced engagements as well as 1099s to ensure you fully understand the scope of talent your company is engaging.

It should be a best practice to include all human cloud components within your total talent management strategy, including freelancer management systems providers, which are a new sub-category of online staffing. Your staffing solution providers are already investing in human cloud solutions as they explore, innovate and expand their offerings. Recruit Holdings has invested heavily in various areas of the human cloud (Quandoo, 99Designs, Gengo). Randstad has its Innovation Fund (invested in Gigwalk and Twago), Adecco purchased OnForce (under its VMS brand, Beeline), Kelly Services partnered with the former Odesk (now Upwork) and Mitchell Martin has an incubator investing and developing new human cloud businesses.

Will the future hold million-billion-dollar risk or reward for these companies and their clients? Probably both. Technology will march on and businesses will figure out the best way to fold in new, innovative human cloud solutions. Companies will emerge and morph into engagement models we have not even thought of that combine human cloud, artificial intelligence, big data and high-touch strategic solutions that will enable better and faster talent vetting, placement and tracking. Be ready.

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