Managing a modern-day field service function presents numerous challenges to business leaders. Consistently getting the right person for a service request to the right place at the right time has only become more difficult in today’s hyper-competitive, on-demand business environment. Because of this, field services spend, which often includes services essential to the functioning of a business (e.g., point-of-sale systems, security cameras), can easily fall victim to cost overruns, variable levels of work quality and external regulatory risks that can affect services outputs.
To meet these challenges, businesses have increasingly looked to augment their current W-2 field service employees by engaging third-party vendors. But while diversifying beyond full-time technicians is a reasonable start, businesses should not stop at merely outsourcing field services functions to external partners.
To fully account for the factors above and more, executives should also evaluate the place of independent contractors, or 1099 technicians, within their field services workforce. In fact, because of both the increasing draw of the freelance economy for highly skilled workers and emerging technologies like cloud-based freelance management systems (FMS), businesses can now integrate contractors into their field services operations more easily than ever before, leading to cost savings, increased operational flexibility and, as a result of better service outcomes, happier customers.
The Field Services Category: Characteristics and Challenges
The field services category includes many forms of work. Most common among these is IT field services, which encompasses the repair and maintenance of physical equipment and hardware (e.g., routers, monitors, digital signage). In a broader sense, field services can also include other forms of installation (e.g., cable) and MRO-related tasks, as well as more clerical project-based work that must be completed in the field (e.g., claims and adjustments within the insurance industry).
Regardless of the type of work, managing field services comes with a set of unique challenges. Chief among these is the unpredictable and time-sensitive nature of demand for field services: you don’t know you need a repair until something breaks. Businesses often need to complete service requests in numerous locations that are geographically dispersed, meaning both demand and resources must be efficiently allocated in changing conditions. The larger the distance between or number of locations, the harder managing the field services category becomes, as W-2 techs must be flown across the country to get to a job — hardly cost effective or efficient.
In addition to challenges on the demand side, businesses must also confront hurdles when it comes to supply: that is, finding, engaging and managing skilled and trusted contractors. Along with the numerous locations and geographic regions to account for, executives will also need to manage hundreds or sometimes thousands of workers, ensuring timely service delivery at a consistent quality level. Meeting these baseline standards — further exacerbated by aggressive service-level agreements (SLAs) that require near-immediate responses — only becomes more difficult in the current labor market, which lacks the required number of qualified technicians to meet demand. And even when the business has secured an adequate number of contractors, there are still multiple forms of risk that need to be monitored, from certification validation and renewal to quality control and possible ballooning costs if unforeseen events necessitate bulk hiring or overtime.
To address all of these unique characteristics and challenges, businesses commonly evaluate three options for staffing a field service operation:
- Using predominantly full-time W-2 technicians
- Outsourcing field services to a third-party vendor
- Engaging a team of independent contractors
All three options offer different benefits and risks, which is why most businesses do not consider each exclusively. In many cases, a hybrid approach will work best.
While adopting the best from each approach is helpful, leading field services organizations are moving in the same direction. In the past, businesses relied heavily on W-2 workers to handle field services operations, trusting that a full-time technician would deliver consistent, experienced outputs in exchange for secure employment. But given the demand and talent challenges above — which have only increased as businesses have expanded and labor market dynamics have changed — field services organizations have increasingly looked to outsource more of this category to vendors, who can best account for various operational and risk factors.
At the same time, however, offloading this category to a vendor may not fully address a company’s field services needs. While research from Gartner indicates that by 2020 the portion of field service work performed by non-employees will reach 40%, these technicians need not only be employed by a vendor. In fact, multiple concurrent business trends — including the rapid growth of and preference for the freelance economy among highly skilled workers and the rise of cloud-based software to organize, manage and pay such talent — have made integrating 1099 technicians into a field services program a realistic and compelling choice for businesses.
3 Key Reasons for Integrating Contractors
The freelance or “gig” economy has received a lot of hype in recent years, and, as such, businesses would be right to express skepticism about applying “the next big thing” to a category as intricate as field services without first vetting the solution. But upon closer examination, executives will see that creating a hybrid field service workforce model offers several key benefits.
Upon closer examination, executives will see that creating a hybrid field service workforce model offers several key benefits.
First, and perhaps most immediately important, integrating contractors into a field service operation offers a more effective way to manage spend. As one example, WorkMarket, an ADP company that offers an FMS originally designed to manage field service contractors, told Spend Matters it has consistently found the IT freelancers it delivers to enterprise clients come at a 30%–40% discount compared with outsourcing that function to a third-party vendor.
One major reason for these costs differences is because independent contractors engaged directly through a FMS, rather than through a third party, are offering their true rate, not the marked-up prices procurement expects when working through an intermediary. The same goes for leaning heavily on W-2 employees: cost factors from overtime payments to travel reimbursement can quickly break a budget, to say nothing of the comparatively limited operational flexibility these workers offer. To fully optimize field services spend, adding contractors into the mix is an essential consideration.
Beyond financial factors, engaging 1099 technicians also creates needed flexibility, enabling a modern approach to field services management. Using contractors gives businesses access to a more geographically diverse workforce, meaning a given 1099 technician may be located closer to a work site and thus can provide a quicker response time.
As one example, the retail industry often consists of businesses dispersed over thousands of stores. Each location will have different levels of service requirements based on multiple changing factors, from consumer demand to seasonal shifts and even demand shocks from natural disasters. Engaging contractors in addition to W-2 or outsourced technicians allows businesses to balance service level needs across geographies dynamically, putting the right people in the right place when they’re needed. And when supported by a cloud-based FMS platform that can actively analyze and recommend worker allocation, field services managers can quickly identify and implement the best coverage ratios.
This improved flexibility ultimately leads to the third key benefit to using a hybrid approach: integrating contractors helps businesses deliver the best possible services outcomes.
As mentioned above, highly skilled workers (including, for example, IT field services technicians) are increasingly deciding to operate as independent contractors, for reasons from access to flexible work schedules to better pay. The technicians that decide to go the freelance route also tend to deliver higher-quality service outputs. This is because their livelihood depends exceptional performance: their most recent job could always be their last one if something goes wrong.
In contrast, W-2 employees, despite their immediate reliability, are also much better insulated against rapid termination, even in spite of variable work quality. Similarly, with third-party vendors, abruptly ending a service relationship over a single bad job would simultaneously create undesirable financial and legal headaches.
Adding contractors into the mix offers the best of both worlds. What’s more, using an FMS tool that can vet contractors for quality, training/certification and past performance ensures that businesses can measure and continuously improve work outputs, rather than simply playing catch up to service requests.
The Case for a Hybrid Approach
When it comes to managing field services, executives should look to support their field services counterparts with the most relevant strategies and tools they can provide. This means offering more than just incremental cost savings and a baseline of qualified workers. Instead, forward-thinking procurement leaders should strive to deliver real value — like increased operational flexible, efficient cost models and superior service quality. While these outcomes can be supported by W-2 workers or third-party vendors, the best way to fully achieve this goal is to take a hybrid approach, integrating independent contractors into the heart of a field services organization.
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