It has been a busy summer for Europe’s leading providers of platforms that connect businesses with freelance IT professionals.
The emergence of the freelance platform providers has been one of the most interesting trends in the European IT services market. A handful of frontrunners have broken through to reach real scale and are starting to consolidate their positions through acquisition. One of the common features is that nearly all were established by former big four/leading business consulting firm alumni, while they are increasingly looking to differentiate through the features of their platforms.
Sweden’s eWork has recently emerged as the country’s largest IT services provider, based on teknowlogy Group’s latest rankings, and, despite a tough second quarter, saw its revenue rise by 2% to SEK 6.5bn (€611m) in the first six months of the year. The company, which has more than 10,000 consultants on assignment, has been making headlines in recent weeks due to its involvement in a power struggle, with two board members attempting to push ahead with a buy-out which other shareholders believe falls short of the company’s valuation.
Munich-based Comatch is demonstrating that the model can work even in Germany’s relatively rigid labour market. The company, which was established by former McKinsey consultants Christoph Hardt and Jan Schachtele, has a database of more than 10,000 independent consultants and has supported more than 2,500 client engagements to date. The company recently launched in the US and aims to differentiate through the calibre of its associates. More than 10% of the management consultants in Comatch’s global network previously worked for one of the traditional top tier consultancies (McKinsey & Company, Boston Consulting Group, Bain & Company) and a further 15% worked for one of the international “big four” companies.
France is another hotspot for emerging players. Paris-based Weem, which was set up by former BCG, Kurt Salmon and Peat Marwick consultants, recently added the 1,000th independent consultant to its ranks. And fast-growing generalist firm, Freelance.com, significantly ramped up its presence in the IT services space, with the acquisition of INOP’s network of 70,000 digital experts earlier this summer. In the first half of the year, Freelance.com reported an impressive 19% rise in revenue to €133m.
The pandemic has been a double-edged sword for freelancers. On the one hand, many of these platforms have reported a surge in interest from consultants wanting to work in a freelance capacity. Some were driven by a loss of their permanent position as spending on consulting projects froze, others reassessed their work-life balance during lockdown. A recent Comatch study found that the biggest reasons for consultants going independent are to have control of the topics they work on and to have greater flexibility in their schedule. However, many existing freelancers have found the going tough this year. A recent study by the University of Edinburgh and freelance association the IPSE found that three quarters of high-end professional freelance workers have lost income due to the pandemic, with average stress levels increasing by 80%.
The freelance platforms have had a rapid rise to prominence, and despite the challenges faced by many freelancers this year due to the pandemic, we will see growing numbers of IT professionals – both young and old – looking to work in an independent capacity. There are several trends that we expect to play out as the sector matures. Firstly, the market remains highly regionalized at this stage, and we expect a number of larger national and pan-European players to emerge from a wave of consolidation over the next few years.
The platform operators face two challenges: to attract and retain the best talent and to provide a differentiated service to customers. On the first point, vendors should look to drive a lasting connection with their professionals by offering the kind of support that many have found lacking this year: opportunities to network, guidance on skills development and health and wellness. In terms of customer differentiation, the “intelligence” of the platform will be increasingly critical in improving the speed and effectiveness at which the right skills can be matched to deliver an assignment.
Lastly, we also expect to see the platform providers build closer ties with IT services vendor community to both help them fill in the skills gaps in delivering specific projects, while offering their benched professionals an opportunity to keep their hand in the game at times of low activity.