A Disruptive Response is here today!

I’ve written in a past blog about disruption, and asked readers whether they would be the disrupter, or the disrupted.Recently, I have been asking the same question to the leaders of Eastern European Offshore Outsourcing firms. One specific question I asked them was “what is your disruptive response to fundamental changes in your market?”

Interviewee Andrei Khrekhov, Head of Technical Programs, for Fujitsu’s Global Delivery Center (GDC) Russia, mentioned the Team Force network as a disruptive response to competition, to ensure high utilization of full-time technical resources.To learn more, I asked Valentin Makarov, President of Russoft, the Russian Software Association. Valentin introduced me to Ruslan Gainanov, CEO of Team Force. Ruslan was kind enough to grant me an interview. I learned that “Team Force is a smart staffing company”, and much more.

What is the Team Force Disruptive Response?

Team Force adopted a “Coopetition” support model, defined by Wikipedia as “collaboration between business competitors, in the hope of mutually beneficial results.”The firm offers a “Skills Cloud” to make the skills of idle full-time employee consultants available to other consulting firms that have an immediate demand for those same skills. The cloud offers a collegial approach to aggregating and exchanging supply and demand, and not allowing the market to rely on a series of individual, point-to-point relationships where skills supply and demand aggregation would not be visible.

Why is the Skills Cloud a Disruptive Response?

In my earlier post on disruption, I reviewed and commented on Consulting on the Cusp of Disruption, by Clayton M. Christensen, Dina Wang, and Derek van Bever, in the October 2013 issue of the Harvard Business Review (HBR). With an online subscription, you can read it here.

The authors characterized three forms of offering consulting, ranging from the traditional “Solution Shop” to “Value-added Process Businesses” and then to “Facilitated Networks”. The Team Force Skills Cloud is a disruptive response because it enables “Facilitated Networks”.

In my experience, the expert network form is the most flexible, least constrained, and most likely to deliver value at an exceptional price. It is at once the most disruptive, and presently the least likely form to be destabilized by other disruptive initiatives.

Key business drivers for the Team Force Skills Cloud

The Team Force Skills Cloud was developed for the Russian IT consulting market. There are differences between US and Russian labor market for IT talent. In the US, subcontracting (freelancing) is a common model for individual IT practitioners. This allows subcontractors to move freely to contract situations demanding their skills, while leaving situations where their skills are not in demand. Similarly, US employers may contract for required skills on a short or long term basis without the overhead, challenges, and inertia associated with full time employment.

In Russia, the most popular approach for individual service delivery is the “permanent, full-time employee” contract. Individual subcontracting is not a common situation. A key challenge for employers is that they cannot easily hire and fire as their demand for IT skills fluctuates. This “full time inertia” means employees may sit idle in one firm, while another firm needing those same skills has no access to them. In reality, this situation is challenging for employees too. Idleness opens the potential for morale problems, skills deterioration, and resume dilution. Team Force CEO Ruslan Gainanov characterized the situation as “Hire, not fire vs. Hire not, fire.”

This challenge for employers and employees alike provided the impetus for developing the Team Force Skills Cloud. Here is the essence of this disruptive response… The Skills Cloud is a risk reducer for employers and a motivator for IT professionals who prefer an active engagement to sitting idle.

Skills Cloud Origin

The Team Force Skills Cloud began by serving the SAP market.
For a cloud market of IT skills to work efficiently, one requirement is that a practitioner’s relevant IT skills must be rated according to a well understood scheme understood and accepted by cloud market buyers and sellers. Fortunately, there is a skills rating approach used by Russian SAP market participants. This rule-based skills and seniority rating system considers the employee’s time in grade, particular skills, time in project management, and similar measures. In theory, skills exaggeration and inflation are minimized. This is necessary for a useful disruptive response.

Skills Cloud Community Policing

Another Skills Cloud “must have” is for participating cloud members to offer guarantees from the labor supplier organization to labor consuming organization. Despite the intentions of employers to correctly rate their employee’s skills, any particular consultant / project interaction is a potential for a skills mismatch. As today’s supplier might be tomorrow’s consumer, reciprocity mandates “truth in consultant characterization”. The Skills Cloud is a Business to Business (B2B) market for professional services.

Note that a freelancer market composed of individual service sellers cannot offer a “replacement guarantee”. Freelancers must present test certifications and recommendations as evidence of their capabilities and skills consumers have no recourse but contract termination if the freelancer’s abilities are not “as advertised”. According to Ruslan Gainanov, employers dealing with individual freelancers are engaging in a Business to Consumer (B2C) transaction model, without the guarantees of B2B.

Skills Cloud Current State

Russian companies make a breakthrough with this Cloud Skills market approach. Presently, there are 100,000+ consultant days per year available on the Team Force Skills Cloud marketplace. As an IT staffing firm, Team Force offers several approaches to monetize the Skills Cloud

Subscription – Team force charges a fee to use the Skills Cloud market
Time-based (planned) – Team Force will charge a fee based on the length of the publication time of a job (skills needed), or employees (skills available). This would ensure the Skills Cloud only contains fresh, agile information on real jobs and real employees
Dedicated HR Manager – Team Force provides Skills Cloud employers a fee-based dedicated Human Resources manager on a scheduled (e.g. quarterly) basis; HR manager will manage all transactions to offer and obtain available and required skills
Percentage of transaction value – Works with large participants (e.g. EPAM, Luxoft) who use the exchange as an intermediate broker. The large participant holds one contract with the Skills Cloud exchange rather than dozens of contracts with small skills providers. This “single point of contact” approach makes it possible to track transaction volume and charge fees accordingly. With small buyers and sellers, contracts are negotiated off the exchange, eliminating the possibility of transaction-based fee generation.

Skills Cloud Future Plans

The next step for Team Force is to extend the Skills Cloud beyond the SAP market into the larger world of IT specialists. A key metric for success in this model is the number of participating employers. Today in Russia, the SAP cloud contains over 7000 consultants, available for projects of various sizes. Tomorrow, the world of IT will offer greater participation and the possibility of offering this business model to other geographic markets.

The Bottom Line

Team Force Skills Cloud is a dynamic approach to removing inertia from an IT services market that is largely full-time employee-based. The fundamental appeal of full-time employment is retained while there is a direct means of reducing or eliminating expense risk due to idle full-time employees. At the same time, employees stay engaged and challenged, rather than becoming idle and demoralized.

The well understood skills rating model in the SAP world relieved an impediment to employer participation. It will require talent and expertise on the part of Team Force and collegial community policing by Cloud Skills participants to ensure this model works in the larger world of IT and in other geographies where other cultural norms and expectations may apply.

Disruptive Response – Skills Cloud