Embrace Online Staffing or Be Flattened

There are some new kids on the staffing block: Elance, oDesk, and dozens of others. If you haven’t been paying attention to online staffing, you’d better start. The numbers show that Elance had more than 650,000 job postings in 2011 and had cumulative revenue of  $500 million since it started. Its competitor, oDesk, had more than a million job postings in 2011 and its contractors earned more than $25 million through it in February 2012 alone (annualized, that would be $300 million).  There are other sites like Guru, Vworker and Freelancer.com that are in a similar vein.

But preliminary findings from our recent buyer survey show that online staffing is just barely penetrating the contingent market. Imagine a world where you can get the worker of your choice via a website with minimal effort, no obligation and zero legal hassle (most online staffing companies handle the compliance issues, 1099s, year-end tax reporting, etc.).  No more grappling with high mark-ups, onboarding hassles, corporate culture misfits, supplier mismanagement, etc. Wouldn’t that make your life easier? That is what online staffing in bringing to the table.

Think back to the automation of textile manufacturing in the 1800s. As a protest, the Luddites tried to break the mechanized looms that were taking away their jobs.  But what the automation did was make textiles so cheap that it spawned a whole new industry, which ushered in different functions and countless jobs.

Ditto with online staffing. Sure, it will reduce the number of people doing manual sales, recruiting, etc., but in the long term, lower pricing will generate increased demand and new roles. My recommendation: that both suppliers of staffing services and their clients embrace this phenomenon. It’s going to go a long way and staffing firms should see it as big opportunity if seized – and a threat if ignored.

Comments

Add New Comment

Post comment

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

TargetRecruit

Reena Gupta 05/18/2012 10:56 am

Our last company blog spoke about The War for Talent’s Secret Weapon: Technology. And to quote Andrew Karpie: “First, staffing firms need to think seriously about the changing environment including applicable technology, incredibly more information, demands for efficiency and faster cycle times. This could affect market segmentation and operations models.” This is key, Andrew-To adapt to the multitude of organizational, process and workflow changes, not to mention the data increases, ALL (for Ken Schuster) staffing companies will have to identify a set of priorities on how to make way for a huge paradigm shift. First priority: Technological Preparedness. In the way that candidates are sourced, tracked and communications are managed from partners and Clients such as Elance-this will be critical in order for a staffing company to more easily integrate into the new industry model(s). Cloud Based CRM and Applicant Tracking Systems (Total Recruitment Technology) like TargetRecruit not only “handles” this workload but “drives and manages” business operations that call for a high level of automation and flexibility. We’ve been partnering and supporting staffing companies that have not only implemented this technology but envisioned and embraced these changes years ago. These staffing companies are in “thrive” mode…not “survive” mode. Looking forward to your next blog on this Subhadra.


Staffing Industry Analysts

Andrew Karpie 05/12/2012 06:11 pm

This is an excellent polemical piece that serves well to catalyze an important discussion of a complex topic.

I certainly agree with Subadhra that this is phenomenon that should not be ignored and actively grappled with by staffing firms.

I also agree with Jay that the complete disintermediation of human-enabled staffing will will not occur, there will not be an extinction of staffing firms. many of which are in a rapid state of adaptation. On the other hand, I do not agree that the reason for this has to do with wages/income levels, as I do not think there is anything inherent in these online staffing platforms that restricts them to their current "pay profiles:" longer-term, more lucrative engagements could cerainly be mediated, and it is also possible that such platforms could support contractors making a full-time livings (as is the case for a platform like this that serves translation professional world-wide: http://www.proz.com/, a case where the contractors and their work, not the intermediaries, may be under siege, due to the rise of "machine translation").

In my view, technology is the key disruptive force, making possible the rise of these e-platforms (see http://www.staffingindustry.com/Research-Publications/Publications/Staffing-Industry-Review/May-2012/Expert-s-Corner) and challenging staffing firms to embrace more technology more effectively (see http://www.staffingindustry.com/Research-Publications/Blogs/Andrew-Karpie-s-Blog/A-Staffing-Firm-s-Strategic-Guide-to-the-Universe-of-Talent-Acquisition-Technology-TAT). In the latter reference, I argue that staffing firms need to see themselves more and more as "information processing service intermediaries," in effect, to a greater or lesser degree, becoming e-platforms. So I see a range of different species evolving between the very traditional staffing agency model and the new radical, almost fully-automated e-work platforms.

Sean raises the excellent question of what to do, "how" to respond to these powerful developments of online staffing platforms (like eLance, et al). This should be a discussion that we really start to delve into here at SIA with our industry members this year. But I think we can step down one level of detail at this point with a few suggested perspectives (then we can get more into this in coming months):

First, staffing firms need to think seriously about the changing environment including applicable technology, incredibly more information, demands for efficiency and faster cycle times. This could affect market segmentation and operations models.

Second, staffing firms can look at/study what the on-line staffing platforms are doing in of practices they too can adopt.

Third, (as pointed out by our VP Research, Jon Osborne)staffing firms, with access to capital resources could consider entering/diversifying into the extended market segments served by the new e-work/online staffing platforms by either investing in the development of such a platform or acquiring one of the many such e-work platforms that are now emerging as start-ups.

Looks like we are on the way to a lot of learning.


MBO

Jay Lash 05/11/2012 08:00 am

Back in the day, everyone thought that monster was going to put the staffing firms out of business. They became their largest customers. On-line marketplaces work great for many things, ask Amazon or eBay. Although these Freelancer sites are attractive to the average moonlighter or third world worker, I don't think they will take the place of Independent Professional staffing firms or engagement organization for those looking to maintain gameful employment. Do the math, can you live on $500 a year?


sean 05/10/2012 02:35 pm

I like reading your posts when I get time. This one is interesting but does not state or even hint at how online staffing firms can do all the things you say they can do. I would be interested in reading a follow up post on this subject that touches on the "how" part.

PS. There is no red asterisk by the email box, yet when I tried to send this comment without providing my email, an email was required. This policy should be made clearer.

Thank you.


Total 4 comments