Verifying Your Vendors: Less Risk, Greater Reward
Most people are familiar with business-to-consumer (B2C) sharing economy companies, such as Uber, Airbnb, and DoorDash, but what you may not know is that this fast-growing, widely recognized business model is also being increasingly leveraged by business-to-business (B2B) companies to access on-demand services in lieu of short- or long-term contracts with third-party businesses.
Some examples: During the pandemic, manufacturers –especially small ones – were left with idle factory capacity. On-demand manufacturing marketplaces such as Xometry, Fictiv, and 3D Hubs connected industrial firms with new clients, so they keep their factories and workers fully utilized, making them more resilient and agile. On-demand platforms such as FLEXE, Flowspace, and SpaceFill helped warehouse owners make money from their underused facilities by renting them to firms both large and small who are desperately seeking space to stock their inventory. B2C leaders like Airbnb and Grubhub are also aggressively pursuing the business market by riding the work-at-home/work-anywhere wave.
The market for the B2B sharing economy isn’t small, with almost every business now leveraging sharing companies to take advantage of all sorts of services that might range from manufacturing, logistics, and warehousing to software development, computer hardware rental, online human resources, and payroll services, to name a few.
A crucial point which many businesses engaged in the B2B sharing economy are increasingly aware of is that engagement often carries considerable liability risk.
Scoping the Market
The sharing economy itself is already large and will only continue to grow. BCC Research predicts the global sharing economy market value will reach $1.5 trillion by 2024, up from $373.7 billion in 2019, with the B2B segment growing at a rapid clip. A Business.com survey indicated nearly 70 percent of companies today use some aspect of the sharing economy at least once a month, with 26 percent taking advantage of these services on a daily basis.
Real Risks at Stake
B2B sharing economy companies are different from typical vendors. The relationships are more transactional and often the workforce is also less meticulously vetted. Integration varies wildly from company to company, ranging from traditional stand-offish connections to vague and poorly understood connections through apps, websites, and personal devices.
The biggest risk most vendors face today – and one that CIOs are increasingly wary of when leveraging B2B sharing services – is cybersecurity. Contractors with access to critical company files have the power to do immense damage, if they are so inclined, and need to be vetted more thoroughly.
There are also other risks. The insurance or certifications that third-party vendors often represent themselves as possessing may have lapsed or might simply not exist. On-demand customer service and sales forces, particularly service providers who enter customers’ homes or properties, represent a much more significant risk than your average Uber driver or DoorDash delivery person.
The onus to thoroughly vet B2B sharing economy vendors and contractors is on the business that hires them; but often, this simply isn’t happening. The same types of checks and balances a business uses to hire an employee or a traditional supplier should be implemented for sharing economy vendors and contractors, especially those that will have access to their data and systems. This might include verifying a business owner’s identity and criminal history, a business registration, a contractor’s professional licenses and/or certifications, and – perhaps, most importantly – the individual or business’ insurance coverage.
Opportunities and Obstacles
The good news is that industry-wide, vendors of all sorts are becoming aware of the crucial nature of verification and are beginning to put processes and systems in place to address the issue. Apple, for instance, has added new capabilities to verify consumer’s driver’s licenses, and two U.S. states (Arizona and Georgia) have already fully accepted the Apple digital copy stored on phones as legitimate. More states are sure to follow.
The opportunity (and simultaneous obstacle) for businesses that wish to be successful in the B2B marketplace is to design solutions that will verify what is essential, and only what is essential, for any given role or service qualification. Most qualifications are highly specialized, not broad or universal like a driver’s license. In some cases, the ability to verify both micro and macro credentials is necessary and can be effective at reducing risk and liability and ensuring brand integrity, profits, and growth in the B2B sharing economy.