CWS 3.0: February 15, 2012

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News: Cloud Hiring Takes Off

Earlier this month, eLance, an online platform that connects independent contractors and companies, announced it had secured funding to expand, which is a sign the business model has taken off.

The company announced it had secured $16 million in expansion capital, from the Stripes Group and existing investors New Enterprise Associates (NEA) and Kleiner Perkins Caufield & Byers.

The news is significant because it indicates that “smart money” is selecting a contingent workforce management business as a hot target for investment (based on future growth). Second, it may portend a shift that is occurring in how businesses and contingent workers are connecting, with information technology acting as the “great global disrupter and disintermediator” of at least some parts of the traditional temporary staffing industry. 

ELance is just one of a growing number of freelance and crowdsourcing platforms that can be accessed anytime and anywhere to secure specialized talent on a temporary basis. Other freelance platforms, like Guru.com , oDesk, vWorker, Freelance.comProject4hire.com, provide not just a “meeting place” for businesses and contingent workers, but also a whole outsourced platform for conducting and managing temporary work assignments (including billing/payment, quality control, etc.). Other such platforms are more specialized in their focus, such as Serv.io (creative, content generation) or ProZ and GetLocalization (translation and localization).

With the ongoing development of web technologies and applications, more and more work has been shifting to online, remote forms — not just work related to information processing tasks, but more and more work related to complex human interactions (from phone reception to doctor visits). With the ongoing, heady technology and work model innovations (e.g. IP telephony, crowdsourcing, etc.) and the tendency of businesses to use contingent workers for “special skill/expertise” assignments, the phenomenon of freelance and crowdsourcing platforms is clearly not a passing fad and should grow considerably in the current business and economic climate. 

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Research Analyst

Andrew Karpie 07/03/2012 7:19 pm

Jay, Thank you for your thought-expansive comments. Interestingly, with where technology is and is heading and with already foreseen talent/workforce structures aligning with generational change, we are not talking about something science-fiction-like at all, but rather a transformation already well underway. All starts seemed to be aligned, except for regulatory regimes and institutional intertia. While the latter will eventually be overcome, I find it worrisome that public sector and law makers seem far from the reality that we need to be addressing.

I very much confer your statement: "If we can quickly and efficiently support the needs of both creative and professional solopreneurs, accelerate their growth, and do so without disrupting the regulatory and structural system in which we all work and live, we will create the next generation of growth, prosperity and greatness. That’s the real business model to invest in."

I suspect that business investments in new models of talent/worker engagement will be the way. But to be successful the models must be win-win and enhancing of the position of independent talent/workers, not just the organizations that use their services. Certainly, those organizations need to achieve benefits of efficiency/cost savings, flexibility, et al, that is understood. But talent/workers must be able to benefit economically/wholistically. On both sides, legal and regulatory issues loom (taxes, employee benefits, etc.). It is interesting to consider, for example, that the establishment of healthcare exchanges might very well support movement toward a more dynamic workforce. However, this new development is met with considerable angst, particularly in the business community, and it is never articulated as part of an integrated national employment policy.

As you say, I think it is up to innovators in the contingent workforce intermediation industry to take the first steps forward through entrepreneurial activity and as an industry try to break into and influence the policy making discourse.



VP

Jay Lash 16/02/2012 1:55 pm

Great post by the SIA team with lots of food for thought. I want to pick up on the idea that the staffing industry can embrace these tools, rather than seeing them as a threat. But I also believe that as these companies gain traction the concept of the “underground economy” will become a focus. Today, these jobs tend to be under the radar and therefore the scrutiny of tax and employment regulatory officials. I see an alignment problem between government and business.

To properly realize the potential of a tech-driven disintermediated future employment model, we need a passport for independence. Individuals must be able to move from project to project and company to company with better, more robust systems, safety nets and the tools to support them as compliant, independent businesses. This is not a return to the traditional staffing company model that turns independents into employees, but rather an approach that empowers independent professionals to operate as businesses-of-one with easy and safe mechanisms that pay into and couple with financial and taxation systems that are already in place. These mechanisms would enable independent workers to fund government revenue and build the protection necessary to insulate their clients from misclassification risks associated with issues like workers compensation, general liability and other business insurances.
A subset of the temporary staffing sector – often those performing replicable lower-cost tasks, has shifted to a new work model. The real litmus test will be when higher value, strategic work shifts, something we observe every day at MBO.
If we can quickly and efficiently support the needs of both creative and professional solopreneurs, accelerate their growth, and do so without disrupting the regulatory and structural system in which we all work and live, we will create the next generation of growth, prosperity and greatness. That’s the real business model to invest in.


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