Freelancers. Contractors. Contingent workers. Whatever you call them, a new report from SAP Fieldglass and Oxford Economics says external workers have become a resource most businesses simply can't do without. The global study, which surveyed 800 senior executives from a range of industries, is fresh evidence that today's workforce is in the process of a major metamorphosis.

4 key forces that are changing the way companies work

1. The multichannel workforce is growing (and probably will continue to do so). Multichannel simply means that business leaders are hiring external workers from all kinds of paths, such as services providers, online freelance marketplaces or staffing agencies. There are a few factors contributing to this growth. SAP Fieldglass VP of Presales Sara Sullivan points out that

  • Many companies are experiencing talent shortfalls in areas like data-driven decision making, intellectual property protection and technology skills that drive transformation agendas. People who can fill these needs can get good pay as external workers, all while potentially getting more flexibility and personal work satisfaction.
  • Baby boomers entering retirement are open to coming back and have significant intellectual capital that lets them be highly productive and impactful.
  • Technology is enabling businesses to handle distributed workforces to meet needs for specific projects or to fill roles that can be performed better by non-payroll individuals.

"Looking out three years," says Sullivan, "91 percent of the executives tell us the external workforce will be important for sourcing skills that are in scarce supply."

2. External workers are essential to central operations and business strategy. According to Sullivan, "Businesses increasingly see contingent workers and service providers as a means to access the critical skills and capabilities essential for core operations, and to position themselves for future growth in today's digital world." Almost half of respondents (46 percent) say they couldn't do business as usual without them, while two out of three respondents (65 percent) claim they're important or very important to operating at full capacity and meeting market demands.

3. Business leaders want to do more than just save money. Yes, sometimes external workers can be a better deal for a business from the start. But because executives know that external workers are so tightly embedded in core operations, executives now are much more focused on finding talent that helps their companies do better. In fact, respondents assert that the external workforce

  • is a key enabler of business performance (55 percent)
  • helps companies develop products and services (68 percent)
  • increases speed to market (66 percent)
  • improves organizational agility (64 percent)
  • boosts financial performance (62 percent)
  • improves workforce culture to bring people with different background and experiences into their organizations (54 percent)
  • connects the workforce to new ideas (49 percent)

Better performance likely means that the businesses easily can offset the competitive rate external workers might ask for.

4. Visibility matters (and needs improvement). Even though business leaders acknowledge the contributions external workers have for their companies, most (65 percent) aren't highly informed about the non-payroll workers in their businesses, with the disconnect being worst among C-suite executives. That can have a number of negative ramifications for businesses and make it extremely difficult to maximize the benefits external workers offer.

"Most senior executives do not know how many external workers they have," says Sullivan, "let alone whether they are being paid negotiated rates, if they do quality work, whether they are certified to do the work they were hired to do, or who has access to their facilities or systems. This obviously raises red flags from regulatory and internal compliance to fiscal responsibility, physical security, data protection, etc. [...]

"[One pharma company, for example], thought they had about 7,000 [external workers]. We deployed our solution and discovered that they had more than twice as many external workers. What was alarming about this is that these external workers have access to their data, their systems, their networks, their IP--a lot of confidential information."

As another more general example, 44 percent of workforce spend is on the external workforce. That figure that potentially could be trimmed if executives could keep better tabs on worker numbers, needs and activities.

As for why this area is problematic, Sullivan points out that the external workforce and the way it is managed is still an evolving field. Subsequently, executives simply don't realize it's something they need to handle as rigorously as they do internal workers. Organizational siloing also blocks executives from having a more enterprise view of the workforce. The good news is that technologies have been developed that make the recruitment and management of the external workforce across many channels totally doable.

Stepping up to the challenge

SAP Fieldglass' report is important because it suggests that companies can become even more competitive by tapping external talent more effectively, and that businesses will need additional, innovative tools to meet increasing external workforce needs. But you don't have to wait to take action. The report recommendations capturing more value by ensuring leadership has workforce visibility, knowing the full value your external workforce has, anticipating the skills you'll need in the future and applying workforce strategies to all labor sources. With external workers potentially bringing in significant bucks and solidifying your place as a market leader, this is one area where becoming a pacesetter for your industry--starting today--is fantastically intelligent.