Igor Putrenko of Servicebit explains how smart contracts sitting on top of a blockchain could revolutionise the staffing industry, driving efficiencies for the businesses and workforce in an increasingly decentralised workplace.
The idea of a job for life no longer exists. Most people who the father of management thinking Peter Drucker referred to as ‘knowledge workers,’ will go through a form of career transition or transformation several times during their working lives. This is especially true of IT workers who will spend a lifetime learning new skills hands then adapting them to meet ever changing challenges.
At the same time, businesses are having to become more flexible and agile than ever before – both to meet the needs of digital transformation as well those of a changing workforce that’s demanding increased flexibility in the workplace for both personal as well as professional reasons.
“The workplace is ever-evolving – and at a far greater pace than we’ve ever seen before,” says Peter O’Donnell, CEO of employee benefits provider Unum UK in its recently published Future Workforce report.
“The next 10 to 15 years are likely to see these advances gather even more speed, transforming the face of business – both internally and externally,” he adds.
The challenge of a decentralised workforce
Statistics from PwC (Workforce of the Future, 2018) and SAP (2017) 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. As many companies is is 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.
Consequently, 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 too with 60 to 90 days not uncommon, in part 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, in much the same way as AirBnB has reduced the friction between those wanting to rent out their property with those looking for somewhere affordable to stay on their travels?
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 (originally all jobs were priced at $5) while for longer term freelance projects there are platforms such as Upwork and Pontoon.
In addition to these, there are specialist platforms aimed at IT professionals including Toptal and IT- Suppliers. Looking for a specialist developer to work on your digital transformation project? IT Suppliers has a million to choose from across different geographies and with different skills and budgets.
Digital supply chain
However, while marketplace platforms certainly help to reduce the friction between the supplier and the corporate client, they are only part of the solution. It is only with the introduction of Blockchain technology that the ‘digital supply chain’ will truly be revolutionised.
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.
As Robert Handfield, Ph.D., NC State University said in the Summer of 2017: “Blockchain is in my mind one of those areas that supply chain practitioners need to watch carefully. This one is going to make a huge difference – more than IoT, serialization, sensors, or any other emerging technology. Hold on tight!”
Underpinning the blockchain revolution are smart contracts: essentially 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!
As the Harvard Business Review wrote in its article, ‘The Truth About Blockchain’, January/February 2017:
“Intermediaries like lawyers, brokers, and bankers might no longer be necessary. Individuals, organisations, machines, and algorithms would freely transact and interact with one another with little friction. This is the immense potential of blockchain.”
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.
Furthermore, 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.
Servicebit is one company which is set to roll-out a service for the IT recruitment sector which uses blockchain technology. However other uses for the technology are emerging too.
Last year research from CompTIA found that 16% of companies had purchased blockchain-enabled tools, while 22% were developing tools using blockchain and another 24% said they were exploring the technology.
The UN is currently using blockchain across 16 agencies, including the World Food Program to help refugees purchase food with only an eye scan as well as the Office for the Coordination of Humanitarian Affairs for improving donor financing, securing and monitoring supply chains, and data protection.
Microsoft and Accenture also recently announced a partnership to use blockchain technology to provide a legal form of identification for 1.1 billion people worldwide as part of the global public-private partnership ID2020.
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 not just on streamlining the digital supply chain in the IT industry but across many different sectors over the coming years.