COVID-19 Has Accelerated Direct Sourcing Adoption and Technology Changes

The impact of the pandemic on the economy has encouraged many companies – large and small – to reduce cost and increase agility through the increased use of temporary workers.  These workers are being sourced through a wider choice of channels, including use of a staffing agency temp, engaging an independent contractor, calling in an SOW consultant or turning to an online work platform.

Market Trend data reported by Barry Asin, President of Staffing Industry Analysts (SIA), includes:

  • Direct sourcing (acquiring temporary resources through channels other than staffing agencies) is already used by 30% of buyers, and 49% plan to put a direct-sourcing program in place within the next two years.
  • 43% of large staffing buyers foresee an increase in usage of online staffing/talent pool in the next 10 years.
  • SIA estimates that 54 million Americans did gig work (defined as staffing agency contractors, SOW consultants, directly hired temporaries, online platform workers, and independent contractors) in 2019, approximately 34% of the workforce. That amounts to $1.3 trillion in spend with the largest share going to independent contractors.

The rapid emergence of direct sourcing and talent pools is fueled in large part by the emergence of new technology offerings.

  • Asin cited technological change wrought by the last recession: In 2007, only 24% of large companies had a VMS in place; by 2010, the percentage had grown to 64%.
  • In the second quarter of 2020 alone, $1 billion in venture capital funding focused on the HR tech space.
  • Online staffing firms, crowdsourcing firms and online work services saw their revenue rise by 42% in 2019 to $178.5 billion according Staffing Industry Analysts (SIA).  While the majority of revenue continues to be generated by firms in the business-to-consumer space (e.g., UBER, Lyft), the pandemic has significantly impacted their revenues, while  the business uncertainty driven by COVID-19 is causing the firms focused on business-to-business (B2B) to continue to expand at a healthy rate.  Factors causing this expansion include the surge in acceptance of remote work, prioritization of digital transformation, and need for increased agility via a flexible workforce.