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.

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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.


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