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

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jlash
jlash like.author.displayName 1 Like

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

Pradeep Chauhan
Pradeep Chauhan like.author.displayName 1 Like

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.

 

Jeffrey Leventhal
Jeffrey Leventhal

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
jlash

 @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
Jeffrey Leventhal

 @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
andrewkarpie

@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.

Matt Rivera
Matt Rivera

 @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.

jlash
jlash

 @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.

jlash
jlash

 @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.

andrewkarpie
andrewkarpie

@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.

Brian Pauley
Brian Pauley like.author.displayName like.author.displayName 2 Like

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.

Mollie Carter
Mollie Carter like.author.displayName like.author.displayName 2 Like

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
jlash

 @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
andrewkarpie

@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."

Matt Rivera
Matt Rivera like.author.displayName like.author.displayName 2 Like

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.

Rich Pearson
Rich Pearson like.author.displayName like.author.displayName 2 Like

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
jlash

 @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
Rich Pearson

 @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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