This story is interesting. Some believe the accounting profession is under threat from online labor platforms. The author argues that these worries are unfounded because accounting services are too personal, complex, and so forth for an “Uber for accounting” to succeed.
There actually are several Ubers for accounting already. One of them, Countup, claims it has “curated” a group of accountants for “up to 50% less.” Another, HireAthena, offers accountant “moms” to startups and nonprofits. A third, Taxaroo, connects tax preparers with whomever.
All of these sites package accountants and their services as though they were products, then market them under the online platform’s brand. Evidently some practitioners are going along with that. If the concept takes off, it could compete with traditional CPA firms that serve individuals and small businesses.
But firms that mostly serve larger businesses have a different concern. Their clients don’t need to use a public labor platform because they can set up private ones that are specific to their needs. Middle-market clients such as retirement communities or retail auto dealers, for example, might band together to establish a membership platform. A Fortune 500 client could set up one all of its own.
Private labor platforms could be a headache for every provider—from solo practitioners to boutiques to the Big Four—that offers non-attest services to these segments. Why? Because they’re every bit as likely as the public platforms to commoditize labor or die trying.
Let’s look at some specifics.
An engagement sourced through a private labor platform probably doesn’t begin with a discussion of the client’s needs. The client would instead have determined a solution ahead of time and served it forth as an ordinary job description. The description might end up part of a contract, and “statement of work” might even be in the document title. But the SOW is drawn up by the client.
My only experience—sort of—with this approach is the time the CEO of my then-employer decided to change the company name to a highly generic word. We had eight weeks to execute. My boss suggested I hire a branding consultant to write a report justifying the change.
I called five firms. As soon as they heard the new name was non-negotiable, the first four took a hard pass. The fifth, a solo practitioner with a great sense of humor, accepted. His fee was enormous, but he delivered what we needed. His website today has a page full of stories about prior projects. My former employer isn’t on it.
So I don’t know how well this “take it or leave it” approach would work for soliciting independent service providers. I doubt it would play out the same way as recruiting an employee.
Confidentiality clauses are standard among B2B agreements. Among other things, they might forbid you to use the company as a reference without prior written permission. That’s just basic courtesy anyway. Usually compliance is a matter of exchanging emails.
But a private platform might codify a no-reference policy. Under these circumstances, the closest you’d ever get to a recommendation is a generic HR statement. To service providers, that’s worse than useless. It effectively damns them with faint praise.
If there’s a prime directive in professional services marketing, it’s that you have to be strategic about the clients you keep. Each one must enable you to do the sort of work that secures other good clients. That goes double during times when the firm is sold out. Therefore if a client is unreferenceable for any reason, the engagement fees had better be high. (See branding consultant, above.)
A reverse auction is where you bid against other providers to offer the lowest price. It’s the sort of thing you do to unload excess inventory. Priceline is a well-known example.
As far as I can tell, the B2B reverse auction is an approach copied from FedBid, a DC-area online platform operator. FedBid is a go-between for government contractors and some public sector agencies. The company has been in and out of trouble with regulators. It has a starring role in a highly colorful inspector general report published not long ago.
The mere presence of a reverse auction function is a red flag for domestic B2B services firms because even if you have a lot of people on the beach, you cannot compete on price. You could still propose your regular rate in case no other provider cares to bid. But if someone beats you, it might be best to disengage and let the other guy be the low-cost provider.
An interesting feature of Uber is that assessments are bidirectional. Both drivers and passengers can be rated. Drivers with a low rating will be unable to accept fares. Passengers with a low rating will not be picked up.
But a private platform serves the client only. Any ratings feature would be like an employee performance review, but with the results posted for the entire client organization to see.
One-sided feedback is especially vulnerable to abuse. On a labor platform, it’s unclear what would prevent someone from using the feedback system to control the supposedly independent contractor. For example, it could be used to extort free deliverables or service hours. Worse, suppose one of your staff uncovers evidence of fraud. The client threatens a negative rating unless the issue is dropped. Do you go along? Delete your profiles? Throw your staff member under the bus?
A private labor platform might strictly be for “contract employees,” which is a baroque term for temps. It’s a tipoff that behind the scenes, a third-party staffing agency has been installed as gatekeeper. Any client engagement would involve becoming an employee of the staffing agency and also paying a toll, probably about five percent of fees.
This is fine for individuals who really do work as temporary employees. A five percent cut isn’t a bad deal, comparatively. Traditional staffing agencies take much more.
But it’s a bad deal for firms—and, really, all independent providers who operate through their own companies. It means that if you want to acquire that client, you might be stuck having to misrepresent yourself, your employees, and your subcontractors as W-2 employees of the intermediary agency. And you’d still have to pay the intermediary that five percent off the top, without getting anything in return but a tenfold increase in your administrative overhead.
To participate on a private labor platform, you, your employees, and your subcontractors may be required to undergo a background check exactly as though you were applying for employment with the client company.
But for independent service providers, the big issue isn’t the identity and criminal checks. It’s the financial disclosures. You might have to agree to a credit check, even if the engagement has nothing to do with handling money. You also might have to produce tax forms or sign an IRS Form 4506-T allowing the client to examine your past tax returns. The ostensible reason for the IRS check is to make sure your business has other revenue.
Privacy implications aside, such requirements are a major security risk. Background checks are usually outsourced to companies that accept no responsibility for their management of personally identifiable information (PII). And the PII tends to end up in offshore service centers where US laws don’t apply. Should something terrible happen, the problem would strictly be yours.
What It All Means
Public or private, these platforms have a common aim: Convert labor into a utility. The problem is, utilities compete on price. But labor on tap is expensive.
Even Uber is often very costly despite heavy subsidies from both investors and its labor force. The seesaw between surge pricing and driver disincentives appears to be affecting the company’s reputation among customers. As a result, even though taxi service is not a free market (to Uber’s benefit), I believe the company will abandon its dependency on labor and move to self-driving cars as soon as possible. Here’s hoping the clock doesn’t run out on them first.
Meanwhile, in professional services early signs point to labor platforms becoming some mix of glorified job board and rent-seeking middleman. One is not like the other, of course. The first is basically the result of confusing independent service providers with employees.
The second kind of platform, the intermediary, is more depressing. The private intermediaries make their money by locking up entire markets (a single multinational company can be considered a market) and riding on provider fees while hiding behind the client’s brand. The public ones lead prospective clients to believe that the intermediary organization is the one actually creating and delivering the services (“Meet our accountants…”). Collectively, these intermediaries look like a bunch of people running around trying to get ahead by invoking their authority and taking credit for things they didn’t do. It’s like a dysfunctional organization blew up and got all over the economy.
And it’s not that online labor platforms are such an awful idea. They’re actually a great idea. It’s very hard to find CPAs (not to mention consultants, lawyers, or freelancers) who are talented and have the right domain knowledge and work on a contingent basis and have availability. Google’s search function isn’t good at finding folks like that. How wonderful it would be to have a genuine B2B community where clients and providers could meet up online and conduct business as partners on equal footing.