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.