The challenge of a decentralised workforceStatistics from PwC show in 2000, approximately 20% of workers in large corporates in developed countries were external (ie. contractors, temps, etc.). However, by 2020 this figure is expected to rise to 60% with only 40% employed directly. In IT the figures are even higher with the external workforce now getting around 70% of IT budgets from global companies.
“For companies, it’s often more cost-effective also to hire specialist IT contractors for certain jobs than train in-house teams.”In today’s volatile market, where reduced headcount and budget flexibility are the keys to remaining competitive and defending themselves against ‘digital disruption’, external workers are often preferred to employees. However, finding external IT talent, especially in such a competitive marketplace, isn’t always easy. Sourcing them through recruitment agencies or social networks can be both slow and expensive. It also requires high levels of administration to process all the necessary paperwork including contracts, purchase orders, timesheets, and invoices.
Flexible employees, lower wagesConsequently, income for the external workers is often lower than it could be with 15-25% revenue going to intermediaries and additional agencies (for example it’s not unusual for a recruitment company to subcontract payment to their contractors to another umbrella company for handling invoices and payments).
“Payments can be delayed by 60 to 90 days because of long and complicated approval processes.”But just how can this ‘friction’ be reduced so that suppliers can be matched easily and cheaply with companies requiring their services? One solution is through an online marketplace platform. Plenty of these exist. For example, for relatively cheap one-off gigs – especially around design and marketing there is Fiverr.com whilst for longer-term freelance projects, there are platforms such as Upwork. In addition to these, there are specialist platforms aimed at IT professionals such as Toptal.
Why blockchain will revolutionise IT staffing issuesHowever, while marketplace platforms certainly help to reduce the friction between the supplier and the corporate client, they are only part of the solution, Blockchain is the answer. A sequence of blocks, or a distributed ledger, in which every participant possesses a complete copy of the data, Blockchain enables companies to have much greater visibility of their supply chain compared to traditional Electronic Data Interchange (EDI) – the common standard for business communications since the 1970s. With Blockchain, you can track every single stage of delivery without the need for manual checks thereby massively improving efficiency and saving companies a fortune in the process.
Smart contractsUnderpinning the blockchain revolution are smart contracts. These are pieces of code, or tiny computer programs, that sit on top of a blockchain and which execute an action (such as a payment) when certain conditions are met. For example, in-house buying they could be used to automatically transfer the deeds of a property to the new owner once full payment is made, thus reducing human intervention in the form of expensive lawyers! In the IT sector, one of the main challenges for employers as well as recruitment agencies is constantly having to find new contractors to work on short and mid-term projects – a problem which is only going to get worse with an increasingly decentralised workforce. For the employer this means constantly checking and validating a potential candidate’s references while for the contractor it means time spent updating their CV and sending off applications.
Smart contracts promise to make this tedious process a thing of the past. A smart contract can store personal information – such as previous experience, degrees, skills etc – and because this information is on blockchain it can’t be tampered with.
Blockchain benefits allFurthermore, it’s possible to speed up the onboarding process – time which could be spent working on the project – because tax obligations and labour agreements can be integrated into a smart contract as a matter of course.
Nor are benefits restricted to the employer. There are benefits for the contractor too.For example, remuneration could be embedded into the smart contract so that each time a milestone is reached, it automatically triggers payment rather than having to wait potentially months for payment. While it’s easy to dismiss blockchain because of the hype around cryptocurrency, there’s no doubt the secure peer-to-peer technology is set to have a profound impact on the IT industry and across many different sectors over the coming years. Igor Putrenko is the founder of IT Suppliers.
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