A new generation of online service marketplaces is giving small companies more opportunities than ever to find specialized expertise and affordable labor. Main Street businesses can shop a virtual international bazaar of freelancers to recruit computer programmers in Russia, graphic designers in San Francisco or data analysts in India.
“This is one more step in the path to leveling the playing field between small and large businesses,” said Thomas W. Malone, a professor at the Sloan School of Management at the Massachusetts Institute of Technology and author of “The Future of Work” (Harvard Business School Press, 2004). “A small-business person in a company of one can look to the world like a very large company and have access to all kinds of services — and that’s largely because of this kind of model.”
These online marketplaces are fueled by several trends. The recession and recent wave of downsizing have forced many corporations to eliminate in-house services and use independent contractors instead. Buyouts and layoffs have pushed many skilled professionals into the freelance marketplace.
Meanwhile, technological advances make remote work and virtual teams more feasible. Business processes are allowing companies to mix and match services with more ease than ever. An array of freelance marketplaces are making services tradable online, much as eBay and Craigslist made goods tradable a decade ago. These sites include general freelance marketplaces (Guru, Elance, oDesk) and others offering specialties like software (Rent A Coder), personal assistants (virtualassistants.com), graphics (99designs), or creative services (CrowdSpring).
Some of these freelance marketplaces are booming. In the first quarter of this year, oDesk freelancers logged 830,000 hours, more than double the figure for the same period the year before and five times the rate in 2007. Nearly 234,000 jobs were posted at Elance last year, an increase of 64 percent over the previous year.
Fabio Rosati, chief executive of Elance, said his clientele was shifting from an earlier wave of technology-oriented companies toward more traditional small businesses, which now represent about 80 percent of his clients, including mom-and-pop retail stores, manufacturing companies, real estate agencies and physicians. “We’re shifting from early adopters to mainstream,” he said.
These platforms are diversifying beyond mainstay tasks like Web and software development and graphics. Freelancers increasingly are taking on assignments like customer service, data entry, writing, accounting, human resources, marketing, payroll, accounting — and virtually any “knowledge process” that can be performed remotely. Some businesses even are hiring freelancers to set up and manage their corporate profiles on social networking sites like Facebook or Twitter. Using these platforms does not necessarily mean going overseas. In many cases, they are used for “homeshoring” to freelancers in the United States for services like graphic design, writing, sales or customer service. The research firm IDC says homeshoring is growing by 18 percent a year.
In some cases, the cost savings can be substantial: the hourly rates of programmers in Russia, India or Pakistan are a fraction of those in the United States. These freelance marketplaces also allow companies to assemble teams quickly, find specialized expertise, begin new initiatives and drop everything when it’s no longer needed. Organizations can remain flat and focus on their core missions.
When John Wilde, chief executive of Tailor Made Products, a manufacturing firm in Oconomowoc, Wis., wanted to build a Web site for a new line of children’s kitchen gadgets called the Curious Chef, he turned to oDesk and hired a firm in India. He paid about $20,000, which he estimates is roughly half what he would have paid in the United States.
“This has given our company a chance to play really, good, solid Internet ball at an affordable price,” Mr. Wilde said. “Our little company can afford to have a really top-notch Internet play with this new product line.”
The first step is to identify what tasks might be ripe for outsourcing. , an equipment and services firm in Anaheim, Calif., seeks freelancers for two types of tasks: specialized skills that fall outside the expertise of in-house staff, such as programming, and time-consuming tasks, such as researching new sales leads.
“We recognize the core competencies of our businesses,” said Carl N. Kasalek, vice president for business development at Delta Wye. “In areas where we might not be as strong, we’re looking outside for individuals with that as their strong suit who can pick up projects that we’re not able to accomplish efficiently on our own.”
The next step is to choose the platform that best suits the project you have in mind. The marketplace is now crowded with sites of varied specialties and business models. Familiarize yourself with sites by reading the guidelines, job posts and pay rates.
Start with small bites. Even if you plan to use the contractor for a major project, pick a small assignment as a test run — preferably one with little financial or operational risk.
“When I hire someone new, I give them a little test project on a backup server so they can’t mess up any data,” said Alex Auseklis, vice president for finance at Sundia in Oakland, Calif., which makes True Fruit cups and uses oDesk freelancers for virtually all of its computer programming. “If it’s obvious they’re not the right person, you have lost very little.”
Writing a precise project description is essential. Those who work in offices often forget how much gets picked up by osmosis. A remote employee doesn’t have that opportunity — and may also be hampered by language barriers. “You need to be crystal clear about what you want,” said Gary Swart, chief executive of oDesk. “What do you need done? When do you need it done by? What are characteristics of the people who have been successful in that job in the past? The cleaner you can articulate that, the higher degree of success you’ll have.”
Managing a Virtual Work Force
Managing freelancers is an easier task when companies are buying a finished product. For example, on CrowdSpring and 99designs, companies post fixed-price jobs and pick their favorite proposal.
Still, 99designs urges companies to provide continuing feedback as the proposals roll in. “First and foremost, it’s important to be as hands-on as possible,” said Matt Mickiewicz, co-founder of 99designs. “If you post a project and leave it for a week, you probably won’t be happy with the result. Design is an iterative process. The more you participate, the happier you will be with the final output.”
Jeremiah Owyang offered $250 for a blog logo on CrowdSpring and spent hours critiquing the proposals. “I received over 100 entries,” he said. “It required a lot of manual review and feedback from me — a tremendous amount of time. Whatever I was saving in money, I had to put in a lot of extra time to keep the communications up.”
Other sites require more careful vetting of workers because companies are hiring someone for a future task. Many feature ratings from past employers and job histories. Elance and oDesk offer a battery of tests to measure skills like English proficiency, e-mail etiquette, accounting and hundreds of Web and programming applications.
When hiring, companies should follow all the usual best practices short of the in-person interview. “Do the same things you would do offline — you’re still going to interview, still going to get references and still going to ask for samples of work,” Mr. Swart said. “Treat it like the real world because it is — it just happens to be remote and online.”
One common mistake is to think outsourcing allows you to put a project out of sight and out of mind. Instead, Mr. Rosati of Elance recommends that companies break projects into segments, establish milestones and keep tabs on progress. “Whenever you hire someone, it’s really important to recognize you have responsibility for the outcome,” Mr. Rosati said. “You can’t completely hand things over to someone and say, ‘Go off and do it, and I’ll see you in a month’ — unless you’ve worked with the person, and they know exactly what you want.”
Some sites have features to assist oversight and collaboration. Elance and oDesk offer virtual work rooms and automated systems for tracking hours and payments and for generating tax documents. Some even allow you to look over your freelancer’s shoulder: oDesk takes screen shots of the freelancer’s computer six times an hour.
When Carl Kasalek, a tech-savvy 26-year-old, first proposed using freelancers at Delta Wye, he encountered skepticism from his boss — the founder of the company who also happens to be his father. How could they trust a stranger from the murky online world? How could they be sure the freelancer wouldn’t take their sales leads or data to competitors? But after a dozen successful projects conducted through Elance with both domestic and international freelancers, Mr. Kasalek says his father is sold on the freelance marketplace.
“There have been multiple times when I’ve said, I’ll do this on my own, and he’ll say, ‘No, let’s send that one out,’ ” Mr. Kasalek said with a chuckle. “The mind-set has completely changed.”
- Start small. Begin with bite-sized projects that allow you to test a freelancer without much risk.
- Do your due diligence. Scrutinize the freelancer just as you would a potential employee or contractor. Check references, ask for examples of past work and interview the candidate by phone or e-mail.
- Be clear. Remote work arrangements put a premium on clear communication. Be explicit in laying out expectations and deadlines.
- Stay engaged. Just because you’re hiring workers remotely doesn’t mean you can forget about them.
- Set milestones. Establish a schedule for deliverables and give feedback.
- Practical tips on outsourcing projects from someone who tried it, from E-Commerce Times.
- Suggestions for software buyers that apply to many other fields as well, from Rent A Coder.
- A New York Times account of how laid-off workers are finding work as freelancers.