Structural changes in workforce composition and how we work have dominated the headlines since the COVID pandemic and received much research attention.
Most of the analysis has focused on remote working, the gig economy, hybrid models, and the astounding growth of the contingent workforce which today is over 50% larger than pre-pandemic and represents about 36% of total US employment.
What has received less attention are high-end professionals working in teams, often intermediated by giant corporations like Accenture, TCS, Deloitte, and the like, delivering specific projects for their clients. The delivery of these multi-million dollar projects for ERP implementations, engineering, legal, research, etc. is governed by “Statements of Work” (SOWs) that lay out what the service provider is supposed to do, how they are being compensated and what to do if things go wrong.
Ronald Coase in his 1937 Nobel Prize winning paper explained that firms exist because of the differential transaction costs of organizing work inside firms based on trust versus arms-length ad-hoc contracting by individual workers. Applying this insight to the IT consulting giants makes intuitive sense, as even the most gifted developers would find it hard to develop the high-value clients that these corporations serve and gain the reputation of delivering high-profile projects consistently.
But what differentiates these SOW firms from ordinary staffing agencies?