Episode 4 Transcript

Intro

Matt: Welcome back to the show everybody, the Professional Services Pursuit, a podcast featuring expert advice and insights on the professional services industry. My name is Matt Finch and my guest today is John Ragsdale, Distinguished Researcher and Vice-President of Technology Ecosystems at TSIA. John, amazing to have you on the show, I can't believe we've managed to secure you as a guest on our show. I'm absolutely delighted, thank you for joining us.

John: Oh man, it’s great to be here. It's a fun topic and I’m looking forward to the conversation.

Matt: Yeah, fantastic and it's funny whenever I hear of TSIA, I think of just the industry experts, talk about thought leaders in the space, right? I encourage any of our listeners if you don't know TSIA, absolutely look them up, Technology and Services Industry Association. Follow them, join them, become members, learn from them, they’re just an amazing resource for the services industry. So John, we're delighted to have you on the show today. Really our topic is going to be around this concept of the network economy, the liquid workforce and these are terms I'm going to ask you to help us define as we go through. But John, as we've gone through COVID, you know touch wood/fingers crossed coming out the other side and emerging in this new world, help me define initially what you would say the network economy is. Especially in the construct of now COVID and what that means to the world and all of the flexibility that's now required. We noted by the way, a 57% increase in the use of freelancers since COVID started, which is pretty incredible, but let's just take a few steps back. Network economy, liquid workforce, talk us through that from your perspective as a thought leader in this space.

What is the Liquid Workforce?

John: Well I know it's sort of a new concept, especially when we're looking at professional services and consultants, traditionally, this has either been owned by employees or subcontracted through companies that you had a great relationship with. But whether you call it liquid workforce, freelancers, on-demand workforce, gig workers, whatever you want to call it, I think the reality is this is becoming a much more common paradigm and definitely will be in the future. So I recently had an opportunity to interview Joseph Fuller, who's a professor of management practice at Harvard Business School, he's also the co-chair of their project on managing the future of work. And he recently published a study building the on-demand workforce in partnership with the Boston consulting group and they surveyed 700 senior business leaders at US firms about their use of an on-demand workforce. Any familiarity they had with these new emerging digital talent platforms, which I'll talk more about later, but I think that's really the key to doing this successfully.

And a couple of findings from that report is that 40% of the executives they interviewed have already used these digital talent platforms to find highly skilled workers and that was the focus of this study. Not on Uber drivers, but on highly skilled people that had a certain skill set or competencies, industry experience, et cetera. 90% of the executives said that they saw that these talent platforms, so would either be somewhat or very important to their future competitive advantage. So companies understand the need to scale. The other data point from that survey I'll bring up is that 60% of the executives said it was highly likely or somewhat likely that they would reduce their own employees and increase their on-demand talent moving forward. Whether they've acted on this or not, I think that they recognize that there are a number of trends taking place here and as you said, there are some big challenges to this model, but there are also some huge opportunities.

Matt: Amazing. So I mean the concept of freelancers, contractors, gig workers, whatever the new terminology might be. You know, certainly the term gig workers has been more recent, liquid workforce, network economy is one phraseology we're seeing now. But the concept of freelancers and contractors has been around decades longer. It's just somebody that wants to be available to more than just one employer on a contract-style basis. You turn up, you do a job, you get paid and then you move on to the next one. So do you think COVID has been a real driver of that or was this coming anyway?

Has COVID-19 Accelerated the Use of Freelancers in Professional Services?

John: Well there's a number of trends around that. I think COVID has accelerated those because even companies that had never done any experimentation with remote workers or contract workers have had to figure out a way to make home-based remote workers successful. And what we are seeing in a lot of news reports right now is that workers really liked this model. They don't want to go back to the nine to five office job and if that's something that's going to be required by their employers, they're going to look for alternatives. And this gig approach really appeals to them because it gives them a very flexible work schedule. If they want to pound out 80 hours a week and then take three months off and go to Europe, they can do that. Our surveys told us that after COVID-19, 97% of our member companies, who are all B2B tech companies, said that they intend to keep delivering some professional services remotely that were previously delivered on-site. So they see that this is going to be a reality. A couple of other trends that were already in place before the pandemic, the first thing is younger workers just have a very different attitude toward how they want to work. And there are a lot of studies about millennials. One said that 91% of millennials expect to stay in a job for less than three years. They'll have 15 to 20 jobs over the course of their working lives. So this is a huge difference from baby boomers and other generations who are the senior people in companies where we were taught that you get a degree, you get a job at a company, you work your way up and you stay there until you retire. And younger workers, millennials and Gen Z are just not interested in that.

Another thing is that tech companies are constantly expanding into new industries, new geographies. I mean, is there any tech company that does not now have a healthcare vertical after the last year and the huge amount of spending going on in healthcare? And as you start opening offices in far-flung regions of the world and you start going after more industries that you don't have a lot of expertise in, just having the right expertise becomes much more challenging. Here I am in Silicon Valley and I know companies that have open recs for consultants open for a year or more because it's a very competitive market. Attrition is high and filling those slots is really, really difficult. So as you start needing new skills, new industry experts, people in certain geographies where you don't have a lot of brand identity, moving to the contractor liquid workforce concept, really makes sense.

Fixed-Price Predefined Project Management Trends

Another trend that I think is really important to this is if we look at professional services a decade ago, 80% or more of the projects were custom pay-as-you-go projects. But as we see companies shift from on-premise to the cloud, we start seeing many more projects are fixed-price predefined projects. And a lot of cloud companies when you buy it, you get an implementation option, A, B or C, so there's not a lot of custom work anymore. Currently, 53% of all professional services projects according to our benchmark data are now fixed price predefined. And obviously, these predefined repeatable projects can be very well-documented. So every time you complete one, you capture your lessons learned, your best practices, the library of customization code. So there's really less training and expertise required to execute these projects. And that means that these projects are really ripe to go to some of these crowdsourced resources because they don't need three months of training in order to be effective.

So I think it's fair to say, there were some early approaches to crowdsourcing, tech projects, there was a startup, which I won't mention because a friend of mine was head of products there, that was really very early on. And some of those were, let's be honest, kind of a disaster. Very often they would just put projects out for you to bid on and people that didn't have the right skills were bidding and getting projects and it didn't turn out so well. But that’s where those digital talent platforms come in because they eliminate the risk because you give them a hiring profile. The skills you need, the languages you need to speak, the code requirements, the products they've got to have expertise on and they will find those workers for you. And they take care of the payments, the paperwork, the W2's and all of that. So I think a lot of executives may have had some poor experiences with early approaches to this. But if you haven’t checked out where this industry is, I would say spend some time looking at the options because it definitely is a much lower risk than it used to be.

Matt: Yeah, I think it's a really interesting point around that solution space that you mentioned, I mean without revealing too much about how old I am. You know, I remember the days of floppy disks in drive writing tons of code, sat in a freezing cold server room on a Saturday afternoon upgrading a system. I just remember the margin erosion that we had based on the fact that these solutions were entirely custom versus the ones now where you can just pick up a module, pick up a pre-packaged solution and then deliver it within a certain amount of time. And this kind of move to SaaS I think has really driven that because they are designed to be more product-led than solution-led.

Even though many SaaS solutions are hugely customizable, I think a lot of companies have gone through that early digital transformation maybe in the late eighties, early nineties and figured out what worked and what didn't. These enormous on-premise projects that they used to do. You've got to be boots on the ground versus I can be wherever I want to be in the world, delivering a certain package to this company. And I've got a skill set and I put myself on the marketplace, I deliver that solution and I move on to the next one. I think it's a really fascinating change from a technology perspective, but also the way that the workforce is responding to that. I think that that generational shift is really interesting between those two generations. And bringing people along for the ride for them into the new world, I think is super fascinating.

Just a quick question based on something you mentioned there, you know, if you are that tech company that's had that job requisition open for a year and you can't find it, how does someone stay competitive? Is it purely just a money thing? Do we just need to offer more money and someone will come along or is it a different thing? What kind of things would attract the right person these days to open a requisition that's been there for a year?

How to be a Competitive Employer in a Tough Job Market

John: Well most of the companies I see here in Silicon Valley are requiring that you were here, that you were in the office five days a week, et cetera, et cetera and COVID broke all of those assumptions. And so if you've got a rec sitting open, if you're only recruiting from a very particular region and there's an expectation that they're going to spend some or all of their time in the office, you're going to have to throw that out the window. What we've seen here in the Bay Area is a lot of people who were paying ridiculous real estate prices because they had to be within commuting distance of their employer have all moved to the Midwest or someplace else. A lot of people moved to Tahoe, where you can get a lot more real estate for your money and you can work anywhere. So again, I think companies that are clinging to some of those old paradigms about owned on-premise employees are gonna have to change their ideas. Because there's some amazing talent out there, but they're not within an hour of your office and they're not going to drive into work every day.

Matt: Yes and they're not going to want to pay Silicon Valley prices to live and the cost of living and tax implications of course as well. I mean we see an interesting migration to certain states in the United States that have different tax implications for people as well. So I can pay less tax, get a bigger house for my money, do the same job and deliver the same service and value to the company that I'm working for. I think it's a really interesting prospect. But also and maybe this is me being old school, I think there is an element that people miss from that human connection, you know physically being in an office. You’ve got to be prepared at some point to still go back to an office, work with people face-to-face and just get stuff done. I think that balance is really there and we've spoken before about how you can't go to too much of the extreme. You can't go and bury yourself in Greenland in a hut somewhere and as long as you've got an internet connection, you can work. You still need that human connection and that ability to travel, see and meet people too. Would you tend to agree with that or do you think it's all going completely remote and no one's going to be in a head office ever again?

John: Well I've worked from home since 2003, so I'm a big believer in distance work. However, my company still has a kickoff every year and we all get together in the same rooms. And the amount of networking and knowledge sharing and collaboration that go on and just relationship building that you do face to face, I don't think you can ever replicate that 100%. We've been doing our conferences virtually now for a couple of years, we've got our first in-person conference in Vegas coming up in a few weeks.

Matt: I'm looking forward to it John, I can't wait.

John: The members are chomping at the bit. And I've missed that and just seeing those people and shaking those hands and having those one-on-one conversations in the hallway that yes, you technically can have the experience in a virtual world, but it's missing a lot of quality there. I think the opportunities for the in-person, do we need it at 100%? No. Can we use it for strategic conversations? Yes, but I don't think we're ever going to get away from it completely.

Matt: I think that you’re spot on with that notion that you just can’t replace that in-person stuff. I think that balance is what’s going to drive the success of this moving forward, but you have to be flexible, you have to allow for the skills and the people and the resources to be anywhere in the world. But also encourage and cultivate a mindset and a culture that says it's still great to meet with people and be in person. I think that balance is really important.

John: I think especially in a subscription economy, you've got to be building these very strong relationships with customers. And even if you can do 90% of an implementation remotely, having some in-person contact with your strategic accounts is really critical because it builds that stickiness from the beginning. And whether it’s with the implementation team or a customer success manager or whomever, having some face-to-face contact really increases the stickiness of that relationship. And ultimately is going to impact long-term ability to expand selling and renewals and more rapid adoption. It just builds so much credibility. So yes, while I do think that most projects and implementations can be primarily done remotely, I hope that we're going to keep some on-premise components to do some of the strategic mappings. And then understanding what's really unique about each customer because you can't lose that completely.

Matt: Fantastic. So just kind of moving topics here for a second, a lot of companies are going to be pretty hesitant to move to this kind of large scale, on-demand liquid workforce. You know certainly the more modern tech companies would find this may be an easier path to take. But maybe if you've been around for a while, you've been through lots of different styles and cultures of the workforce and now you're in this new world, what would you, as kind of a thought leader and advisor here give as some advice or certainly next steps that any firm could take in exploring this idea of the on-demand work?

The Risks and Rewards of a Using Freelancers Instead of Full-Time Employees

John: Well again, referencing the Harvard study, part of the interviews and survey work they did was understanding what the challenges were moving to this sort of paradigm and there's a lot that you expect. Do they worry about how we effectively manage dispersed teams? How do we onboard freelancers effectively? There's the risk of sharing your intellectual property with the gig worker who's probably doing projects for your competitor as well. But the single biggest barrier that they found was that executives saw the potential for this. The frontline workers want the model, but the frontline managers are just not open to the idea. We've always done it this way and they're very resistant to change. And having spent the last decade working with tech companies on digital transformation, I don't want to pick on middle management here, but it's really a common theme. The executives have this vision, the younger workers are anxious to do anything new and different and try new approaches, but middle management drags their feet on giving way.

So first of all, managers need to understand that these new approaches to staffing are absolutely required if they're going to scale and with the constant increase in product complexity, you need new and greater skills all the time. Every release has more AI embedded into it. Like I said, you may be going after healthcare and you suddenly need people with a lot of domain expertise working with healthcare companies on HIPAA compliance. Which definitely most companies don't know that much about. I think if you present them with not only the business case for doing it, but also they can understand the new approaches to finding, recruiting and training that talent, they'll get over some of those concerns, but change management is hard.

Matt: Yeah absolutely. I almost feel like there's a cultural change in management as much as anything else. And a huge part of change management really is the people of course, but if you've got that middle management mindset, most stuck in their ways and more hesitant to adopt, I feel like that's the group to tackle first. You've got to make sure that those folks are on board with the vision and with the culture of the new workforce, so yeah, super interesting. Onboarding in particular I think it's an interesting topic because so many companies have long and let's say maybe arduous onboarding processes for brand new employees. And sometimes they are wonderful cultural experiences and other times they are dreadful classroom experiences where you sit there for weeks and weeks and just get kind of fire hydrant style. What would be an approach to onboarding a freelancer, especially if they're on a fairly short-term project? How would you approach that?

How to Onboard Freelancers Effectively

John: I think you're right and if we're honest with ourselves, tech companies have traditionally not been very good at onboarding, especially remote workers. And this was one of the biggest challenges in the early days of COVID-19 as they were hiring people. They had always flown them into the corporate office for a month to train them and they suddenly couldn't do that and they didn't have the systems, nor the skills. So we had to figure that out and so I'm hoping that it's not such a big roadblock as it has been in the past. You talked about the importance of culture and building a knowledge-sharing collaborative culture is not an easy thing to do. But if this is going to work, it's absolutely got to be a part of it because these gig workers want to feel that they're a part of the company, they're a part of the team. They don't view themselves as some pay-for-hire person that's not engaged with you, they feel that they're a valuable part of your company and if you can't make them feel that they're probably not gonna want to do a lot of work for you.

So I think if you're looking at how you should onboard these folks, clearly this has been an issue for a while. At one of our Vegas events a couple of years ago, I did a breakfast tabletop discussion on multiple generations in the workplace. And one of the members said that they were having a real issue bringing new talent in for professional services because traditionally it took three months of training before you could do your first project. These young workers were saying if I can't be on a project my first week on the job, I don't want to work here. I'm not going to spend three months learning before I actually get to do something. The old way of doing things had already reached its limit, but I was talking about the fact that more projects are predefined, fixed-price repeatable. And if you're doing a good job of capturing lessons learned, best practices, creating project plans that are incredibly detailed, these are really good things that you can give to contractors to do. They've got a playbook, they got a blueprint, they got a roadmap, they can execute that without having weeks and weeks of training. But the key here is that they've got to have an open line to ask questions.

So if they don't know how to do something, they can't sit frustrated and feeling isolated, they've got to have a buddy they can call or a manager they can call or some open communication and some collaboration platform. I mean you guys have a collaboration platform as part of your PSA offering and that's really critical that there's gotta be a way you can just throw questions and suggestions and ideas out there and people are going to be collaborating with you. So I think if you create that culture of knowledge sharing and collaboration and you're doing a good job of creating those execution plans for projects, it really shouldn't take three months to get one of these freelancers up to speed. Hopefully you can give them a week's worth of overview, let them play in a test environment and get started.

Matt: I think that talks back to your earlier point of those middle managers, you know, the people responsible for looking after and helping these people execute their daily lives and the activities that they've been brought on to execute. That's why those middle managers are so important because we've got to adapt and change to probably just be a week's onboarding and not the traditional two months that everybody's used to doing. And whilst the executive might give you the go-ahead to hire a freelancer or gig economy worker, actually you've got to be prepared to change the culture of the team to adapt and adopt that person. I think that's a really, really interesting point. The other thing that I just kind of picked up on there a little bit as well, was this concept of a network economy worker, a gig economy worker, having a different relationship with the company from a financial perspective and contractual perspective, but not from a cultural perspective. They should be part of the team and it doesn't matter in the background how they’re paid or how they bill their time or what their financial relationship is with the organization. When they're part of a team executing on a project, if you are a permanent employee or a gig worker that's there for a year or for a week doing a job that culture should be the same, it shouldn't be any different.

John: Yeah and that's a big change for tech companies. I mean I worked for a number of CRM vendors and we would bring in like a language expert to create the multilingual version of our software and boy, they were ostracized. They sat in a different little cubicle, they didn't go to lunch with us, we didn't even know their name. They were not part of the team and that was not a great experience for them. It probably didn't ultimately create great multilingual versions of our software for our customers. But younger workers today, the way they approach work and whether they're a permanent employee or they're just signed on to do a project, view themselves as a part of the team and one of your coworkers. And if they don't feel that love, they're not going to stick around for long because they want to feel valued and appreciated and get to work and help you be successful. Make that happen.

Matt: Absolutely, yeah. It's kind of back to that cultural element of it. Doesn't matter what relationship you have, it's someone that's part of the team. Yeah, very good. John, what should companies be looking out for in the future? What plans do they need to be putting in place to be prepared? Is there going to be another bubble to burst? What are the trends that you're seeing and that you're forecasting heading into 2022 that somebody working with the network dichotomy is going to have to engage with? Talk to us about the future John, get your crystal ball out. Tell me the lottery numbers for this weekend and give me your trends for the future in the services world.

Current Trends in the Tech Industry and the Need For Resource Forecasting

John: Well, there's been so much gloom and doom about tech spending and the long-term impacts of the pandemic on the tech industry and boy, I'm just not seeing it. I do an annual technology survey of our members every year, looking at adoption and plan spending of key technology across professional services, support, education services, customer success. And boy, last year we saw the highest plan spending I had ever seen in the 15 years I've been doing the surveys. The reality is a lot of companies eliminated their travel budget, they eliminated their events budget and they had extra money and they started plugging it in the infrastructure. So they started attacking a lot of upgrading and bringing in some new tools that they had been putting off. The 2021 surveys are open right now and I'm hoping to release those results in a couple of weeks and again, I'm seeing very high plan spending.

I'll give you an example of professional services automation, adoption went from 72% last year to 85% this year. 85% of tech companies have adopted PSA, but 55% of them are saying they're planning additional investment in the next one to two years. So there's a lot of tech spending and I think that we've seen some pent-up demand finally coming to reality, pipelines are big. So I think there's a lot of growth out there, but bringing it back to this topic, I think if you're in professional services, one of the things you need to do a better job of is resource forecasting. When I interview people about why they have purchased professional services automation, one of the most common reasons is revenue forecasting. Because you know, now they've got a number and they've got to hit that number and they want a better understanding of what projects are being quoted to customers, what's the likelihood of closure or how much revenue. But also they're getting more visibility into what is being positioned because very often sales sells what's easy to sell. It may or may not be what you want them to sell and the more advanced insight you get into that you can do better coaching about maybe pushing the projects that you want to sell. Which you're probably more revenue, better margins. But along with doing that revenue forecasting, you also need to do the resource forecasting and I see a lot of companies not doing that. And that means what are the projects being quoted that could potentially close six months, 12 months, 18 months out and what are the skill sets I need to be successful with those projects?

So that’s where if you've released a new analytics product or it's on the roadmap and they're pre-selling it, or you're making a foray into retail, financial services or healthcare, you've got a year's notice that you need to start recruiting some consultants with expertise. Because the worst scenario is you start closing these deals, you don't have enough resources or the right resources and then you end up with a backlog. And let me tell you, if you want a customer that's going to be a long-term renewing customer, telling them they just went through a years sales cycle, they paid you and now you're telling them it's going to be six months before you can implement, boy you're doomed from the beginning. So I'm hoping that companies are going to leverage their PSA platforms to get a better look at what's coming down the pipeline and get a really advanced look at where their resources need to be a year from now. And that's going to push them to start identifying some new approaches to bringing in the right workers with the right skillset and the right locations because I don't believe they're going to be able to scale up with the old model.

Matt: Yeah, I think you're spot on John and something that we've seen, certainly a big uptick in with the conversations we have is our traditional integrations with Mavenlink would be the CRM and finance system. But actually it's now the applicant tracking systems and the people systems to say our sales pipeline tells us that we're going to probably need these skills in six months time. We don't want to be asking for them when the deal closes, we want to start searching for them when our early-stage sales pipeline tells us we're probably going to need this. And we’re seeing a lot more of those conversations happen as well, so I feel like that kind of resource forecasting and the intelligence behind it, is really in more demand than ever. That's a really interesting point.

So John, just to kind of wrap us up here, talk us through what are the final points you'd like, our listeners and anybody listening to this podcast to take away. What are the key messages you want people to take away from this?

Overcome Barriers to Recruiting via Digital Talent Platforms

John: Change is hard, but it is inevitable and the companies that are the most open to change tend to be the most successful companies long-term. So this concept of a liquid workforce or a gig economy is the way younger workers want to engage. It's really the only way you're going to scale your operations. So if you aren't doing this today, I think you really need to find a way to get started. And if this is a new concept for you and you're trying to figure out where to start, or if you aren't focused today on moving away from those custom projects to creating these fixed price repeatable projects, you need to start today. And if you're offering those fixed price, repeatable projects and you're not capturing best practices and lessons learned every time to make the project easier for future consultants, that's something else that you're going to have to start practicing. Also if you haven't done any investigation into these digital talent platforms, you really should have a chat with your HR organization. Hopefully they have some that they're already working with, they can investigate some options. Hand them a list of the perfect employee profiles for the consultants you think you're going to need a year from now and let them send them to some of these options and see how many folks they have in their network already. You can understand what the pricing would be for that kind of talent.

So even if you aren't doing this today, I would say work with HR to figure out how you can leverage this approach in the future because sooner or later you're going to have to. And my final point, which we talked about quite a bit is if you don't have a knowledge-sharing, collaborative culture, you're ultimately not going to succeed with remote employees with gig workers, ultimately even with customers. So if this has not been a focus for your organization and it hasn't necessarily been in professional services. For years we've been rewarding this cowboy mentality of I'm the only one that knows something and that's why I have a high utilization rate and I got all the premiere projects and the biggest bonus checks. And if that is your culture, it is a dying culture. Look at the needs of the younger workers and start capturing and sharing knowledge and enabling collaboration.

Matt: Yes. John I felt like life lessons as much as business lessons, some fascinating insights that you gave us there, thank you for that. John, thank you so much for being on the show today, on the podcast, we're really grateful to have you, what would be your kind of final call to action? Where can people find you? How can they engage with you? What's the best way to get in touch and learn more from you and your organization?

John: Well go to TSIA.com, we have a lot of our research that is available to the public, so if you're not a member, you can get a taste. I do 50 webinars a year, so just about every Thursday I’m doing a live webinar on some technology-related topics, so check out the schedule for what's coming up. We've also got a huge list of on-demand topics and this topic has come up a few times. So check this out and hopefully I'll see you and some of our listeners in Las Vegas in a few weeks.

Matt: Fantastic, I can't wait. Amazing stuff John, thank you again for coming on the show today. I really appreciate your time.

John: Thank you Matt, it was great to be here.

Matt: All right, well as always, please feel free to reach out to our podcast at podcast@kantata.com. Follow us on LinkedIn, head to our website mavenlink.com with any follow up questions or suggestions for future episodes. If you'd like to read the research report that Mavenlink has put together, The Changing Face of the Modern Workforce, click here. John, thank you once again for being on the show. I really appreciate your time and we'll speak to you all very soon. Thank you.