The Gig Economy Comes to Service Providers | Sherpas in Blue Shirts

Posted On January 14, 2016

There has been tremendous discussion around the “gig economy.” You need look no further than Uber or Airbnb to see the successful use of this labor model and understand why its popularity is growing among entrepreneurs, employees, and employers alike. Here’s the real news: major service providers are starting to experiment with the model. Here’s why.

The drivers

Two major factors are driving the gig economy. The first is the impact of millennials in the workforce.

There is a sea change in how millennials want to work. Ranking high in their demands is more flexibility. They want to be able to manage their lifestyle better – better, quite frankly, than I did at that age. They want more freedom, want to be able to work from home and potentially change the relationship between employees and employer.

Another driver is the recognition that the traditional employee model – whether it’s an in-house model in a US environment or an offshore support team – is inefficient and very inelastic. We employ a lot of people and incur significant cost in finding them, hiring them and training them. We put them at desks and provide them work. We often end up with a lot of the wrong people and never enough of the right people.

And since work is variable, the traditional employee model often results in unused capacity. This is not only a costly frustration but is counter to the more elastic, consumption-based models in today’s businesses and in clients’ demands from service providers. Traditional employee models are stuck in the 1950s and don’t allow moving to a consumption-based world.

The consequence

Consequently, clients are increasingly asking their third-party service providers to move to a more flexible construct. At Everest Group, we’re involved in numerous conversations where major service providers are experimenting and trying to understand how to navigate these twin secular forces—the desire of talent to be more flexible and the desire of clients to have more consumption-based services.

Providers are still in the early stages with these new talent vehicles and experimenting to incorporate them in their services. The work-at-home movement certainly is a part of this; it’s affecting the call center world and also the technology development and maintenance world, particularly for legacy applications.

We also see a lot of service providers relying more on contracting with SMEs rather than employing them. The contracting model allows providers to bring in subject matter expertise as required on a just-in-time basis.

We also see service providers experimenting with crowdsourcing within their own organizations. In large outsourcing organizations, we’re starting to see requirements go out for internal departmental and individual bids on work.

Considering all of the experiments together, we see a dawning recognition that providers know they need to adjust their talent models to incorporate the gig economy into their service delivery. Look for this blog to keep track of this movement and show use cases as they evolve.

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