As the service world moves increasingly towards a consumption-based model – in both business and consumer markets – traditional product-driven companies are re-inventing their business plans to adjust and create service-driven revenues. In the tech market, it’s a matter of survival, as service providers are adding to their services portfolios and traditional VARs and resellers are moving to an MSP model to retain customers and drive recurring revenue. Hardware alone is no longer a sustainable model. Sales need to be supported by IT services too.
As VARs and OEMs evolve to become MSPs, they are identifying services and solutions they can attach to their product lines, which, while increasing their revenue streams, also brings them into a largely unknown IT services world with a need for field service teams to deliver their new services.
Traditional Technician Models
Two traditional models have existed for several decades to deliver field services. The first is to simply hire a team of dedicated field service techs in each geographic area in which a company has a footprint. The second is to follow a third-party outsourcing model, where IT services businesses would outsource their field services to partners. While both models have been largely effective, market changes are making them less effective for companies that are prioritizing field services.
While the W2 or permanent labor model provides a consistent in-house resource, it also inherently creates downtime and overtime. Companies with in-house field service labor often have a hard time optimizing workforces, as they need to hire enough technicians to handle peak demand without long wait times. That also means they will have extra staffing during off-peak periods. In addition, there’s a cost and time factor associated with sending W2 technicians to work sites – the further techs have to travel, the less flexibility they have in getting to additional work sites.
The outsourcing model provides more flexibility in terms of matching workforces with demand and eliminates the need for hiring and managing a W2 workforce of technicians. But, there is no brand connection or loyalty, and techs may be working for one IT company one day and another the next. The outsourcing model can also be a significant expense. It has worked well for many companies offering field services as an add-on, but not necessarily part of a strategic plan and, as companies strategically focus more on their services capabilities, it may not be the most efficient model.
Field Services in a Gig Economy
But, a third model has emerged over the past decade – the direct-to-contractor model (or gig model), which allows businesses to engage contract technicians directly and hire them for jobs. In many ways, the contractor model takes the best elements of W2 and outsourcing models and adds greater cost and time efficiencies, making an ideal option for businesses looking to grow their services revenues.
The contractor model is able to offset some of the challenges of traditional models and offers a highly flexible and scalable solution that allows services businesses to keep up with both demand and technology trends.
“Companies, regardless of the target customer, are looking to go after services revenue and they all want to tell their customers, ‘Yes, we can provide the service,’ regardless of what technology solutions they are providing to those customers. They want to be the one throat to choke,” says Mynul Khan, Founder and CEO of Field Nation, an online field service marketplace. “That creates this amazing opportunity, but also a huge challenge.”
That challenge, he says, is being the single source for technology for customers, including services, but doing it at scale. The services business is a recurring model that requires a very different scalability than product-driven businesses. Any time a customer puts in a service ticket, service organizations must be able to dispatch technicians to work sites to address customer needs, which means not only having technicians available, but technicians with the right skill sets.
“Because of technology changes, there's been a constant battle within service organizations to make sure their talent poolskeep up with newer technology skills,” Khan adds. “Their customer needs haven't gone down – if anything they have increased – and they are struggling to meet those needs with a fixed workforce or with an outsourcing model.”
These challenges, along with a gig mindset that is becoming more prevalent in today’s workforce, are driving the growth of contingent field service labor and the direct-to-contractor model, specifically. The problem, of course, is securing reliable contract workers when customers call. But, there would still be challenges for services companies. Specifically, they would need consistent access to a skilled labor force when customers called.
Khan recognized the evolution of field services to a contractor model, but he also saw an opportunity to make it easier for companies to find the workers they would need. That’s what led him to launch Field Nation 11 years ago, with the intent of providing the back-end infrastructure that would connect services firms with technicians and manage every work order and contractor on its platform. The company processed more than a million work orders last year alone.
Why Direct to Contractor?
Moving to a direct-to-contractor model allows companies to build their services revenue streams efficiently without the friction of outsourcing models or the inefficiencies of permanent workforces – but with the benefits of both.
- Infrastructure – Like the outsourcing model, a contractor model means companies don’t need an infrastructure to manage service delivery. Instead, a platform – like Field Nation – provides the third-party system that connects technicians with jobs, and collects and tracks all job-related data. The result is a constantly growing pool of technicians that includes skills and certifications, work histories, and performance ratings.
- Scalability – Because there is no time-consuming hiring process, and technicians are paid by the job, scalability is as simple as listing new jobs on a platform that acts as a job board for technicians to claim. Companies are able to post jobs as they arise to meet seasonal or other variable demands, and scale back down as demand returns to normal levels. Scalability is limited only by the number of available technicians.
- Skillsets – It’s nearly impossible for in-house IT teams to keep up with all the certifications and skills needed to address all customer needs in a timely manner. A contingent labor model expands the available talent pool to include techs with the right skillsets or certifications that meet criteria for any given opportunity.
- Visibility– Because businesses work directly with contractors, they have more visibility into the work being done than with an outsourcing model, where the relationship is with the outsourcer. By using a well-designed contractor platform that enables real-time communication between techs and hiring companies, every step of each gig is tracked and quality and progress can be more easily ensured from assignment to completion.
- Branding – Perhaps the greatest challenge with any sort of contingent labor is brand representation. Gig workers do not have the same inherent loyalty as W2 workers. As a result, hiring companies must be able to track and monitor every job for quality and timeliness, but they also have put in concerted effort to reach a level of loyalty with technicians as brand representatives. The benefit of the model, however, is that contractors and services businesses build relationships through recurring job agreements, which builds loyalty, branding, and quality.
- Cost – There’s a clear cost benefit with the contractor model, as any costs related to W2 workforces are eliminated. In addition, companies can pay on variable scales based on individual job requirements, rather than paying the same rate for each gig. Because technicians are hired on a per job basis, companies are not paying employees for down time during seasonal or other low periods.
Total Value Proposition
While cost is often the initial motivation for exploring the direct-to-technician model, the ultimate benefit is the ability to build a network of familiar and trusted technicians with the necessary skillsets to complete jobs. Through ongoing relationships and multiple jobs, these technicians learn to understand and represent your brand to your customers. That, says Khan, is even more valuable in the long term than cost savings.
“Over a period of time, you are actually building a network of direct contractors who are representing your brand and who know your company so well and are providing a consistent level of quality service to your customers,” he says. “Over time, that becomes more important than anything else.”
Edited by Erik Linask