The Sharing Economy is NOT Big. Part 3. Access Economy: Co-working Spaces, Gig-Economy and SaaS
Access Economy: Co-working
Co-working spaces are popping up everywhere and have created a unicorn, WeWork. They have allowed a lower cost entry point into office space. Renting a desk at a co-working space instead of signing a five-year lease when you may only need it for five months is an irresistible value proposition for freelancers and small businesses.
Co-Working spaces also provide a place where entrepreneurs can connect, exchange ideas, and create projects together. They are a great place for early-stage startups.
The nature of work is changing because of digital movements like the collaborative economy and the gig economy. The cultural framework of what constitutes a job is transforming.
The economic downturn and the real estate slump made property owners more flexible. It also pushed people away from traditional employment because it became harder to find stability there. The collaborative economy is moving people towards sharing economy activities like Airbnb because it makes economic sense.
Adam Neuman CEO of WeWorks said they see themselves as a physical social network. The way people connect and exchange ideas on social media platforms, is happening with people in co-working spaces when they collaborate face to face.
Co-working spaces allow people to access office space, expertise, and markets without needing the infrastructure of traditional brick and mortar offices. Co-working spaces are part of the sharing economy because they are access vs. ownership and they are collaborative employment or crowdwork.
It’s been shown that people who choose to go to co-working spaces find that, their productivity goes up. If that wasn’t enough they expand their business networks, find more work opportunities, become more creative and happier. In other words, compared to working at home or working inside a corporate structure it’s better in every way because people thrive in these environments.
I’m co-working right now and it’s one of the best decisions I’ve ever made. My contacts have expanded, and I’ve signed on several clients for my writing and marketing service.
There is a strong correlation between the amount of control you have over your circumstances and your levels of satisfaction. Co-working spaces, with their 24/7 working hours allow for high degrees of flexibility. It facilitates a lifestyle that the participant has complete control over. What’s clear is that the overwhelming majority of people who try it love it.
Cities like Santa Cruz have realized that instead of going after a 200 person business to relocate there it makes more sense to have a co-working space with 200 people in it. This creates deeper ties to the local economy and some of these people will likely grow into fully fledged local companies.
Corporations are also joining the co-working movement. Some snatch up desk space at co-working spaces so that they can catch startups at an early stage. Menlo Innovations, a software development firm, set up a co-working space in their own office to diversify ideas and increase productivity.
There is the problem of high fixed costs that are difficult to offset against variable and flexible payments from customers. So co-working spaces are trying new differentiators, like a women’s only and industry-specific co-working space to hack stickiness. They’re also bundling services, like housing and group discounts for the same reason. They’re throwing in food, dry cleaning, and travel & visa services to pull in more revenue. Coworking spaces are going to continue to grow, and we will see more collaborations between early-stage businesses and corporate innovation teams.
Gig Economy: Crowdwork
The democratization of computing power through cloud services, the networks created by social media, and the use of smartphones are enabling this movement.
There is a massive shift happening where more and more people are moving to the gig economy. Most people, 70% of those who offered a service, said their experience of the gig economy was positive.
Despite the fact that most people like the sharing economy, it’s making it difficult for regulators to keep up. Should Postmate couriers be employees or contract workers? Is Airbnb a software or accommodation business? How would insurance work?
Local legislative responses vary. Some give sharing economy companies carte blanche while cities like Austin Texas banned Uber. Seattle allowed these workers to unionize, while Utah requires companies to register with the state.
Sites like TaskRabbit, Upwork and Uber create opportunities for micro-entrepreneurs. Etsy, Amazon and eBay have millions of businesses operating on their platforms and they’re not all small. Some are multi-million dollar operations.
Sharing economy workers do not get benefits or insurance. But as this sector grows we are going to see companies fill this gap by offering some version of benefits packaged specifically for this market.
It’s important to note that most of the gig economy is not ‘app’ based. The largest segment in this market is temporary work, temp agencies, and self- employment.
According to the Spera Freedom Economy Report in the next five years up to half of the United States population could be self-employed. Independent work is on the rise in the states and globally.
In 2014 Amazon had 2 million merchants while eBay houses 25 million sellers. Compare that to the largest employers in America, the United States Department of Defense which employs 3.2 million people followed by Walmart with 2.1 million people.
The number of opportunities for those who want more freedom and want to gig has exploded. All net new work since 2005 is in ‘alternative arrangements’ according to a study this year by Lawrence Katz and Alan Krueger of Harvard and Princeton universities.
Uber settled a class action lawsuit and will pay 100 million dollars to retain the right to classify drivers as contractors. This is an important battle for them because if they are forced to classify their drivers as employees it could threaten the existence of the business.
These types of lawsuits are at the very center of the struggle between sharing economy startups and regulators. Taskrabbit is creating massive value in the marketplace, but legislators are having a hard time deciding what box to put them in. The current labor laws were created for the industrial age. Finding the balance between creating a social net for employees and allowing the free market to innovate will be a challenge in this space for the foreseeable future.
In 2015 the mobile worker population was 1.3 billion. In 2012 Independents contributed about $1,000,000,000,000 to the U.S. Economy.
Between the crowdfunding, 1099 work on platforms like Uber and Freelancer, the collaborative economy is creating more and more entrepreneurs, freelancers and micro-entrepreneurs.
Amazon alone had over 5 million third-party sellers across all of it’s marketplaces in 2017. These sellers, product sales totaled $118.57 billion. Not all of the incomes made on these platforms are small. More than 140,000 third-party sellers surpassed $100,000 in annual sales. Add to that total number of freelance incomes, all the gig economy incomes, ebay resellers, social media stars and you will see that that the sharing economy is a huge part of the work economy and it constitutes a significant amount of small businesses. 29% of all workers in the U.S. have an alternative work arrangement as their primary job. Once again we have a brand new economic activity (the gig economy) which has suddenly taken up a large share of the employment market. This is a theme that repeats throughout this market. These movements are big and fast, and they conquer large amounts of market share quickly.
The enterprise is going to use more labor on demand as the technologies that facilitate this increase. And more of this is going to happen on mobile.
The gig economy population is going to be more diverse than the traditional employment market ever was. These workers here may get their own employment classification as well.
It is only going to get easier for people to make a living without a job. The platforms are multiplying. By 2020 gig economy workers are likely to double to 7.6 million people according to Intuit.
There’s a two-way effect. Workers are enjoying more freedom through the gig economy. But companies are also enjoying cost savings by forgoing insurance and benefits. For companies it’s access vs ownership, or labor as a service.
The nature of work is changing to something that is more flexible than it’s ever been.
Specialist HR companies have already popped up that deal specifically with gig workers.
All of the economic, technological and cultural forces along with things like just-in-time scheduling, automation, robots, and artificial intelligence, are going to impact the labor market in unforeseeable ways. We can make educated guesses about some of these changes, but others are going to take us by surprise.
Candidate Clinton made a comment on her campaign that she wants to ‘crackdown’ on the gig economy. What exactly she means and what she will do if she wins the presidency is unknown. What we do know is that at very least the gig economy is going to get more legislative attention. I would guess that some basic protections will be given to all workers. This has already started in the United Kingdom.
Access Economy: Software as a Service(SaaS) & Cloud Computing
This is one that never gets mentioned, probably because the focus of the sharing economy is in consumer markets. But software as a service is access economy. Instead of paying for proprietary, client-server software that you host on your network you get it on a subscription basis accessing it through the web. The same way an individual accesses Spotify an enterprise can access a CRM. Another name for SaaS that gives away it’s relationship to the sharing economy is on-demand software.
All of the cloud-enabled ‘as a service’ services like infrastructure as a service and platform as a service are also part of the collaborative economy.
The market is worth $204 billion in 2016 according to a Gartner report. SaaS is now the preferred way to deploy software in the enterprise. “There hasn’t been an on-premises software company funded since 2007,” said R. “Ray” Wang, principal analyst at Constellation Research. “You have no choice. It’s all going to be SaaS.”
Because there’s no buying or maintaining of hardware or software, it keeps growing in appeal. These services are flexible, meaning you can start or quit with a minimal commitment. The entry costs are low. Deploying cloud SaaS starts immediately after you purchase it. There’s no IT support and these services can be accessed remotely with an internet connection. Scaling up or down is easy. All cloud services have fast deployment and all-inclusive functionality. What’s missing is customization.
Customizable cloud services just arrived. This is what PaaS or API-based SaaS is, all of the speed and functionality of SaaS but with a low cost of customization. PaaS services are accessed through a web-based-API.
There are already a few companies headed in this direction like Twilio, Ordercloud, Contentful, and Algolia.
Clearbit, for example, offers business intelligence API’s. It works by allowing you to send an email or url of a company you’re interested in through an API call and you get back information that will help with marketing and sales.
Algolia is a real-time search as a service provider. They allow you to include their advanced high-performance search on your site or app. The search feature on most websites is bad. Algolia takes care of this.
API based SaaS allows for an enterprise to create a mash-up of services from several vendors. Companies are going to be able to use this for say email, CRM, and business intelligence. Interoperability and flexibility will increase.
We can expect more cost savings. Add to this the fact that the revenue model is changing from fixed fees to transaction-based models then we will see smaller businesses invest more in SaaS software.
More SaaS is going to be developed specifically for mobile and networked devices. More AI and predictive analytics will be accessed through it. The overall trends again shows tremendous growth in this sector compared to the traditional method of delivering software. The access economy is a new, exciting, and clearly very popular economic model. Once again the sharing economy option wins in a big way as can be seen by the following quote.
SaaS delivery will significantly outpace traditional software product delivery, growing nearly five times faster than the traditional software market.