By now, various media/journalists have reiterated the contents of the Dec. 18 press release announcing the planned merger of oDesk and Elance, so I need not do that here. Besides, I am an analyst and not a reporter; and in this particular context, I am a “staffing industry analyst.” So I am going to provide my perspective on the announced merger plans within the context of that role. I spent the day considering the announcement, and now am sharing just some of the thoughts I have had.
oDesk and Elance in the Context of the Online Staffing Platforms
oDesk and Elance (and freelancer.com) belong to a specific category (or species) of online staffing platforms. I have called them “prototypical freelancer marketplace platforms” (see “Online Staffing” Platforms: 2013 industry segment landscape). This species of online staffing platforms has a lineage that dates back to about the year 2000 (with companies like Rent-a-coder and a few others), and more about half of the 70 or so online staffing platforms operating today appear to fall within this class.
The key characteristics of these freelancer marketplace platforms is that they enable online work performed by freelancers (almost anywhere with an internet connection?) for businesses (almost anywhere with an internet connection?) — the work-arrangement is intermediated online and the work is conducted online/remotely (for more explanation of this distinction, see “Online Work” vs. “Online-Intermediated Work Arrangements” – That is the Question). Some of these platforms like oDesk and Elance have aspired to a global scope across many categories of knowledge work; others have focused regionally or linguistically/culturally (i.e. Spanish-speaking countries). Once again, the work than can be enabled and performed because of these platforms is knowledge work that is performed online/remotely.
This species/lineage of prototypical freelancer marketplace platforms has certainly been successful and has clearly proven its viability and value for many millions of online freelancers and millions of small businesses around the world. In 2012, nearly $1 billion in spend on important knowledge-based freelancer work was enabled through these platforms.
Indeed, this species of platforms — and in particular the two largest and most successful ones (oDesk and Elance) — have over the past 10 years firmly established two major innovations in the world of work arrangement intermediation (aka the staffing industry):
- They have demonstrated how highly-scalable, spatially-independent platforms models can successfully intermediate contingent work arrangements more flexibly, more quickly, and more economically than traditional contingent workforce staffing supply chain models.
- They have created a new form of contingent work-arrangement — on-demand, online/remote work as a service (aka Talent-as-a-Service). oDesk and Elance have demonstrated that this can be done on an enormous global scale, that this kind of new work arrangement can be made to work for millions or workers and businesses.
oDesk and Elance in the Context of the Existing Staffing Industry
Staffing Industry Analysts estimates a global staffing industry market size of $450 billion, with about $375 billion for temporary staffing (the total global spend on all contingent workers — temps, ICs, consultants, etc. — may be around $1.8 trillion). Clearly, the new world of online work that prototypical freelancer marketplace platforms has created to date (now more than $1 billion in spend) seems small by comparison. But we should also consider these observations:
- This new kind of work arrangement is in its infancy. Penetration among small business users of online work in the US is still low and continuing to grow; in addition, penetration is even lower — though quickly growing — in other parts of the world (Europe and AsiaPac). Perhaps most important of all, penetration of larger enterprises has barely begun. There appears to be an incredibly large growth potential for this new kind of work arrangement.
- While oDesk and Elance are not staffing firms by any conventional definition, with 2013 combined gross service revenue of $750 million, the new merged company (if it were considered a staffing firm) would slot right in around the rank of 35th in the ranking of the largest global staffing companies (SIA’s Largest Global Staffing Firms 2013). That observation really should give us pause.
In some sense, oDesk and Elance have created a new kind of staffing firm (the online staffing firm for this other new 21st century animal online work). In about 10 years, they have created this alternative staffing firm that is global and which is comparable in gross revenue size to some of the largest conventional global staffing firms.
As noted above, oDesk and Elance, as the most successful prototypical freelancer marketplace platforms can be considered staffing industry innovators: (1) they have shown how work arrangements (in general) can be intermediated with a new online platform model, and (2) they have commercially established a new 21st century form of contingent work arrangement: on-demand, online/remote work as a service (aka Talent-as-a-Service).
Over the past year or two, some conventional staffing businesses (large and small) gradually have started to pay attention to both of these innovations. While I am aware of many such cases, I think it’s enough to cite the recent Kelly partnership with oDesk as a precedent of a conventional staffing firm moving beyond the thinking stage and taking action to begin to harness the innovation of on-demand, online/remote work as a service (aka Talent-as-a-Service) and deliver it to its enterprise clients.
The Next Era of Online Staffing Begins
Over the past 10 years or so, we have witnessed the first era of online staffing platforms. When oDesk and Elance started to develop their platforms, there were just a handful of companies trying to do the same thing (build prototypical freelancer marketplace platforms). It wasn’t until the impact of the Great Recession was felt in the economy that oDesk and Elance began to achieve any real scale, as businesses sought more economical and flexible way to get work done and workers all over the world now saw the opportunity brought to them by online freelancer marketplace platforms.
Today, there are more than 70 online staffing platforms of various kinds, about 40 of which are prototypical freelancer marketplace platforms. It appears that it was only in the past two years that online staffing platforms became something that showed up on the conventional staffing industry radar. I find myself thinking, half-jokingly, that the only person prior to 2012 who saw online staffing platforms as a part of the overall staffing industry was Elance President and CEO Fabio Rosati, who has been on a decade-plus mission to bring innovation (and the other side of the coin, disruption) to a staffing industry much in need of business and service model innovation and perhaps a little shaking up.
But now as 2013 comes to a close, we are starting to see how online staffing is becoming a part of the overall staffing (work-arrangement intermediation) industry. It is doing that in a number of ways:
- Bringing a new online platform model as a viable alternative to the traditional staffing supply chain model as way of intermediating all kinds of work arrangements (not just online/remote freelancer ones) — See Kelly, oDesk and the “Hybridization” of Staffing in 2013.
- Creating a new kind of work-arrangement — online platform-based, flexible/fractional on-demand, online/remote work as a service (aka Talent-as-a-Service) that is untied from physical places of work or branch offices.
Both of these foundations have now been established, oDesk (led by Gary Swart) has demonstrated the incredible (global) scaling potential of online staffing platforms. Elance has demonstrated how these large scale platforms can extend innovatively, from just being marketplaces to being broader service ecosystems that bring additional value to businesses and workers over and above the marketplace value.
An enormous amount of financial and human capital has been invested for these two businesses to get to this point of establishing the above foundations. Having done so, both businesses find themselves at the start of whole new game. The game is no longer about creating those foundations, but now it’s about exploiting them and capitalizing on them over the next years, as the work-arrangement intermediation industry (what has been heretofore called the staffing industry) evolves and expands in the new 21st century digital age. For these two online staffing platform leaders, this represents a whole new round of investments, innovation, and competition and partnership on a broader industry scale.
In this broader, longer-range, strategic context, it becomes clear that it makes sense that the groups of investors in oDesk and Elance rethink continuing to pour resources into two — only seemingly competing — prototypical freelancer marketplace platforms. oDesk and Elance have already both won that competition, and now another bigger, more important game is starting with a whole set of different opportunities, competitors, and partners, etc.. It makes a great deal of sense for the investors, at this time, to combine and refocus the assets of oDesk and Elance on the new game that is now starting and as the next era of online staffing platforms (taking their place in the future work-arrangement intermediation industry) begins.