The Greedy Middlemen
Why do independent consultants have to go through middlemen to land the interesting assignments at Sweden's major tech companies?
For me, this has been a burning question for many years.
My own experience
I've been one of those middlemen myself — and made good money doing it, by bringing a large group of sole traders together under my organisation and at the same time building a commercial relationship between us (Middleman Ltd) and the client companies. I set up framework agreements with clients and gathered a great many highly skilled consultants who formed their own limited companies and started working with us.
The upside for consultants
The upside for consultants who suddenly became self-employed was that they now owned their time in a completely different way. What a liberating feeling — one anyone can appreciate. They also owned the process of deciding how and when they planned to retire. How much should go into a pension policy to create a good life here and now, and how much do I want to live on when I stop working — and when do I want to stop?
These are fantastic questions that every salaried employee ought to ask themselves far more often than unfortunately tends to happen today. As a self-employed person you have the wonderful luxury of deciding all of this yourself, not your employer or the state (which, incidentally, doesn't deliver a particularly generous pension when you actually look at the numbers).
The challenge for consultants
But what's the catch? Well, most people don't want to be entirely on their own as sole traders — they want to belong to a context. They also want someone to sell them into the interesting client assignments. The typical feeling is that one's own sales knowledge and instinct isn't all that great. On top of that, there are a large number of contacts that need to be maintained continuously, which can be a real challenge while you're fully occupied with your current assignment.
How consultants solve the challenge
So what do you do as an independent consultant — My Own Ltd? You turn to a "middleman." This typically takes the form of a brokerage service where, as a sole trader, you can sign up with various consultant brokers and have them sell your time and expertise to clients — and you invoice the middleman instead of the end client.
This works well because end clients generally don't want to engage sole traders directly; they prefer a larger player that aggregates such consultants under one roof.
How this can be done better and more efficiently
Here there are two questions worth considering, and they go back to my opening thought — "why do they have to…"
Why does the middleman have to be so expensive for the individual consultant? We're talking about somewhere between 10–40 % depending on the middleman and the competency area. The typical range tends to be 10–20 %.
The second question is why end clients can't simply onboard a sole trader directly into their procurement system.
The answer is that the end client requires the middleman to vouch for the consultant's competence and guarantee a high level of delivery. They simply want the consultant "validated" through the middleman, and for that organisation to take responsibility for professional development, professional indemnity insurance, and so on.
On top of that, end clients don't have the bandwidth to search for expertise themselves — instead they "post" requests specifying the assignment and the competencies required, then send those requests out to the consultant brokers and suppliers they have framework agreements with.
The middleman then has to "manually" search within — or outside — their own organisation to find suitable candidates to put forward to the end client. This is a manual, costly, and inefficient process that also doesn't help the client find the best consultant for the job.
The solution for both the end client and the independent consultant
We believe end clients are spending an enormous amount of money unnecessarily by working in this traditional way. It would be significantly better if end clients instead searched directly for the consultants they want to engage. Those consultants would be gathered in a database connected to a platform with powerful criteria for searching and hiring consultants for new assignments.
We're talking about an entirely new digital way of working — one that simply hasn't existed before.
This means we can now cut away a large part of the middleman cost, which largely consists of manual processes in the form of fees to a consultant manager/salesperson (the middleman) who has to do all of this work by hand — work that today can actually be handled entirely digitally. We're talking about 15,000–30,000 SEK per month, per consultant, that is currently being happily paid over to middlemen.
Conclusion
In the digital world, we no longer need to count the number of suppliers or argue that each one costs a certain amount in the client's procurement system — and therefore that the number of suppliers needs to be kept down.
Quite the opposite, in fact. Agreements are signed digitally, delivery is guaranteed and governed by digital contracts within the platform. The fee is negotiated between client and consultant for each deal and assignment, and all data is stored digitally for both parties in the same platform.
The solution already exists
At GigPort we want to create the new, smarter way to procure consultants. Specifically: stop sending out requests. Search the system yourself. Over time you'll find all the expertise you need right there. Instead of spending time writing an assignment specification, you can use those same criteria in our search engine and find the people you need to hire — directly.