Service Provider Dilemma: How to Manage Contractors Efficiently

No service provider can be all things to all customers. At some point it has to make a decision to acquire the appropriate skill sets to fill the need, partner with another service provider for a specific project or not offer that particular service.

While all three of these options have their share of challenges, not being able to provide customers with the services they are requesting is the most dangerous course of action, as customers eventually will find a partner who can.

So, then, it comes down to two options: Hire or acquire the expertise for that particular customer or project, or partner with another provider that has those capabilities. Most service providers contract out a certain amount of work and have been doing so for years. In fact, many service providers I speak with regularly use contractors for specific expertise for specific customers. Although they are not full-time employees, they have been servicing the same customer for years and have become embedded in those organizations as a direct extension of the service provider.

Research shows that contract workers are on the rise as companies are finding it is more expensive to hire full-time employees, and workers themselves are preferring to be freelancers instead of committing to a single organization. This is especially true for the incoming millennial generation. As a result, more than 40 percent of the workforce will be freelance-based in the coming years.

However, efficiently managing contractors has become a challenge for service providers. Keeping track of their project status, hours worked, skill sets, tasks completed and their availability is a daunting task. It can be time-consuming and inefficient, which for any business means lost profits. Therefore, it is critical that service providers get a good handle on their contractors and manage them better.

It is “The Perfect Storm,” according to Diego Lomanto, vice president of Marketing at Work Market, a provider of a cloud-based freelance management system (FMS) that helps service providers and other businesses manage their independent contractor and freelance workforce.

Lomanto outlined five trends that are all coming together that are increasing the need for service providers to use contract employees more and therefore increase the need for better management systems and processes. Shrinking margins, customer pressure, OEM mandates, competitive threats and talent shortages are all contributing to the dire need for service providers to embrace more contractors, he said.

Now while the channel has been dealing with these issues since Hector was a pup, they are growing more intense. This is true specifically regarding customer pressures. Customers have always been demanding; that is not new. However, with today’s mobile technology, customers are always connected and have gotten used to receiving an immediate response. This has put tremendous pressure on all organizations.

But the move to a more contract-based model also has its benefits, according to Lomanto. It allows service providers to compete more effectively in the modern day “talent wars”; increases market coverage and expands national presence; brings new skill sets, service offerings and therefore new revenue streams; and puts a premium on speed and agility in a hyper-responsive service world, he said.

The fact is, contractors have become a critical part to the business of most service providers. And all indicators are showing it will increase in the future. Efficiently managing these contract and freelance workers is going to become more challenging but necessary.

Knock 'em alive!