Will Online Staffing “Rock” the Staffing World?


Staffing Industry Analysts seems to be been falling in love with the online staffing segment.

It is great to see such young and innocent adoration; it reminds me of my high school days. A new girl comes to school. She is pretty and different. She has some new clothes, and a unique style.  All the boys develop a special affinity for the new girl, most are just curious but some fall head-over-heels. But with the passage of time, the new girl becomes more like every other girl — she changes to fit in and other girls pick up some of her style.

Online services that attract freelancers are becoming more and more of a factor in our overall world of work. However, to compare this segment’s growth to the core of the staffing company services may be a stretch. Most of the professional staffing world deals with full-time independent contractors that have been building their reputation and brand with the help of services designed to find them work. Their assignments typically average more than six months, and contractor income can generally compete or beat pay for traditional employees.

On the other hand, the kind of freelancer that may be using an online staffing site may commonly be supplementing their full-time work with short-term projects and still carry regular day jobs. The pay grade is much lower and competition from off-shore, low-cost countries is fierce.

For the staffing industry to suddenly think there is a trend that will drive clients away from agencies in favor of going direct to freelancers for their assignment fulfillment is a bit like thinking that with the job boards, there will no longer be a need for staffing agency recruiters. Didn’t we think that was going to happen when Monster hit the scene? But in fact, didn’t it turn out that staffing agencies became some of the biggest clients for job board posting services? I wonder if that analogy is a good indication of what might be happening here.

The growth of this new form of requirement-fulfillment is certainly worth looking at and even learning from. But a word of warning:on-going engagement of a quality workforce for long-term and on-site employment is not threatened by freelance job sites.

As companies learn how to dissect their work requirements into tiny pieces, the freelance job sites’ portion of temporary work will grow. But do experienced talent professionals really believe this will erode part of the traditional temporary workforce or lessen the amount of work being done by the FTE and traditional employee?  Asking a freelancer to edit some copy for $1/page makes more sense than asking your $60,000/yr marketing admin to do it, or for that matter paying a temp $30/hr to do it. But asking them to write your company’s core marketing plans, or book your travel and key sales meetings for the coming year may take a greater leap of faith.

Let’s not get distracted or threatened by this new and exciting alternative to getting work done. Employees still need employers, companies still need someone in the middle to make it happen and the administration and compliance parts relating to the law will not be reduced.

Maybe we just need to learn how best to tap into this new resource pool and where they provide the greatest competitive talent advantage.

Jay Lash

Jay Lash
Jay Lash is vice president, marketing strategies of MBO Enterprise Solutions. He can be reached at jlash (at) mbopartners (dot) com.

Jay Lash
Jay Lash is vice president, marketing strategies of MBO Enterprise Solutions. He can be reached at jlash (at) mbopartners (dot) com.

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27 Responses to “Will Online Staffing “Rock” the Staffing World?”

  1. jlash says:

    ………..and let independence rule the day.

  2. Pradeep Chauhan says:

    Reminds me of the 6 blind men and elephant https://dl.dropbox.com/u/45961383/1507537191.jpg
     
    I’ve seen the future and you are all right! You’ll all serve very important needs and all grow. Customers will use what works best in different situations and Old-style Staffing and Online Staffing will grow at the expense of full-time (err bonded) labor.

  3. Jeffrey Leventhal says:

    Jay: I commend the SIA for noticing trends in the staffing and labor market.  Thats part of what an analyst organization does.  Your “new girl” analogy reminds me of the phrase “momentum of the status quo” – the girl became like everyone else and then there was nothing special anymore.  That certainly happens with entrepreneurial companies and probably more often than not, but every now and again something new takes hold.  10 years ago we didnt have indeed, twitter, success factors, taleo, work day, jobs to web the ipad and countless other life and industry changing movements.  Its easy to recognize them after the fact but go back to when they started.  You’ll see some similarities that you now see with Work Market, oDesk and elance.   The world of work is changing.  How people want to work and how companies want to hire is very different today than just 10 years ago.  Career stints are 2-3 years not 20, people enter, leave and then re-enter the workforce at different times throughout their lives.  People are learning new skills more often from non traditional places (online) and thus moving in different professional directions more frequently and people can and want to do more things throughout their day and during their “career.”   Companies are also highly attuned to human capital costs and when and where to leverage full time workers vs. consultants, freelancers and contractors.   Consultants dont want a career and often companies dont need the nature of what many of these people bring all the time.  There are also massive segments of work that cant easily be planned for.  We recently were inundated for engineering professionals to do site survey work for utility companies in the North East USA due to Hurricane Sandy.   Plenty of lower skilled people were available – they needed a highly skilled professional team to show up.   You can’t ignore these trends. I founded the largest and most successful IT labor marketplace in 2003 (exited in 2007) and two years ago launched Work Market.  From the start of my previous business it was the on-site professional labor that was and still is in demand.  None of it was online or offshore – professionals working from jobs assigned through a marketplace and many earning 100k plus per year and performing work for ALL of the Fortune 500.  Work Market is built for the enterprise and for the professional.  We’ve taken what we believe to be the labor supply chain FIND VERIFY ENGAGE MANAGE PAY and RATE, applied technology (lots of it) and launched a marketplace the fulfills jobs directly –  company to consultant – no labor markup – better for consultant and better for HR.  HR engages.  Work Market is filling millions of dollars per month (our first year open for business was 2011) for technology, marketing, healthcare and legal assignments.  Many agencies use Work Market to fulfill their “recs.”  Professional on-site freelancers making 100k+ per year from multiple businesses and loving it.   I dont think your work “erode” is the right way to think about what’s happening.  Try transform , reinvent, innovate.  Most staffing firms are conglomerations of non integrated acquisitions that forgot how to recruit.  Its online cloud based technology that will set them right.   Employers do need employees, but large swaths of work are and will continue to go online, especially with the plumbing that Work Market, elance and odesk bring to the table.  Companies need something in the middle not someone.  That something is technology.  Its online and its happening here and around the globe.  Its not a resource to be tapped as you say, its something you will adopt. Jeffrey, Founder Work Market

    • jlash says:

      @Jeffrey Leventhal Congratulations on your success with Work Market. I do understand the enthusiastic response to this industry transformation but I got really excited about Napster too. These new market places for any product clearly demonstrates a need exists that is not being fulfilled. In this case companies want project workers and all the tools exist to do it without an intermediary. I am all for that. I still question if it is sustainable. I wonder if after the novelty wears off, the government finds a way to tax it and the consultant can develop a set of direct client relationships to earn a good living, will the transformation continue? I hope so, power to the independent.

      • Jeffrey Leventhal says:

        @jlash  @Jeffrey Leventhal

      • Jeffrey Leventhal says:

        @jlash Jay – In the news this week – Adobe acquires Behance – Behance was a network of freelancers leveraged by all kinds of businesses – purchase price was rumored well in excess of 100 million.  This is an example of the enterprise buying the network.  You will see more signals like this.  I understand you think napster was a failure, but it was also a turning point for digital media and a wake up call – friendster and myspace were failures but from that came facebook.

        • andrewkarpie says:

          @Jeffrey Leventhal @jlash This will certainly be an ongoing conversation about an ongoing set of developments. It seems to me that, like the industry parallels Jeff cites, the emergence of platform models in staffing and workforce management areas will continue on a significant course, with legal and institutional, business and behavioral evolution. It is a possible that an iceberg of some sort (e.g. http://www.crowdsourcing.org/editorial/the-lawsuit-that-could-help-undo-or-cement-crowdsourcing-in-the-us/22968) could sink the fleet, but I think we will see (and I am seeing) a broad set of firms with different approaches adapting to opportunities and constrains and finding their niches or larger market segments.

        • jlash says:

          @Jeffrey Leventhal  @jlash Please don’t misinterpret my intent. Napster was a pioneer and certainly not a failure but the model needed to mature in order to incorporate legal and regulatory dynamics (royalties, sales tax etc) Apple solved the problem. Andrew touched one of the concerns I am referring to when he sites the crowdsourcing case. A job posting service and a marketplace for independent workers to find work are certainly where the growth trend is. Engagement of freelancers moves this model into the world of taxation, labor law (FLSA), state unemployment etc. All I am saying is the model has it’s place but it is not a threat to true staffing firms. Independent workers are the future. Enabling them to be compliant and seamlessly engaging with their clients is where the opportunity exists.

        • jlash says:

          @andrewkarpie  @Jeffrey  @jlash Agree, that’s the issue here. Be careful what you get into and if you don’t advise your clients correctly, you can be held accountable. If it sounds to good to be true (and you can get people, at low rates and not have to pay employer side taxes or be subject to federal employment law) it probably isn’t.

        • Matt Rivera says:

          @jlash  @andrewkarpie  @Jeffrey Agree with Jay. It’s like we see today across the spectrum of clients with different needs, different compliance issues and different risk profiles. For very straightforward engagements, this might work well, for others not so much. But in all cases, care must be taken to ensure that Freelancers or temporary workers are paid correctly (and by correct I mean fairly and according to labor laws) and all taxes, screening, reporting, new healthcare mandates, etc. are dealt with correctly and in compliance will all the old and new laws out there. They will have to keep up like we all do, and if not, Andrew’s iceberg may hit. In my experience when it’s “easy” for the customer, it’s because of the behind the scenes work, experience, and best practices that make it that way. When you don’t have that, you’re open to risk. The technology aspect may make it efficient and/or attractive, but it doesn’t mean it’s automatically compliant.

        • andrewkarpie says:

          @Matt Rivera @jlash @Jeffrey This is such a great discussion. Successful staffing intermediaries will be those that best meet their client’s actual needs effectively, efficiently, and legally. Just because something can be accomplished technically (e.g. Napster) does not mean all stakeholders (with economic, legal, social rights and obligations) will be satisfied–that the model will be sustainable. All staffing intermediaries will have to adequately address and manage a range of logistical, economic, legal and institutional factors. I just want to clarify, once again, that we at SIA are simply pointing to the arrival a new technical model and means for addressing various segments of workforce demand, and we are trying to analyze and report on these developments. At the time of Napster bringing a revolutionary platform idea into the market, there was not an iTunes. But today, we have ample evidence of how platform models are transforming many different sectors in the economy (retail, financial services, travel,publishing)–as we drive by many closed Borders stores. So our point is that we really should put on our thinking caps and figure out how to capitalise on new oppoprtunities.

  4. Brian Pauley says:

    Loved the post, Jay and agree that it’s been interesting to see the hype-cycle playing out of late. That said, I see the growth of the online players as a potential opportunity for all parties of the talent supply chain.
    There’s no question that the talented freelancer can benefit from the removal of friction in their chosen marketplace. Opportunities they might never have visibility into are delivered to their inbox!
    The client can benefit – big time – due to the access to high-quality talent “by the drink” at potentially very competitive prices from a very motivated resource.
    Obviously, the question posed by SIA is ” What’s it mean for staffing?” I see creative opportunities there, as well. If our industry can take a ” What’s the best way to help our client get their work done?” approach as opposed to “How do I hang on to this piece of business even if it isn’t in my clients best interest?”, there may well be opportunties to work with online staffing providers vs. against them.
    I’m pretty sure that’d be a much more successful approach than they way our industry (generally) handled the rise of MSP/VMS’s.

  5. Chirag Mehta says:

    This is a good article and it is true to some extent. I compare this wave with what happened to travel industry.
    If you remember, years ago there were many travel agencies and we purchase all our tickets throgh them. Now we purchase most of our tickets online without their help but then we do go to travel agents when we need to organize a big trip like Africa or Europe. Another example would be brick and mortar electronic stores. We don’t go to Best buy for everything but we mix and match – depending upon what we need to get.
     
    So my prediction is that , the staffing industry is going through major cultural shift. Companies will have to decide what type of workforce they will outsource through online and which they will keep in-house.
     
    At the same time, what most of the online staffing business model lack is; connecting businesses to “local workforce”. You cannot hire a technician or a mechanic through oDesk or Elance. You want someone who is local. Flexible work environment is becoming a major factor in finding good workforce.
     
    The way, mind-set is changing, companies do want to be able to quicky access the workforce without things getting lost in translation. At the same time, they do want someone to take care of tedious chore of finding the good group of people as well as off-load tasks like taking care of payroll , workman’s comp, background check etc.
     
    Staffing companies which will survive this transformation would be the one which have such automation and self-service facility in-place to provide such “Hot and ready local talent”.
     
    Eventually, staffing companies with just static website may phase out and there will some left who will create a “showcase” of great talent pool, which their clients can pick and choose on demand.
     
    NextCrew.com offers a technology driven great platform which allows staffing companies to create such platform with a flip of a switch and is the missing piece in local workforce management process.
     
    We recently posted a blog explaining as to how NextCrew is changing workforce industry.
    http://goo.gl/eHv4I

  6. Chirag Mehta says:

    This is a good article and it is true to some extent. I compare this wave with what happened to travel industry.
    If you remember, years ago there were many travel agencies and we purchase all our tickets throgh them. Now we purchase most of our tickets online without their help but then we do go to travel agents when we need to organize a big trip like Africa or Europe. Another example would be brick and mortar electronic stores. We don’t go to Best buy for everything but we mix and match – depending upon what we need to get.
     
    So my prediction is that , the staffing industry is going through major cultural shift. Companies will have to decide what type of workforce  they will outsource through online and which they will keep in-house.
     
    At the same time, what most of the online staffing business model lack is; connecting businesses to  “local workforce”. You cannot hire a technician or a mechanic through oDesk or Elance. You want someone who is local. Flexible work environment is becoming a major factor in finding good workforce.
     
    The way, mind-set is changing, companies do want to be able to quicky access the workforce without things getting lost in translation. At the same time, they do want someone to take care of tedious chore of finding the good group of people  as well as off-load tasks like  taking care of payroll , workman’s comp, background check etc.
     
    Staffing companies which will survive this transformation would be the one which have such automation and self-service facility in-place to provide such “Hot and ready local talent”.
     
    Eventually, staffing companies with just static website may phase out and there will some left who will create a “showcase” of great talent pool, which their clients can pick and choose on demand.
     
    NextCrew.com offers a technology driven great platform which allows staffing companies to create such platform with a flip of a switch and is the missing piece in local workforce management process.
     
    We recently posted a blog explaining as to how NextCrew is changing workforce industry.
    http://goo.gl/eHv4I

  7. Mollie Carter says:

    Jay, I also have to disagree with you, although I enjoyed your thought-provoking article. As director of customer marketing at oDesk, the world’s largest online workplace, I’m also admittedly biased. But the facts speak for themselves:
     
    Our clients (7,000 of them surveyed by an independent research firm) tell us that they are leveraging online work as a strategic advantage, with 3 out of 4 characterizing online hiring as a “long-term strategy.” And 87% believe remote hiring will “soon be a common business practice.”
     
    And, for online workers, it’s not just supplemental piece work, but a lifestyle they are choosing. Again, our research shows 89% of contractors choose online work for the flexible hours, and 83% to work wherever they want. And, 72% agree that they have improved their quality of life. 
     
    We frankly think online work is alive, healthy and growing!
     
    Mollie Carter
    oDesk, Director of Customer Marketing

    • jlash says:

      @Mollie Carter Mollie we agree more then you think. Our research also concludes that 80+% of our independent consultants choose this type of work over traditional work so it is a growing and preferred way to secure project work. Where I question the SIA and their view on the space is the idea that it is a threat to temp staffing as we know it. I see it as an added dimension of the way work gets done and the threat is to the number of Full-time traditional jobs.

      • andrewkarpie says:

        @jlash @Mollie Carter Jay, I would just like to set the record straight on your assertion here abot “SIA and their view on the space,” the “idea that it is a threat to temp staffing as we know it.” Respectfully, your assertion is incorrect. We do not see online staffing as a “theat to temp staffing as we know it.” In our research (three reports thus far), we have sought to educate staffing firms about this segment, and we have discussed what we see as three threats and three opportunities for staffing firms. Two of the threats are about “not being aware” (based in our survey findings) and about “misunderstanding” online staffing. The third threat was for the potential for some market share/revenue encroachment, particularly in certain staffing segments such as IT/software development. In no way have we expressed that there is “a threat to temp staffing as we know it” (and which will surely evolve over time). On the opportunity side of the ledger, we have pointed out that online staffing will result in market expansion and that the innovative platform models of online staffing firms should be looked at carefully as sources of innovative models and practices (to a greater or lesser extent) that could be adopted and integrated into staffing firm businesses over the next 5++ years. That said, I agree with your assertion that online staffing signals and will sigificantly promote the continuing growth in “non-permanent jobs” and the continued erosion of so-called “permanent.”

  8. Chirag Mehta says:

    This is a good article and it is true to some extent. I compare this wave with what happened to travel industry.
    If you remember, years ago there were many travel agencies and we purchase all our tickets throgh them. Now we purchase most of our tickets online without their help but then we do go to travel agents when we need to organize a big trip like Africa or Europe. Another example would be brick and mortar electronic stores. We don’t go to Best buy for everything but we mix and match – depending upon what we need to get.
     
    So my prediction is that , the staffing industry is going through major cultural shift. Companies will have to decide what type of workforce  they will outsource through online and which they will keep in-house.
     
    At the same time, what most of the online staffing business model lack is; connecting businesses to  “local workforce”. You cannot hire a technician or a mechanic through oDesk or Elance. You want someone who is local. Flexible work environment is becoming a major factor in finding good workforce.
     
    The way, mind-set is changing, companies do want to be able to quicky access the workforce without things getting lost in translation. At the same time, they do want someone to take care of tedious chore of finding the good group of people  as well as off-load tasks like  taking care of payroll , workman’s comp, background check etc.
     
    Staffing companies which will survive this transformation would be the one which have such automation and self-service facility in-place to provide such “Hot and ready local talent”.
     
    Eventually, staffing companies with just static website may phase out and there will some left who will create a “showcase” of great talent pool, which their clients can pick and choose on demand.
     
    NextCrew.com offers a technology driven great platform which allows staffing companies to create such platform with a flip of a switch and is the missing piece in local workforce management process.
     
    We recently posted a blog explaining as to how NextCrew is changing workforce industry.
    http://goo.gl/eHv4I

  9. andrewkarpie says:

    Jay, 
     
    Thank you for writing this post– it’s excellent, and I am so pleased to have this discussion and thought process taking flight. 
     
    I’m not sure if you were aware, but we covered online staffing in yesterday’s webinar focusing on our two latest reports on the subject: ” “Online Staffing:” What Is It, What’s Driving It, What Does It Mean For Staffing Firms?”(http://www.staffingindustry.com/Research-Publications/Research/Staffing-Sales-Marketing-Market-Opportunities/Online-Staffing-What-Is-This-Beast) and “”Online Staffing” Platforms: Threats and/or Opportunities for Other Staffing Businesses” (http://www.staffingindustry.com/Research-Publications/Research/Staffing-Other-Staffing-Services/Online-Staffing-Threats-Opportunities).
     
    We are now providing some research coverage of this developing industry segment because it is a now substantial and growing segment that may have some disruptive and transformative impacts across the staffing ecosystem.  Just to be clear, we do not project that “online staffing” will lead to a cataclysm in other staffing industry segments (many different types of workforce intermediation businesses including PEO, temp staffing, and IC management companies like MBO, et al).  We also do not define “online staffing” models as dealing only with freelancers or highly transient contract workers (though as you and others (http://www.kellyocg.com/Knowledge/KellyOCG_Blog/The_Shift_to_Highly_Skilled_Temporary_Work/) point out, more work arrangements of this sort will likely be happening; nor do we define online staffing as only addressing remotely performed work. 
     
    By and large, I think our view of online staffing is consistent with much of what you represent in your blog post:  a new segment, a new way of structuring work arrangements and matching demand and supply.  The segment seems primed for high growth and adaptation, along side other staffing industry segments (with the possibility of some competition for market share, some opening of new opportunities for some today-less-online staffing firms). 
     
    Where our views may diverge are at the beginning and conclusion of your post.  First, extending the questionable “adolescent boy” analogy (and I do have a 16 year old one of these at home), I don’t think we here are girl-crazy and overheated by online staffing.  We just think online staffing is one work arrangement intermediation segment that should be noted and understood.  Second, we do think that other firms in the staffing ecosystem should pay attention to online staffing and really understand clearly what is about, what it’s not, what it means, etc.  
     
    I personally think that one of the really important things to understand about online staffing is it being essentially a “platform business model” which allows it to address “work arrangement markets” in new ways (a big topic).  Once again, such innovative developments can have both distruptive consequences or suggest new opportunity pathways.  I do believe that many innovations being introduced by online staffing firms today can and will be absorbed into many adaptive, but “today-less-online,” staffing firms and used to drive competitive advantages.   
     
    Our perspective is to analyze developments in the industry/ecosystem and try to point out those that seem relevant, have potential impact, present possible opportunities.  Besides online staffing models, another new-comer to the work arrangement intermediation space is “crowdsourcing”–while we are keeping an eye on this, we are not devoting research efforts to it at this time (still emerging, not maturing like online staffing).   While we think “crowdsourcing” should not go unnoticed, we do think “online staffing” merits more attention span and analysis at this stage (we don’t advise ignoring it and plowing ahead without factor it into planning). 
     
    In any case, great discussion on one of many important developments in and on the fringe of the staffing ecosystem.  Thank you!  
     
    PS.  If anyone is interested in a pretty good “business book” introduction the general phenomenon of “platform business models,” I would suggest Phil Simon’s “The Age of the Platform” http://www.theageoftheplatform.com/ (accessible and quick read that does not get into the extensive “economic/management science literature” on platforms).

  10. Matt Rivera says:

    The rise of this and any other business model typically means there is some white space in the market. It was natural that someone would attempt to connect the dots between traditional staffing and Elance or Odesk. The proof of value will determine how it all shakes out, but I think for most companies there is still great value in all a staffing company can do to find, manage and engage contract talent. For some freelancers it makes sense for both them and the client company. For others it probably won’t ever feel the same.
     
    HR needs to chime in and have a perspective on this. I can tell you that while procurement may be OK with this model, I’m not sure it will be as accepted and embraced by HR who is trying to get better at managing and engaging the workforce at all levels. If any manager can go out and engage anyone they want (yikes!) or if HR still has to manage and monitor the online staffing company, what’s the difference? The difference is value. If they are providing acceptable value and quality then there may a place for them in our already crowded and complex marketplace. I will say that it further confuses customers and we all have to do a better job showing where the value lies.

  11. Rich Pearson says:

    Jay:  It’s great to be skeptical, but to classify the entire segment as $1 per hour copy writers seems at best uninformed.  Most of the online work platforms are transparent about the types of jobs being performed and the rates being paid.  Here’s ours at Elance:  https://www.elance.com/trends/skills-in-demand
     
    A more in-depth view of the freelance workers’ rise can be seen here: https://www.elance.com/q/freelance-talent-report-2012
     
    I’m obviously biased, but I’m very confident that this girl, and the appeal of fractional work, is here to stay.
     
    Rich Pearson
    CMO – Elance

    • jlash says:

      @Rich Pearson Rich, please take a look at my post, I just mentioned that the $1/PAGE worker is more economical for the type of work compared to having your full-time staff perform this work. When I do the math from your report it appears that these freelancers are making a Lifetime average of $330 per contractor and $1091 per job. This way of work will continue to grow along with professional consulting work where consultants earn an average over $90,000/yr. the question is which will threaten the staffing industry’s growth.

      • Rich Pearson says:

        @jlash Hi Jay,  I’m not sure how you are doing your math, but as you can see from the trends link I provided (repeated below) hourly jobs on Elance range are typically $20-$25hr.  Just hover over each skill section and you can see the latest trends.  We also support fixed price jobs which range from $5k-$25k.
         
        As a result, we have many freelancers who earn over $100k a year on Elance – these tend to be people based in the U.S. and working full time on out platform, but the great thing about working on Elance is that location no longer determines how much you can earn.
         
        https://www.elance.com/trends/skills-in-demand

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