Subadhra Sriram's Blog

Our Affair with Online Staffing

Late last year, Staffing Industry Analysts was accused of having a crush on the online staffing segment. But 10 months have since elapsed, and I have to say that more and more it feels like we were right in our enthusiasm. Here’s why this revolutionary model is worth watching.

First, the growth in online staffing is not only rapid but starting to take on that hockey-stick pattern typical of successful technological change. Earlier we had forecast global online staffing growth in 2013 and 2014 at 40 percent per year. Based on the performance of companies we are following, we just revised those forecasts upward to 60% in 2013 and 70% in 2014. By the end of 2014, this will be a $2.7 billion segment.

Likewise, the rate of origination of these firms is increasing. In the period 2004-2009, about six such firms were created per year. Since that time, the rate has increased to over eight per year. And that’s just counting those we have identified. We once thought there were 50 such firms. Then it was 55, then 60. By the time we completed our list, we counted 67. After the list was published we found two more.

Why does this matter? The online model is more cost-efficient and therefore a formidable competitor to the brick and mortar, labor-intensive traditional model of staffing. Indeed it’s so cost-efficient that its typical markup is in the range of eight percent. It’s hard for the traditional models to match that. This model is going to shake up how traditional firms do business. And eventually will impact how buyers operate, even though now it’s a small percent of global spend.

One wonders how staffing will all end up. With the proliferation of online staffing firms, there may be a VMS-type service that develops and aggregates workers from the different online staffing firms just as the traditional VMS once did for workers from myriad staffing agencies. And/or maybe the online staffing firms will segregate by type of skill or market.

But even for me in the throes of this “crush,” I would like to add that the people factor — the strong suit of traditional staffing — should not be underestimated. As a heavy user of Elance, I have to say that having an agent — i.e., a staffing firm or recruiter – smooth the process (i.e. screen the hundreds of workers) is worth its weight in gold. From that angle, some additional markup might be worth it.

But regardless, online staffing is clearly going to make a splash, and quite a big one. So make room for it, learn from it and grow with it.


Add New Comment

Post comment

NOTE: Links will not be clickable.
Security text:*

Scott Leighton 09/25/2013 03:06 pm

"The online model is more cost-efficient and therefore a formidable competitor to the brick and mortar, labor-intensive traditional model of staffing. Indeed it’s so cost-efficient that its typical markup is in the range of eight percent."

That is a very misleading comparison. Brick and mortar staffing is employment-based, e.g., classic temporary help staffing. These online services are bare bones operations charging 8% markup to process and track the transaction and bill the client and pay the independent contractor. No employee relationship and no protection at all for the client. Read the fine print (pay particular attention to all the disclaimers and indemnities), it is nothing at all like temporary help staffing.

VouchedIn, Inc.

Dan Gaffney 09/19/2013 04:16 pm

Thank you for the post Ms. Sriram and for recognizing the importance of online staffing models. They're not going to replace traditional staffing firms, but provide employers and freelancers another opportunity to connect.

Amy's comparison to real estate sales is fair, but the commission a real estate agent charges-around 6% of the sale, seems like a bargain compared to the cost that staffing firms charge for temp staffing-in my experience, about a third of the cost the employer pays is going to the contractor. That may work for some freelancers, but for those who don't need the services of the staffing firm, online models may help employers hire more qualified contractors for less cost.

Bingham Consulting Professionals

Amy Bingham 09/19/2013 03:15 pm

Interesting stats Subadhra. I agree staffing firms should watch the online model closely, but your comment about being willing to pay for an agent isn't surprising. Relying purely on technology to procure a skill is like selling your home yourself. You may save money in an agent commission, but you'll also potentially waste a lot of time showing your house to unqualified buyers.

Total 3 comments

Recent Blog Posts

Everyone’s Talking Contingent

Welcome to the 2013 CW Solutions Forum and CWS Summit, our biggest ever. Eight years after the first conference, the Summit has become the networking event for CW professionals. So what does this “biggest... Read More

Making a Business Case

Have you ever tried convincing your manager to make a change?

Change typically involves more resources, either time, money or both. Sometimes it involves a different way of doing something you’re already... Read More

There’s a List for That

Buyers Love it. Suppliers think it’s a great marketing tool. The Staffing Industry Analysts Staffing Firm Market Landscape and Book of Lists is a one-stop shopping resource for companies engaged in all... Read More

Is The World Going Part-Time?

The numbers have it. Here’s the story so far. July's modest gain of 162,000 jobs was the smallest since March. And most of the job growth came in lower-paying industries or part-time work. Moreover,... Read More

Are You Staffing -- Online?

Two years ago anecdotal evidence found that online staffing had barely penetrated the contingent market, with contingent workforce managers paying little or no attention to this new talent source. Fourteen... Read More

Window Shopping: Trying New Suppliers, Discarding Old

Some refer to it as an eye for trends. Others call it experimenting. Certain folks criticize it as a roving eye. When buyers of staffing services do it, it’s called “trying new suppliers.”

Staffing... Read More

Master Supplier is the Comeback Kid

Rest in peace was the requiem earmarked for the master supplier model, having been dismissed by many industry veterans. But it has come back with a bang.

A decade ago the rise of the managed service provider... Read More

Skinny is The New Gray Under Healthcare Reform

 Obama cheerleaders have been plugging the fact that when you mandate insurance, pretty much everybody gets insurance.  But here’s the thing: what type of insurance?

That’s where wellness... Read More

Now Accepting Nominations for the 2013 North America Staffing 100

We are now accepting nominations for our annual list of North America staffing industry achievers, 100 men and women who have made a difference to the staffing industry. I must warn folks: the list is... Read More