What is the external workforce?
They're known by many names - contractors, consultants, freelancers, service providers, and contingent workforce.
What they are is essential to the success of your business.
Welcome to the New Way Work Gets Done:
The External Workforce Takes the Spotlight
In a global economy in which digital skills and other specialized capabilities can make or break a business,
meeting the demand for talent at the right time and in the right place is essential.
Enter stage left: the external workforce.
A fundamental shift is taking place in today’s workforce. In the past, the majority of a company’s labor force consisted of full-time employees who stayed with the same organization for years.
Now a “new normal” exists – global organizations increasingly rely on many sources of talent beyond their traditional, full-time employees – this is known as the external workforce.
In fact, the external workforce is the fastest growing segment of the labor market. A 2016 study by the National Bureau of Economic Research suggests that net job growth in the United States between 2005 and 2015 was due entirely to the external workforce, including contingent workers, temporary and seasonal workers, independent contractors or freelancers, and contract employees.
SAP Fieldglass conducted a global research study, in collaboration with Oxford Economics, examining how the external workforce is reshaping how work gets done.
The results are clear: the external workforce enables an impressive range of business outcomes.
The external workforce can be thought of in two categories: Contingent Workers and Services Procurement.
Contingent workers are individuals hired by a company to do role- or project-based work on its behalf, but not as traditional employees. They could include independent contractors, consultants, freelancers, temps, or other outsourced labor. These workers could be contracted via suppliers for these types of workers and other talent pools such as staffing agencies or freelance market or sourced directly.
Services Procurement, or specifically services providers, are companies that deliver people-based services to an enterprise – consulting firms, marketing agencies, or facilities management companies, for example. They are typically contracted to do project-based work via a Statement of Work (SOW).
External workers are in high demand across roles, departments and industries. It includes everyone from the temporary administrative assistant down the hall filling in for an employee on medical leave to the DevOps Specialist half-way around the world designing a new application for the enterprise.
External workers are known by many names:
- Independent contractors
- Non-full time
- Offshore external
- Multi-channel workforce
External workers may perform many roles, across all departments, such as:
- IT Specialist
- Construction worker
- Web designer
- Project Manager
Because we live in a fast-paced, always-on, global and digital economy, organizations that can engage talent with agility and flexibility reap many advantages. The more nimble a company is, the better it can respond to competitive threats and pivot to capitalize on new opportunities. Enterprises need to be able to deploy resources quickly – wherever and whenever they are needed – to maximize ROI and achieve global business benefits.
By engaging the external workforce, companies can secure hard-to-find skills, scale up and down to meet demand, and increase speed to value without the overhead costs that typically come with salaried staff. Organizations are able to employ highly specialized talent and resources anywhere in the world, at any time. With a robust vendor management platform like SAP Fieldglass, enterprises increase access to a talent pool of digital natives and next-generation talent, select and hire the best talent globally, and then gain a full view into this workforce segment to see what work is being don, where and for which rates. SAP Fieldglass also enables businesses to fully manage this workforce throughout the project lifecycle, from securely onboarding to offboarding, tracking milestones, deliverables and compliance along the way.
Gone is the mindset that considers the external workforce as peripheral or as understudies to the main cast of employees. Recent research articles by Deloitte and Entrepreneur Magazine and others reinforce that the external workforce is essential to improving business operations, increasing speed to market, improving overall financial performance, and effectively competing in a digital world.
In a 2018 research study by SAP Fieldglass, in collaboration with Oxford Economics, nearly half (46%) of executives said that without an external workforce they would be unable to conduct business as usual, and about two-thirds (65%) said the external workforce is important or very important to operating at full capacity and meeting market demands.
This shift shows no signs of slowing down. 91% of executives say the external workforce will be important for sourcing skills that are in scarce supply in three years’ time. Increasingly, the external workforce is becoming critical to business strategy and success.
Companies who manage their external talent and services providers effectively are finding it to be a key driver of competitive advantage, while others risk being left behind as their rivals make better use of these critical human resources. The lack of insight into their external workforce – even answering simple visibility questions like: where are they? What jobs do they do? What is the pay? – can be a serious problem for companies that can’t effectively manage their global external workforce.
New work arrangements require a new kind of management. For over twenty years, one type of solution has transformed how companies find, engage, and manage their growing external workforce: a vendor management system or VMS.
Now that you're more familiar with the external workforce, learn more about vendor management software in our education library article What is a VMS?