Online Sourcing Enhances Staffing

My personal involvement in staffing can be traced back to when I ran finance and operations at Accolo, one of the first recruitment process outsourcing (RPO) companies, where I had a front-row seat to the evolution of recruiting, staffing and HR outsourcing.

It was at Accolo that I became interested in leveraged labor models. There’s a lot of talk about the efficiency gains from new software and technologies, and how much cheaper it is to get a product to market as a result. But nobody’s really tackled the labor side of the equation before, and the spending on payroll dwarfs the spending on technology and systems.

Enter oDesk. I learned of oDesk (which I joined in 2009), when one of my sales guys at Accolo pitched oDesk’s CEO, Gary Swart. They spent 15 minutes talking about Accolo and then the next 45 talking about oDesk. We didn’t sell anything to Gary — instead oDesk hooked me.

I’m an operations guy to my core, and nothing delivers operating leverage like a distributed global workforce. When I saw what could be done by finding the best talent anywhere in the world at a global market wage as part of a 24×7 operation, it made my brain hurt. The efficiencies are pretty amazing.

That said, I don’t see online work as a threat to traditional local staffing. Through research, we found that 85 percent of oDesk clients would not have hired locally if online workers weren’t an option. Online work is an enhancement to traditional staffing and employment. The use cases are different and a smart human capital strategy leverages the best of full-time employees, local staff augmentation and an online workforce.

The Future Work Model

So what does the future of work look like? I see the future as a blended model — a coexistence of traditional employment, local staffing and online workers. What will change is the fluidity with which individuals move between the three models. We’ve already seen average job tenure shift from decades to years, and I think we’re headed toward people flowing easily between traditional employment and independent contracting. In order for this to be possible, the legal and regulatory mindset will need to change. Traditional and legal definitions of employee and contractors are increasingly disconnected with reality, and healthcare will have to be decoupled from employment.

 

Matt Cooper

Matt Cooper
Matt Cooper is vice president of marketplace operations at oDesk.

Matt Cooper
Matt Cooper is vice president of marketplace operations at oDesk.

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8 Responses to “Online Sourcing Enhances Staffing”

  1. andrewkarpie says:

    I still tend to believe that as platforms broaden/flatten labor markets, average contractor market rates would fall at first (unless the platform is able to bring previously inaccessible high skilled labor into a rapidly growing market–which in fact such platforms are doing in some cases).  But, as I think John Horton is pointing out, they can also become “opportunity lattices” (especially if learning is possible). What’s more they needn’t be simply a spot market for decomposed labor/talent (as in some crowdsourcing models), but rather platforms that connect embodied talent/skill and those who will value and us it.  Whole interesting important discussion.  But I’d like to come back to the original focus of the post: the impact of emerging online work platforms on existing staffing industry structure(s).The interesting question seems to me how over the next 1-5-10 years the buyers/employers, the talent/skills, and the staffing specializing service intermediaries will evolve as increasingly powerful and geographically pevasive online labor platforms continue to emerge  (something which started with job boards over 10 years ago).  I don’t see this emergence of online work platforms as only creating a distinct labor market for online work,  Platforms like oDesk are only single instances of onliine workforce platforms that are and will be created. Platforms for intermediating and establishing work arrangements can extend to construction workers, truck drivers, et al.  Moreover, platform scope can be increased as well (beyond being labor spot markets) to being “opportunity lattices” for nuturing and developing skilled workforce over longer relationship-development life-cycles. Institutional inertia will slow this process, but sometimes there are tipping points that we just don’t see coming.
     

  2. mattcooper1 says:

    Andrew and Vikram – thanks for your comments, great discussion.  
     
    Vikram – I wanted to address some of your points, as I think they highlight some common misconceptions about online work.  First, online work gives tremendous opportunity for upward economic mobility.  The average hourly rate of an online worker increases by 190% over 3 years.  Our staff economist, John Horton, just posted an interesting study of this on our blog: https://www.odesk.com/blog/2012/07/25749/.    
     
    Second, the online wages are very competitive relative to local wages.  The average hourly rate of an Indian contractor on oDesk was $9.78 in June, almost 4x the average local starting wage of a .Net developer with a CS degree ($2.40/hour, source: PayScale) and 13x the average per capita income in India ($0.78/hour, source: Wikipedia).  Working online has other benefits, such as avoiding the 2-3 hour commutes that are common in many large cities or being able to work from home while caring for family.
     
    While there are situations where individuals post a job at a below-market rate, people vote with their actions and those jobs go unfilled.  Open, online and global employment marketplaces like oDesk give clients and contractors access to talent and economic opportunity that isn’t available locally.  Our model doesn’t work unless it’s good for both the contractors and companies.  The data above and our rapid and sustained growth is an indicator of the positive impact online work can have on all participants.  

  3. […] drawing from his many years of experience in the staffing industry. Check out his first post, Online Sourcing Enhances Staffing, which discusses the relationship between online work and traditional local staffing, as well as […]

  4. andrewkarpie says:

    Vikram, what you say about wage rates seems to be supported by at least one study I know of: March 2012 research paper by Ajay Agrawal, et al, “How Do Online Platforms Flatten Markets for Contract Labor?“ http://andrewkarpie.com/wordpress/?p=1270. However, the question/issue you raise could apply to any labor market, online or not. In any case, there has to be some equilibrium where workers have an adequate level of living to keep working, subject to other societal values being imposed/embraced–that’s a very big, complex issue (socially, politically, economically). It is certainly one question that applied to online work platforms (just as it does, once again, to labor markets in general). As to online work platforms, I think there are also many other important questions, besides this social/regulatory one, regarding transparency, transaction costs, effects on amounts of work performed/workers employed, at what costs. To me a major question is in this area: initiallly online work platforms “atomize” the workforce (independents, free-lancers) whose value creation and earning potential is limited by their own resources (scaling is limited). Will these work platforms evolve to support not just efforts of individuals, but the collaboration of individuals and the formation of multi-individual valaue creating entities that can scale and increase their market power as suppliers of labor/value. @andrewkarpie 

  5. andrewkarpie says:

    Vikram, what you say about wage rates seems to be supported by at least one study I know of: March 2012 research paper by Ajay Agrawal, et al, “How Do Online Platforms Flatten Markets for Contract Labor?“ http://andrewkarpie.com/wordpress/?p=1270. However, the question/issue you raise could apply to any labor market, online or not. In any case, there has to be some equilibrium where workers have an adequate level of living to keep working, subject to other societal values being imposed/embraced–that’s a very big, complex issue (socially, politically, economically). It is certainly one question that applied to online work platforms (just as it does, once again, to labor markets in general). As to online work platforms, I think there are also many other important questions, besides this social/regulatory one, regarding transparency, transaction costs, effects on amounts of work performed/workers employed, at what costs. To me a major question is in this area: initiallly online work platforms “atomize” the workforce (independents, free-lancers) whose value creation and earning potential is limited by their own resources (scaling is limited). Will these work platforms evolve to support not just efforts of individuals, but the collaboration of individuals and the formation of multi-individual valaue creating entities that can scale and increase their market power as suppliers of labor/value.

  6. andrewkarpie says:

    Test

  7. VikramMalik says:

    All good but where is the quality of pay? Even as an Indian, I find it simply unfathomable that there are entities out there, whether individuals or companies, that are looking to pay next to nothing for hardcore, laborious, professional, high quality work, on these freelance sites. Unless a minimum threshold of pay is mandated by these sites – which actually pays bills and puts food on the table, even in a relatively inexpensive country like India, all this is just talk, with little value. As an instance, I can perhaps safely make a sweeping generalization of sorts that at least half the jobs posted on oDesk are such that they would not even ensure survival, forget about a decent quality of life, in practically any part of the world, INCLUDING India.  

  8. andrewkarpie says:

    Matt, This is an excellent post, especially as you lend your combined expertise from both online and traditional (local) worlds.  I am agreement with you about the emergence of a blended model that accomodates perhaps even more than three service system models of “work arrangement intermediation.”  For the evolution of traditional staffing firms, technology will be a critical factor. andrewkarpie sia_akarpie 

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