a person walking in water with reflection of white clouds

Although half of U.S. workers may freelance within the next few years, large companies are still reluctant to utilize this growing workforce. That’s according to The Staffing Industry Analysts’ (SIA) annual report: The Gig Economy and Human Cloud Landscape. Here’s what’s causing hesitation from companies and why the SIA predicts it will change.

What is the human cloud?

Before jumping into the report’s findings, let’s understand how the SIA defines the human cloud. It’s a “group of technology companies that connect workers to work through a website or some other digital platform.” This includes online platforms, crowdsourcing, and online work services.

SIA human cloud framework

Human cloud usage grew a healthy 65% in 2017, reaching $82.4 billion in spend. Although B2C companies (think Uber and Ele.me) comprise 90% of human cloud use, trends show a bright future for the B2B segment—predominantly in online staffing.

The B2B segment of the human cloud grew 19% in 2017, reaching $6.4 billion. Of that spend, online staffing generated an estimated $5.2 billion.

WHY USE OF HUMAN CLOUD SOLUTIONS REMAINS LOW

In response to large companies increasing their use of flexible talent, a new crop of solutions developed including Freelancer Management Systems (FMS). An FMS helps companies reduce risk and simplify talent engagement. However, use of these online solutions remain relatively low at 13% in 2017.

Although today’s FMSs provide more time-saving services and capabilities, many companies primarily use the platforms as freelancer or agency marketplaces instead of an end-to-end solution.

But interest is growing as 21% of enterprises surveyed say they consider using an FMS within the next two years. This suggests FMS use may grow as companies see online platforms less as a talent channel and more as a solution that delivers greater efficiencies and cost savings.

enterprise use of human cloud services

4 REASONS WHY LARGE COMPANIES ARE HOLDING BACK

The bottom-line value of online platforms are well documented, so why are large companies so slow to adopt human cloud services? The SIA report uncovered four main reasons:

  1. Trusting work to someone offsite. Most of the B2B human cloud works remotely, which can create discomfort for employees. Many of the employees surveyed didn’t understand how to properly vet and collaborate with talent they’ve never met. And employees were concerned about risks such as data security and IP rights.
  2. Taking responsibility as employer. Most human cloud vendors are technology platforms where people can connect with companies. The platforms don’t employ the freelancers or agency workers who use the platform. To many companies, this raises a red flag that they may be seen as the freelancer’s or agency’s employer.
  3. Questioning how vendors can really help. Companies believed many human cloud vendors over promise themselves as being the total solution to all their contingent workforce needs. But companies understand even the largest vendors specialize in certain industries or verticals. Without clarity about which markets vendors serve and the problems they solve, companies remain guarded.
  4. Vetting the right talent. When posting a project on an online platform, an employee may receive dozens of proposal submissions and wonder how to select the ideal talent. Some talent resources try to reduce the overwhelm by providing services such as shortlisting talent, but companies still feel uncertain about the process.

LOOKING FORWARD

There’s a growing trend that may help companies embrace FMSs and other online solutions. Vendor management systems (VMS) are beginning to integrate human cloud applications to provide companies a more robust solution. Early reports suggest that companies sourcing talent from a VMS-enabled human cloud marketplace can save 10%-15% compared to a traditional staffing channel.

Despite company’s hesitations, the SIA expects human cloud spend to continuing growing in the B2B segment. The growth is driven by greater global internet access, people becoming more comfortable with working through an app, and how the digitization of work enables it to be performed remotely.

The workforce industry notices these trends and companies are changing their business models to remain relevant. Partnerships are forming between technology vendors, management consulting firms, and staffing companies at an increasing rate. SIA predicts such partnerships will create hybrid firms. Before long, it may be difficult to distinguish between traditional and online staffing.