Contractors are likely to react in one of two ways to the news that online freelance and contract marketplace oDesk has surpassed an impressive $1 billion in client spend. Online marketplaces either pose a threat and should be viewed with dread; or they offer opportunities and should be embraced.
Whatever your view now, online marketplaces are here to stay and you won’t be able to ignore them forever. In fact, the likes of PeoplePerHour, oDesk, Freelancer.co.uk, Elance and their peers are being dubbed by The Economist as ‘the workforce in the cloud’.
And contingent workforce consultancy Staffing Industry Analysts is calling the development ‘Talent as a Service’. It predicts that the online staffing segment could grow by as much as 60% during 2013, possibly reaching $5 billion in value by 2018.
So, where does that leave contractors? Well, most will probably be OK in the short term, particularly those in core contracting disciplines like IT, engineering, construction, marketing, management and finance.
Why? For two reasons. Firstly, mainstream contracting in the UK is still dominated by large and medium sized corporate and public sector clients. Big banks and engineering firms, and the government and local authorities, have established supply chains and procurement channels that rarely include online freelancer marketplaces – at least for now.
Front-line managers try to circumvent procurement for the sake of expediency, but that’s rarely more than for ad hoc urgent projects paid for using a company credit card.
A central element of that supply chain involves staffing agencies. ‘Online staffing agencies’, as Staffing Industry Analysts calls the online freelancer marketplaces, are in direct competition to traditional agencies, as the broker and intermediary between client and contractor.
But the traditional agencies have locked-down the supply chain within most contracting disciplines. In IT, the number of contracts sourced directly by clients rarely rises above 10%. Even in interim management, where agencies have the least control over candidates and clients, they still bump along supplying roughly 50% of demand.
Unless agencies move into the online staffing space, then disrupting the existing supply chain will take many years. Of course, agencies may choose to create a new hybrid business model that satisfies both the predominantly small, micro and start-up businesses currently fuelling the ‘talent as a service’ boom and large organisations alike.
The second reason, and possibly the major concern for contractors, is low cost competition, mainly from outside the UK. In some disciplines, such as animation/illustration, new media and some areas of IT and software development, it is no secret that large amounts of work are being outsourced and offshored.
This offshoring is typically to countries with low labour costs, and that therefore look very attractive to clients. And in some sectors it is causing work to shift out of the UK, losing UK-based freelancers and contractors assignments and contracts.
But clearly where the contractor has to work onsite, as with most financial institutions, engineering firms and public sector clients and the like, the online staffing solution is just not practical.
Large client organisations have good reason to require contractors to work on site, such as productive and efficient work flow management and security; these will not change in the near term.
There are also skills and regulatory barriers, most obviously in the professions and associate professions such as IT, engineering, finance and marketing, but also in content creation.
You might argue that a content provider in Nairobi can knock out a series of desk researched optimised blogs on UK taxation as well as one based in Nantwich, but for a fraction of the price.
However, Google’s Penguin 2 algorithm is highly unforgiving of unoriginal content and no amount of desk research can replace several decades of experience within a national business system. Nor, of course, is it easy to replicate the cultural nuances that will appeal to ‘local’ audiences.
So, we should congratulate oDesk and its peers on their impressive achievements. But right now, and in the short term, most contractors can view online contractor marketplaces with anticipation and not dread.
Especially those contractors who, in accordance with contracting skills best practice, stay abreast of their marketplace and keep their skills current so as not to lose out to the overseas competition, or competition of any kind.