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A recent Forbes article by Matt Mottola entitled, “Every freelance platform needs an enterprise strategy” was a popular read last year. The title and story line are accurate without doubt. Big corporate clientship of freelancing offers several important advantages to freelancers and to the marketplaces that support them.
For example, Howdy found that big corporates offered Latam freelancers higher pay and more attractive working conditions. Michael Kearns, CEO of Virtasant notes that big companies are more prepared to engage freelancers on larger and longer projects. Codemonk recognizes the benefit of deeper, longer term, strategic relationships. Enterprises are also more willing to think global as freelance platforms Indielist, Uncompany, and Ollo discovered working together on behalf of a large global technology company. G2i and Andela are two of the platforms that recognized the potential of Enterprise to drive significant revenue growth. Expert powerhouse and Redegate found that big company clients also supported collateral opportunity in areas like expert networks or corporate education. Flock notes that Enterprise growth is a reputation builder.
A number of reasons led the freelance revolution to be more quickly embraced by startups and small and medium sized (SMB) organizations. Not surprisingly, as Scotland’s Gigged.ai CEO Rich Wilson points out, SMBs organizations are more likely to experience urgent talent gaps as they grow and strategically pivot. Claus Leinoe, CEO and founder of Denmark’s Jelber finds they are more open to temporary talent and contingent staffing by necessity. Norway’s Folq points out that SMB clients find freelancing an efficient means of attracting difficult-to-find and expensive-to-own fulltime talent when in fact they’re only needed periodically or “on demand”.
But change is in the wind. A 2024 Malt survey of 5000 European freelancers found that big corporates – what pundits generally mean by “enterprise” – provided about half of freelancer’s work in 2023 overall, and specifically 34% for German freelancers and 51% for French freelancers. By contrast, in 2021, Enterprise represented only 20% in Germany and 14% in France. It’s a meaningful change in a short period of time.
As Michael Solomon, co-CEO of 10x Management explained, working with Enterprise companies is different. The sales cycle is longer. Requirements are greater. Competition is more intense. There are more steps, more decision makers, and more gatekeepers. Compliance is a huge concern and, hence, the psychology is different. Big corporates tend to see freelancing as imposing a series of risks and potential liabilities that need to be managed. For the big corporate crowd, freelancing remains a work in progress, not yet fully formed or professionalized.
In turn, the challenge for freelance marketplaces interested in expanding their big corporate business is this: How to demonstrate the ability to manage the important risk factors that stand between freelancers and Enterprise clients. As a first step, it’s important to clarify what these risk factors are:
Business continuity risk – Does the platform have the financial means to remain in business for the foreseeable future?
Talent risk – How can we be sure the platform talent meets my requirements for technical competence and experience?
Scale risk – Does the platform have the talent and systems to expand as our needs increase?
Cultural risk – Can I feel confident that freelancers on the platform have the interpersonal skills to work effectively with our staff?
Retention risk – How can we be sure platform talent will remain fully engaged until the work is completed?
IP risk – How can we be sure the platform and talent respect our requirements for confidentiality?
Compliance risk – How can we ensure we are operating legally and protected from suit or fine as the protection an agency or company would offer?
Outcome risk – Will the platform commit to delivering the outcomes promised, and doing what’s necessary if outcomes are missed?
Insight risk – Will the platform offer guidance that helps us (HR) manage total talent e.g., insights about future talent demand, high in-demand skills, compensation trends.
New-to-me risk – Will the platform protect me (as the decision maker). Working with freelancers feels risky. Will you help mitigate the risks to me and my team?
Freelancers can’t wish away these risk factors, but they can understand them. Success working with both SMB and Enterprise clients depends on how well freelancers and their freelance marketplaces understand the concerns and take action accordingly.
To help freelance marketplaces to better understand the variety and intensity of risk-related concerns, Humancloud undertook a pilot study working with freelance marketplace CEOs and executives in the US and internationally. Leaders from the DACH region as well as Germany, Benelux, UK, France, Spain, and Latam participated. Marketplace executives were asked to share their ratings of the risk factors for both SMB and Enterprises using a five point scale where 1=not a risk factor, and 5=significant risk factor.
Here’s what the survey found:
humancloud.work
A quick review of the data from this pilot study points out several risk factors that are shared by both SMB and Enterprise companies, three key areas where Enterprise worries are meaningfully higher than SMB, and two new risks worth understanding:
First, there are many risk related concerns that freelance marketplace executives see as common to both SMB and Enterprise companies. Six of the 10 risk factors were judged to be important enough to be at least moderately important as a consideration in establishing working relationships with freelance marketplaces.
The areas where risk was generally seen as low was cultural risk and insight risk. The worry that freelancers lack the skills to act professionally and effectively cooperate was low. The expectation that marketplace might not provide guidance, education, or research on broader talent issues and challenges was also deemed a lesser concern.
Four risk factors were described as significant for both SMBs and Enterprises:
· Talent risk
· Retention risk
· Outcome risk
· New-to-me risk
It’s no surprise that access to high quality talent and the commitment to doing the complete job (retention risk) were shared concerns. It’s worth noting that clients – both SMB and Enterprise – increasingly expect freelance marketplaces to meet specific outcomes rather than simply broker a relationship between freelancers and clients.
This is a material change, as is the expectation that platforms will act in ways and provide support that enables HR and other big corporate clients to reduce their personal risk in selecting a freelance solution. “New-to-me” risk is an important factor that marketplaces must incorporate into their service.
The pilot survey also found a number of areas where big corporates are expected to be more risk sensitive:
· Scale risk
· IP risk
· Compliance risk
The first of these is scale risk, the ability to expand and contract services as required by clients. Big corporates are keen to leverage successful work, and admired talent, over their larger base, and expect preferred freelance marketplaces to have the scale to be able to support this.
IP risk is a second critical area. Enterprises are seen as more sensitive to misbehavior or inappropriate sharing of confidential client information, and the consequences of IP issues is seen as more problematic.
And as expected, compliance risk is a big concern for the Enterprise segment; after all, the size and potential cost of problems is magnified. For example, Nike may have misclassified thousands of freelancers or other temporary office workers and now faces a potential tax fine of $530 million. A 2022 settlement with the State of New Jersey cost Uber over $100 million.
It’s also worth mentioning that two newly identified risk areas received strong votes of affirmation in the pilot study. For example, Insight risk – will the marketplace provide insight and support in utilizing freelancers – was one of the few areas where SMBs were expected to be more demanding of assistance than big corporates. Expect both client categories to want more platform support.
Finally, new-to-me risk is an obvious, important, and rarely mentioned risk factor. HR’s lack of involvement with freelancers until recently is indicative of real uncertainty in how to strategically factor freelancing into talent requirements and work and organization design. For freelancing to fully embed, marketplaces will have to be consultants and educators, providing independent talent with more than a dash of change management.
Viva la revolution!