The rise of Gig Economy & Why Fractional Engineers will drive the next IT Wave

The Rise and Impact of Fractional Engineers in the IT Sector

Before we get into why Fractional Engineers are the way forward in IT, we wanted to give clarity to the term. So, I decided to ask our beloved ChatGPT to give a definition of Fractional Engineer & received the following response.

“A fractional engineer, also known as a fractional or freelance developer, is a specialized professional who works on a part-time or contract basis for multiple clients or projects rather than being a full-time employee of a single company. Fractional engineers are typically hired to work on specific tasks or projects, leveraging their expertise in a particular field, such as software development, machine learning, data science, web development, or other technical areas.”

Well, the above does paint the picture, while there is more to Fractional resources, more of that later.

A report by Upwork & Freelance Union, the freelance workforce in The US represented 36% of the total US workforce, standing at a whopping 59 million in 2020. A survey by LinkedIn in 2020 found that 71% Tech companies hired more freelancers & temp workers, while MBO reported in 2019 that 54% startups & 64% SMBs hired independent contractors actively. I have specifically quoted pre-covid surveys here, to show that the demand & the supply of the fractional workers was high, even before the workplace got revolutionized by the pandemic.

Freelancing is not a new concept, in fact, occurrences of independent workers offering their services to different parties can be dated back to the medieval Europe, where craftsmen were hired by different guilds for their services. During Renaissance, artists & sculptures offered independent services to the patrons. Industrial Revolution allowed skilled workers to engage on project basis. While Tech & Digital Revolution gave a boost to these independent service providers by providing them a platform. But Globalization eventually opened global forums & international reach of these independent workers to horizons beyond their traditional reach.

While we’ll analyze the reasons for the surge & sustenance of demand for fractional workforce, the biggest driver has been the accessibility of resources across the globe, powered by a revolution in availability of platforms for hiring them.

The likes of Uber, Zomato, Swiggy & DoorDash epitomized gig economy in the e-com world, the likes of Freelance, gun.io, Turing have given a great platform for the gig workers in the tech space to prove their mettle. The size of the world’s gig economy transactions is supposed to grow by 17% CAGR, to a $455 B by the end of 2023. A report published by BCG & Microsoft put India at the forefront of leading this growth, employing more than 90 million people in the non-farm sector & 24 million in shared services roles.

But what is the change & why gig is now becoming a point of more focused discussion? What Uber, Zomato & the likes did in the last 10 years, was towards more non-skilled/informal skills economy. What Covid & the recent shift in the technology space is doing now is bring gig in full foray to the IT services & high – demand skills like IT, Marketing, HR, Finance etc., with IT leading this change. Uncertainty in demand for companies, flexibility requirements from workers & need for hybrid work environment, are major factors driving this growth.

Let’s look at some of these factors driving the growth of fractional engineers in the IT sector.

  • Growth of the startup ecosystem – Startups don’t have high budgets to maintain bench strength, as per forecasts, unlike the IT behemoths. They generally work on small projects, with specific tasks, with hiring done for these projects on a short term/need basis. Getting fractional engineers, either on contract or from the gig market, gives them flexibility, manage unpredictable flow of projects and short-term finances.
  • Changing technology needs & market landscape – While technology landscape has always been unpredictable, ever – changing and constantly evolving, what has happened during Covid & the release of ChatGTP, has made it much more challenging for the recruiters to meet the changing demands. Gartner’s report on the state of the IT skills states that top IT skills go either unfulfilled, or the managers boil down their need for skills to fill the position in 70% scenarios.

The challenge is not the availability of resources, but the demand for ever changing skills, even for short term projects, making it difficult for the HR team to hire more fulltime folks, as they might become redundant in a short span. 1 way that companies adopt is constant upskilling of their resources, but not every company has the resources or the time to do this. Thus, they resort to looking in the open market to hire fractional engineers, with specific skillsets, whom they can leverage as needed.

  • Costs & Efficiency – A lot of studies show that hiring fulltime roles is a better option, provided you have a long-term need, your requirements are predictable, you have the team internally to evaluate the right resources and you have the backing to take risks, in case these resources leave & you must start from scratch. But when the demand itself is so unpredictable, in fact the technology adoption is quite fast, changing the need for skills often that predictability is a distant dream and this change makes getting people to evaluate skills tough, the choice is clear.

In addition to this, hiring ready to deploy fractional engineers saves companies training costs, onboarding costs, reducing opportunity costs when such resources need to be replaced and often, save office space costs, as a lot of these fractional workers either work remotely or from the premises of the resourcing providers.

  • Well – Rounded Industry experience – It’s very rare for fulltime employees to work across multiple projects, roles, or clients, spanning across industries, mainly since they understand the client & the project well, the management tends to retain them on the same client or project long – term to ensure higher customer satisfaction. On the other hand, fractional engineers work across projects, often across industries & domains, giving them a well-rounded exposure to different industries, ways of working, making them more flexible to unpredictability, that the IT sector is marred with.
  • Gig economy’s rise – While the demand has grown, a lot of this is driven by the supply of good talent, demanding flexibility in work environment and opening towards fractional roles. Skilled professionals, including ML & Data experts, are increasingly choosing to work on a project-by-project basis, providing their services to multiple clients simultaneously.
  • Covid – the nail in coffin – As I have highlighted in some pre-covid figures above, need for fractional workers was rising even before Covid, but the need for remote work, flexibility in work timings & a new engagement model that emerged during Covid, has driven this growth much faster. Companies can now access a global pool of talent without the constraints of geographical boundaries, expanding their options for fractional hiring.

While the need for fractional engineers is on the rise and we are confident that it’ll define the next epoch of IT growth, it does come with its own challenges, including accountability, managing the resources etc., which we will evaluate in our coming set of blogs, but one thing is crystal clear, gig economy is here not only here to stay, but might well become a norm in the coming decade.

One that can be compared to what happened with the IT infrastructure industry when AWS & Microsoft arrived with their cloud offerings. Anything that had an unpredictable demand and did not form the core of the company’s offerings, made a good case for Cloud. Can we draw a parallel with deployment of Fractional Engineers?

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