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Confidential Report – NOT for Distribution | ©2014 by Crain Communications Inc. All rights reserved.

The Rise of Freelancer Management SystemsReview of an emerging technology

October 17, 2014David Francis, Research [email protected]

Global

The Rise of Freelancer Management Systems | October 17, 2014

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The Rise of Freelancer Management Systems

1

Key Findings

• A freelancer management system (FMS) is unique among contingent workforce technologies in that it combines the disintermediating power of online staffing (enabling direct engagements with talent through the platform) with the HR tools/management functions/compliance solutions required by large enterprises, in one seamless platform.

• While the technological components of the FMS offerings are roughly similar for the five companies, they appear to compete in different niches and have one or a combination of three different market strategies, in terms of both the occupations/verticals served, and whether the services of the independent worker are performed onsite or online:

• Field services/“local” worker deployment model – physical worker sent to some physical location

• Professional/“high end” worker model – focus on high level workers with key skills, professionals, consultants

• Knowledge/“online” worker model – focus on content creation and work that can be completed remotely

• While these are not mutually exclusive categories, we feel this is a generally accurate characterization of the respondent firms.

• While FMSs offer a wide variety of pricing models, the most common model is to charge a percentage of spend through the platform (ranging from 2.5%-10%) which can be paid by either the independent worker or the client (or sometimes both). Clients with larger volumes of business may qualify for volume based pricing/licensing.

• On average, (with one notable exception), the FMS providers in this report noted a substantial share of their revenue came from client organizations with greater than $500 million in annual revenue.

A detailed questionnaire was sent to five firms operating in the FMS space in August/ September, 2014. The firms that participated in the survey are (in alphabetical order):

• Elance-oDesk

• Field Nation

• MBO Partners

• OnForce

• Work Market

After the results were submitted, conference calls were held with the leadership of each firm to gain additional insights.

In addition to the survey, several external sources and references were used.

We acknowledge there are other FMS providers not covered in this report.

MethodologyElance-oDesk



Definitions

2

What are Freelancer Management Systems?

• A freelancer management system (FMS) is a category of contingent workforce management technology that enables enterprises to self-manage their engagements with independent workers and freelancers. To fall within the FMS category, a solution provider must provide a complete, end-to-end technology system that can allow users in an organization to search for and find a particular worker and activate, complete, and pay for the work engagement within the system. At the core of these FMS model offerings is a viable platform technology (an enterprise/SaaS system) that a business can use to initiate, manage, complete, track and analyze engagements with individual independent workers who can be identified through their profiles on the system as approved members of that business’ (independent worker) talent pool.

What are Independent Workers?

• Throughout this report we will use the term “independent worker” (IW) to refer to any individual (or group of) independent contractor(s), freelancer(s) or other individual(s) who directly contract with enterprises through an FMS to perform work on a contract/project basis, regardless of the particular tax status they are classified under (i.e. 1099 or W-2*). We use the term independent worker, as opposed to

independent contractor or freelancer, for the following reasons:

• Independent contractor, although often used informally to describe any independent worker, is in reality a statutory legal classification. In the U.S. for example, firms can and do truly engage with 1099 independent contractors, but the independent workers they engage are in some instances not independent contractors, but rather are W-2 employees of either the FMS provider or some other 3rd party, in some type of an agency/employer-of-record (AOR/EOR) arrangement. Thus, the term independent contractor does not encompass the entire “independent” workforce that an FMS engages.

• Freelancer is a non-technical term generally used to describe a person (historically in journalism and other creative verticals, nowadays used to describe someone in almost any vertical) who works “freely” for different organizations on a contract basis. While independent contractor is too specific a term, freelancer is too informal and colloquial, and may still be interpreted by some as only referring to certain “creative” verticals**

*In the U.S., “self-employed” workers are required by the IRS to file a 1099-MISC tax form, hence these workers are often referred to as “1099 workers”. Those deemed as “employed” (by an employer) file a W-2 tax form. The distinction is important as to whether income taxes are withheld or not, but does not necessarily determine whether one is an “independent worker”. Although we use 1099 and W-2 workers of the United States as an example, this principle holds true for other countries where there may be similar statutes regarding tax classification.**Some have suggested the acronym “ICWS” (independent contractor workforce solutions) or the more encompassing “IWMS” (independent workforce management solutions) as alternatives to “FMS”. Although these proposed acronyms may be more accurate as literal definitions of the technology and workforce that the technology covers, they are awkward to say and cumbersome acronyms at best. FMS, being shorter and easier to recall, has gained traction among both users and providers of the service to describe these technology platforms. Although FMS is the acronym for the technology, we will refer to the workers an FMS engages as independent workers as opposed to freelancers.

Elance-oDesk



Evolution of online staffing to enterprise FMS

3

To the right is an illustration that shows how the FMS model is evolving from online staffing and other services in the “human cloud”. The dimensions of evolution are:

• The Purpose of the Technology: Online staffing platforms are talent marketplaces primarily used by small to medium sized businesses, while FMS has evolved to become a talent management system targeted at enterprise clients. Online staffing matches buyers and sellers, while an FMS provides matching and the tools to manage IW engagements after the match has been made.

• Enterprise Risk: Online staffing presents risks (misclassification, rogue spend, quality of talent) to organizations as they do not have the same system of controls that an FMS has; FMS has evolved to minimize the various risks associated with engaging independent workers.

We note that while Elance-oDesk has developed a full FMS offering (Private Talent Cloud), it still derives the majority of its business from online staffing.

Elance-oDesk



FMS vs. online staffing platforms

4

Although the FMS has been likened to (and in certain cases have grown out of) online staffing platforms, they are different in several respects:

• Unlike online staffing platforms, which facilitate direct one-to-one or “one-off” engagements between an individual buyer and an individual worker, FMS facilitates an enterprise-wide engagement and deployment model. This arrangement still allows for direct engagements between buyers and workers, but the key difference is that the rules and processes of the FMS platform will be uniformly enforced across an organization. In other words, with online staffing platforms, each engagement is a one-off experience; with an FMS, although the engagement is still “direct”, it is managed under the enterprise’s rules and system of controls.

• A key difference from online staffing models, which are at their core a marketplace to bring individual buyers and suppliers together, is that there is less emphasis on “sourcing” talent with FMSs. Online staffing is more of a marketplace (like eBay for buyers/suppliers of labor), while an FMS is more of a workforce management platform (handling various aspects of the independent worker engagement such as compliance services, curation, worker pool management, etc.) Often, an organization already has the talent it regularly interacts with, and simply onboards that talent onto the respective FMS platform where the independent worker can then be engaged and managed effectively.

• In online staffing, there is typically little (if any) IC compliance support, while FMS platforms offer varying degrees of independent contractor (IC) compliance services (in some cases, being the “crux” or “cornerstone” of the platform around which the rest of the model revolves).

• FMSs have tools/modules and reporting functionalities built into the platform which provide a great deal of visibility, analytics, and insight into an organization’s scope and spend on its IW talent. This is in contrast to online staffing in which engagement of IW talent is typically performed by line managers (end-users of talent) who may work around existing corporate policies/processes in an effort to obtain that talent. This arrangement can make it difficult for companies to gauge/track total IW exposure and spend, increases the possibility of overspending on IWs, and potentially increases the risk of IC misclassification. FMSs provide consolidated management of these processes for greater visibility, control, and reduction of spend by hiring managers outside the system (rogue spend).

Elance-oDesk


5Confidential Report – NOT for Distribution | ©2014 by Crain Communications Inc. All rights reserved. 5

How does FMS fit into a contingent workforce program?

• In some cases an FMS acts as the only workforce management technology for an enterprise (a likely scenario for small to medium sized business clients), whereas all five providers reported that they also work in an integrated fashion with vendor management systems (VMS) in larger organizationswith sophisticated contingent workforce (CW) programs.

• The illustration to the right describes the relationship of the CW program, VMS, and FMS in an organization where all three are integrated. An enterprise either runs its CW program internally or retains the service of a managed service provider (MSP). A VMS is the technology used to manage vendor/supplier relationships, and an FMS is the technology used to manage and engage directly with independent workers (IWs).

• VMS and FMS are both technology platforms; the distinction is that they are designed to manage different parts of the contingent workforce.

Enterprise

Temporary agency staff Independent workers

SOWconsultants

Elance-oDesk


6Confidential Report – NOT for Distribution | ©2014 by Crain Communications Inc. All rights reserved. 6

The FMS and VMS supply chain

The FMS supply chain

The VMS supply chain

TemporaryStaff

Vendors/ suppliers

• An FMS allows enterprise users to engage directly with independent workers by connecting both clients (enterprise users) and providers (independent workers) through the same technology platform, and providing the tools to manage the complete engagement on the platform.

• An FMS provides service and support to both enterprise users and independent workers, whereas a VMS is primarily used to manage vendors, with few (if any) services provided to the independent workers.

HR/ Procurement

*Statement of work: A contingent work agreement/contract which is characterized by the fact that it is billed based on the achievement of milestones as opposed to being billed based on the number of hours worked.

All users in a global organization

Independent workers in the “the cloud”

Elance-oDesk



Components of an FMS platform

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Some of the components that are characteristic of an FMS (but not necessarily all-inclusive to any FMS) are:

• Ability to find, view the credentials/profile/work history, hire and pay a specific independent worker

• “Sourcing” and “Grouping” technology, which can include talent pools, online talent marketplaces, and “preferred provider networks”

• Vetting, credentialing, and curation of talent (including drug and background checks)

• IC compliance tools and services, including automated recommendations/work limits/structures to ensure compliance. Some FMS providers offer full misclassification indemnification

• AOR/EOR (agency of record/employer of record) and payrolling

• Payment processing, tax withholding, automatic W-2/1099 issuance

• Web and mobile real time communication

• Contract, documentation and workflow management

• Enterprise management tools including bulk upload capabilities

• Client and supply side reports/analytics

• Performance ranking, feedback system, rating system

These various features are typically bundled together as modules in one comprehensive online platform, with a separate user interface for enterprise clients and independent workers.

FMS bundles together several disaggregated solutions from the IW supply chain and channels them into one cohesive end-to-end solution to allow enterprises to engage directly with IW talent.

Enterprise IW Cloud/ Talent Pool

Elance-oDesk



The process of an end-to-end FMS solution

8

• Below is a graphic representation of the typical end-to-end process that an enterprise might use to search for independent workers, verify their credentials, onboard them, pay for their services and then rank their performance, along with the technologies that are often built into an FMS to support each part of the process. The bullets below were aggregated from the responses of the five providers; thus, any particular provider may not offer every single functionality listed below. The platforms are usually broken into “modules”, which enable users to dive into whichever portion of the process they desire. Enterprises can further establish user entitlements and enable/ disable access to various modules depending on specific roles/functions. An FMS is hosted “in the cloud” - in other words it is a web-based application. Enterprise users and independent workers alike log in through a computer or web-enabled device to access the FMS.

• The independent workers have their own process and set of modules (not displayed here), which includes functions to find assignments, manage their profiles, complete vetting requirements, update job progress, receive payment, and communicate with the enterprise.

Sourcing the talent

Verifying the talent

Engaging the talent

Rate/rank performance

Paying

• Talent Marketplaces• Managed/private

contractor clouds• Preferred provider

networks• Talent pools• Profile management

and classification• Automated routing• ATS• Recruitment

(usually an “add-on” service)

• IC compliance• Background checks

and screening of IWs• Learning

management software

• Automatic W9/TIN/ EIN verification*

• Training modules• Insurance and

credentialing• Skills testing• Work history

• Algorithm based job/IW matchmaking

• Geographic mapping to match supply/demand

• Real time communication (online, mobile, and video)

• Request For Proposal engine

• Automatic, rules-based dispatch

• Document management

• Private company forums

• Task assignment and workflow automation

• Work templates• Time, expense,

and milestone approval

• API integration with 3rd party payment processors

• Invoicing and transaction status

• Hourly billing or milestone billing

• 1099 generation

• 2 way feedback loop

• Performance ratings and history

• Ranking

*TIN = Tax Identification number. An Identification number used in the U.S. by the Internal Revenue Service (IRS) in the administration of tax laws to individuals.*EIN = Employer identification number. An identification number used in the U.S. by the IRS in the administration of tax laws to businesses (or independent contractors).

Managing projects

Elance-oDesk



The curation of talent: “talent clouds”, “private talent networks”, “gated talent communities”, and “preferred providers”

9

One of the unique features of an FMS is its ability to organize an enterprise’s independent workers (IWs) into groups, sometimes referred to as “talent clouds”, “preferred” or “private” networks. This type of structure makes the process of matching an IW to a particular project or job much more efficient (and even supports its automation), especially in larger organizations that may manage thousands of IWs. Enterprises can further specify which groups of workers are authorized to work for a particular job (for example, an IT organization may have a particular group of “security-cleared” contractors who are authorized to work at a high-security government site). They can also specify which IWs can be “shared” with other organizations*, or which IWs get first notice when new jobs become available.

Examples of groupings that are particularly common are by alumni status (has a person ever worked for this particular company, yes or no?), specialized skill sets, and location. Others could include language, industry verticals, or performance rating. To get into a “group”, there is often a specific vetting process for that particular group which can consist of skills assessments, licensing verification, or some other process, which depends on the nature of the group. Once grouped, the FMS facilitates communication to these IWs via the web and mobile devices, can perform automatic matching and dispatch functions, and hiring managers across the organization know that any IWs found in the “group”/talent cloud are already vetted.

Vetting/Curation Processes

*One of the challenges with any contingent workforce program is making sure the talent that organizations regularly work with actually have enough work to stay engaged. If IWs are “on the bench” too often, they will likely seek their fortunes elsewhere, and the organization can lose future use of the IW. Organizations can try to retain their talent and decrease IW “bench time” by allowing their IWs to work with other companies on an FMS provider’s platform when the organization doesn’t have enough work to keep them continuously engaged. This increases the talent pool available for all organizations using the FMS, decreases the “bench time” for all IWs in the FMS ecosystem, and keeps the IW available on the system for future use.

Graphic designers

Alumni

Call centerElance-oDesk



The FMS value proposition

10

We asked respondents: “What is the problem that your FMS will solve?”

Answers varied among the participants but there were a few common themes:

• Access to talent: Independent workers often have some type of expertise, knowledge, specialized skillset or other characteristic which has strategic importance to the enterprises that want to engage them. Whether it is at the high end of the IW spectrum, where an IW possesses a highly specialized skill such as a C++ developer, or at the low end where organizations may simply need someone to perform a series of small tasks (assisting at a marketing event, repairing an ATM machine), FMSs seek to provide the method/platform to find, organize, and engage this source of non-traditional worker. In addition, firms may eventually use FMS platforms to gain access to talent around the globe, especially if doing so presents significant cost saving opportunities over domestically sourced resources (a practice known as “labor arbitrage”).

• Reduce risk and increase compliance: Although enterprises are increasingly seeking to engage more independent workers, it can be costly to do so due to the risk of misclassification expenses. Unlike temporary staffing/VMS engagements, where the staffing firm acts as the employer of the temporary employee, that is not always the case with independent worker engagements. FMSs, by the very nature of their technology, encourage proper reporting to tax authorities by automatically generating auditable paper trails, and in some cases offer enterprises full indemnification from misclassification. An FMS platform can also enable organizations to enforce various sets of “rules” (around onboarding, level of oversight, insurance/credentials, work hour limits, etc.) that help to manage misclassification risk.

• Increase efficiency, visibility, and control: Enterprises have traditionally used a number of disaggregated tools, networks, and services (i.e., Excel spreadsheets, job boards, project management software, 3rd party payment systems and HR solutions) to manage their independent worker supply chain and work flow. These engagements were often handled in a “one-off” fashion, making consolidated reporting and compliance with uniform policies difficult. FMS providers seek to consolidate the management of independent workers onto one enterprise-wide platform so that spend can be analyzed and optimized, and so that policies can be implemented uniformly.

Elance-oDesk



Characteristics of the five FMS providers in this report

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• Elance-oDesk started as two online staffing companies (Elanceand oDesk), each with a broad marketplace focus. Once merged, it had more than eight million independent workers around the world on its online platform. This number does not reflect the smaller number of independent workers completing work through its FMS offering, Private Talent Cloud, but does reflect the vast pool of workers available to its enterprise-level clients as a result of its roots in online staffing.

• In contrast, MBO Partners, which has between 20k-25k active independent workers on its platform at any given time, historically focused on IC compliance and back-end support services for a specialized group of professional and highly paid independent workers, which is reflected in the smaller number of independent workers on their platform, relative to Elance-oDesk. The company reported that the average billing for its IW engagements is upwards of $80k, far higher than any of the other players.

• Field Nation, OnForce, and Work Market all grew their FMS platform out of a specialized vertical, IT field services, and focused on filling assignments that required a physical worker to go to a physical location to perform work. They each reported less than 100,000 independent workers on their FMS platform. We should expect the number of independent workers to grow as these companies attempt to penetrate new industries.

Elance-oDesk



Independent contractor compliance

12

• One of the dangers of engaging with independent contractors (ICs)/workers is the risk that they will be reclassified as employees by the tax authority, resulting in fines, penalties, and back taxes. Firmsthat may have been shocked by the large lawsuits/settlements that have occurred at Microsoft (and more recently FedEx) in the United States certainly have reason to be cautious.

• FMS providers offer technology to reduce the risk of misclassification, and some providers, such as Elance-oDesk and MBO Partners, fully indemnify the client organization from such risk.

• In the U.S., the IRS uses a 20 factor test to determine whether a worker, regardless of how a company classifies him, is a true independent contractor or an employee of the organization. Among the most important factors is the level of control an organization exercises over how the work is actually performed. Other countries adopt a similar approach. FMS technology seeks to “automate” compliance in regard to these factors, to varying degrees.

• At a minimum, FMS providers offer a technology generated paper trail, which can prove useful in an audit to prove there was no intentional deceit.

• OnForce reported that it used a 3rd party IC compliance provider (ICon) to offer IC compliance services.

• Elance-oDesk and MBO Partners reported that they offer full misclassification indemnification. In other words, they promise to pick up the tab if the tax authority audits and assesses any penalties/back taxes on organizations that were fined due to classification recommendations made by the FMS.

Elance-oDesk



Industries with greatest use of FMS

13

• We asked respondents, “Has there been a particular industry where your FMS use was entirely or very highly concentrated for some time?” Not surprisingly, Elance-oDesk has historically derived much of its business from “knowledge” verticals (verticals in which workers could complete projects online), specifically in IT and marketing.

• Field Nation, OnForce, and Work Market all have been historically concentrated in some form of IT field services, although each has expanded and now offers its FMS to a broader range of industries.

• MBO Partners has historically been an independent contractor focused firm and has developed relations with “professional/high end” service consultants and independent workers of various sorts. The company described its “vertical” not in terms of a given industry, but in terms of the pay level of the independent worker (“more than $100k in annual billings”).

• We also asked: “What is a rough percentage breakdown of the number of client organizations you are now serving according to their industry vertical types?” Although it is not displayed in the chart, respondents reported a wide variety of industries served. In addition to technology, other client verticals included construction, consulting, consumer products, government, healthcare, manufacturing, media and advertising, technical services, telecommunications, and transportation.

Most common industries that use FMS

Company Biggest Vertical

Elance-oDesk Knowledge workers in IT and Marketing

Field Nation IT Hardware and POS

MBO PartnersProfessional Services ICs who generate

more than 100k in annual bil l ings

OnForce IT and consumer electronics work

Work Market Technology & Communications

Elance-oDesk



Most common occupations engaged through FMS

14

• We asked respondents, “What are the two most common occupational categories that are served by your FMS?”

• OnForce, WorkMarket, and Field Nation reported some variant of IT service professional as their top occupational category, reflective of their histories in IT field services.

• MBO Partners reported that project managers and software engineer/designers were the most common occupations for its FMS.

• Elance-oDesk reported that content creators and technology occupations were the most common occupations on its platform.

• It is notable that all five firms reported some form of technology occupation as either the 1st or 2nd most common occupation served by their FMS.

• It is important to keep in mind that although these may be the most common occupational categories, they are by no means the only ones served by these providers.

Most common occupations engaged through FMS

CompanyTop Occupational

category

2nd Top Occupational

Category

Elance-oDeskContent Creators,

Curators, Moderators

Technology (developers,

testers, administrators)

Field Nation IT Hardware TechniciansTelecommunications Field

Engineers

MBO Partners Project Manager Software Engineer/Developer

OnForce IT Service Technicians Educators

Work MarketTechnology Services

PersonnelRetail Marketing

Elance-oDesk



Location of independent workers and client organizations that use FMS

15

• We asked the respondents: “Roughly what percentage of independent workers are currently engaged through your FMS inside U.S./Canada versus elsewhere?”

• OnForce, MBO Partners, and Field Nation reported that only a very small percentage of the independent workers who performed work through their FMS were located outside of the U.S./Canada (less than or equal to 5% for each, represented by the red portions of the bar chart to the right). Though OnForce reported 0%, the company anticipates expanding outside of North America.

• Work Market reported that 30% of the IWs performing work through its FMS platform were located outside of the U.S./Canada, while Elance-oDeskreported 40%.

• We also asked respondents: “Roughly what percentage of your clients are headquartered in the U.S./Canada versus other elsewhere?”

• Although it is not shown in the chart, every firm but Elance-oDesk reported that 95% or more of client organizations are located in the U.S./Canada (although OnForce anticipates expanding internationally, fuelled by its acquisition by Adecco in August of 2014). Elance-oDesk reported that 15% of its FMS clients were headquartered outside the U.S./Canada.

% of independent workers in U.S./Canada versus other countriesElance-oDesk



Mix of work settings: onsite vs. online

16

We asked respondents: “Currently, what types of work engagements is your FMS supporting, and what is the percentage breakdown of each?”

Respondents noted support of the following work arrangements:

• Onsite work arrangements

• Work performed at client’s “place of business” (POB)

• Work performed at a physical location (i.e. back office, marketing event, offsite client location, data center, etc.)

• Online/remote work arrangements

The chart to the right shows the percentage breakdown of work performed either at a client’s place of business, an offsite physical location, or online.

OnForce, Field Nation, and Work Market reported a high concentration of onsite work engagements. This may be due to their historical background in the IT field services vertical, where part of the value is the ability to deliver a person to a physical location virtually anywhere in the country.

Elance-oDesk reported the highest concentration of remote/online workers with 75% of its FMS-engaged independent workers performing work remotely/online. MBO Partners was the most even, reporting 60% of its work arrangements as performed onsite and 40% of work arrangements as performed remotely/online.

% of work performed at customer place of business, designated physical location, or online/remoteElance-oDesk



Size of client organizations that use FMS

17

• We asked respondents: “What approximate percentage of your revenue comes from client organizations within the following size ranges: Less than $50 million in annual revenue, between $50-$500 million in annual revenue, and more than $500 million in annual revenue?”

• In general, FMS providers generated a substantial share of their revenue from organizations with more than $500 million in revenue. Field Nation is the exception with only 5% of its revenue coming from such clients. On the other extreme, Work Market reported that only 10% of its revenue came from client organizations with less than $50 million in revenue, and 80% from clients with more than $500 million in revenue.

% of revenue by client size

Company0-$50

million

$50-$500

million

$500

million+

Elance-oDesk 41% 9% 50%

Field Nation 50% 45% 5%

MBO Partners 10% 20% 70%

OnForce 15% 30% 55%

Work Market 10% 10% 80%

Elance-oDesk



FMS pricing models

18

FMS providers offer a variety of pricing models, as is evident from the chart below. The two most common pricing models are to license the software for a period of time or to simply charge a percentage of the “spend” that goes through the platform. Licensing fees are often negotiated on a company by company basis and can vary based on the expected level of spend and also on the level of services provided. Reported percent-of-spend fees varied from 2.5%-10%, and are either paid by the client or the independent worker (IW). In cases where the IW pays the fee, an enterprise will contract with the IW and agree to pay a certain amount for a project. Upon completion of the project, the organization will authorize and send payment, at which point the FMS deducts itspercent-of-spend fee from the contract amount. In cases where the client pays the fee, the fee is added to the contract amount and charged to the client after the work has been completed. In addition, platform providers often offer add-on services, which are typically charged for on an ad hoc basis (or negotiated as part of the licensing fee).

In general, the pricing models try to encourage more business by lowering their cost share as spend rises.

Various pricing models of FMS providers

1. Elance-oDesk charges a subscription fee to clients which varies based on the level of services provided. IWs who are sourced through their online staffing platform are assessed an 8.75 percent-of-spend fee. This fee is not assessed to IWs that an enterprise brings onto the platform.2. Field Nation sometimes leases its platform to clients who use it to manage and dispatch their own W-2 employees. They pay a per-ticket fee for use of the platform.3. MBO Partners reported that while the IW pays the fee for access to the platform, about 40% of the fees are voluntarily “uplifted” or paid for by client organizations. 4. While clients are ultimately responsible for payment, client companies can configure how the payment is shown to IWs (i.e. billed as gross or net).

Company Primary pricing model (% of spend)Who

pays?

Alternative pricing

model(s)(% of spend)

Who

pays?

Elance-oDesk Monthly/annual l icense Varies Client % of spend1 8.75%1 IW1

Field Nation % of spend 8-10% IW SaaS Lease2 Per Ticket fee w/

monthly capClient

MBO Partners % of spend 2.5% - 5% IW3 n/a n/a n/a

OnForce Monthly/annual l icense Varies Client Fee-per-transaction Varies Client

Work Market Monthly/annual l icense Varies Client4 % of spend Varies Client

Elance-oDesk



The future of FMS: convergence of technologies?

19

FMS is a new phenomenon, still evolving as this report is written. This begs the question: where is the space headed in the future? While the future is difficult to predict, we note the following possible trends:

1. The technology has developed to the point where large, established firms have started adopting the technology (as in the publicly announced SAP/Work Market partnership). We should expect the industry to experience growth in the years to come, as it shifts from an “introduction” phase into a “growth” phase.

2. The value of the ecosystem as a whole (including the number of enterprises on the platforms, the number of assignments posted through the platforms, and the number of IWs available to enterprises) to potential adopters will continue to grow as worker/organization relationships are nurtured and as more firms adopt the technology. As with any network technology, the value of the network increases in tandem with the number of users/adopters. We believe the number of talented workers seeking non-traditional work arrangements will continue to increase, which in turn will drive firms to seek ways to engage this component of the workforce.

3. We expect the continued formation of partnerships and/or acquisitions involving more traditional contingent workforce players and FMS firms, because:

• FMS shares some of the characteristics of existing technologies, i.e. there is overlap in existing contingent workforce solutions.

• Even where FMS is unique, enterprises prefer a single solution/platform for all of their workforce needs. Thus, as with the recent Adecco/Beeline acquisition of OnForce, there may be further convergence in the space as new and existing players increasingly try to offer a more holistic contingent workforce platform/service.

Estimated stage of the FMS industry in 2014Elance-oDesk


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Elance-oDesk

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