06 December 2012

Freelancer: Another way that talent is connecting with opportunity

As regular readers will know, I have frequently written about the ambitions, growth and success of LinkedIn and consequently, the mixture of threat and opportunity that faces the recruitment industry.

Of course, LinkedIn is not the only game changer that the recruitment industry is confronting.
Services-for-hire website, Freelancer and its dynamic founder and CEO, Matt Barrie have generated a lot of media coverage this year, culminating two weeks ago, in the purchase of rival outsourcing site vWorker.

In case you aren’t familiar with Freelancer, Matt Barrie describes his company, and ambitions, thus: ‘We want to be the eBay of jobs. There will be a company that will be the size and scale of eBay, but instead of buying and selling goods you sell services.’
 
Earlier this year Barrie featured on the cover of Fairfax Media’s Good Weekend (25 February 2012).
As Fairfax journalist Greg Bearup succinctly put it:

" … 70 per cent of the world is about to join the internet. They are poor. They are hungry. They are driven. They are self-skilled. They are self-motivated. They want a job.

Barrie's mission is to connect these poor and self-skilled with the rich and time-poor - trousering a hefty 20 per cent, in commissions and fees, in the process. Big business has been at this caper for years, sending call centres and accounts departments offshore. Barrie's genius was to realise the huge potential for individuals and small businesses to do the same.

In less than three years, and with start-up funds of just a few million, he has built Freelancer into one of the world's leading outsourcing websites, with more than three million users; it has turned over more than $110 million since its inception, and last year transactions worth over $35 million passed through the site, of which Freelancer took $6.5 million. Barrie estimates that last figure will increase to between $10 million and $13 million this year. It's been near 100 per cent growth, year on year, and it doesn't look like slowing."

Barrie is one of a growing band of entrepreneurs that are at the forefront of the ‘digital disruption’.

Professional services firm, Deloitte have recently released a fascinating research report on the likely impact on the Australian economy of this disruption Digital disruption: Short fuse, big bang?. Deloitte hypothesise that several factors affect the extent to which industries are likely to be affected by digital disruption in the future – both the 'size of the bang' (the overall impact of digital disruption) and the 'length of the fuse' (the time it will take for the digital impact to be fully felt).

The report identifies that the extent of competition and regulation in each industry is very important. In highly competitive sectors such as retail change is large and rapid (just ask Gerry Harvey), but in a heavily regulated sector such as health care, the pace of change may be dampened by lengthy approval processes.

The Deloitte report also concludes that the extent to which new technologies can reduce entry barriers and allow small companies to compete with large existing businesses will also determine the 'size of the bang'. Freelancer is a classic example of this point.

Plotted on their ‘digital disruption’ map, Deloitte identify the recruitment industry as one that falls in the 'long fuse, big bang’ quadrant' (along with around 33% of the Australian economy).
As the Deloitte report says:

The digital economy isn’t just about speeding up communication across borders or changing the skills workers need; it’s about changing the very nature of consumption, competition and how markets work.

More profoundly, it is also driving a significant shift in the balance of power between organisations and individuals. The explosion in connectivity and the availability of information is putting today’s consumers, employees, citizens, patients and other individuals squarely in the driver’s seat. (page 6)

This is exactly where Freelancer comes in. Freelancer has the business model, capability and scale to connect demand (work to be done) with supply (skilled people) all over the world. Of course, Barrie wasn’t the first into this market, elance and Guru have both long been big players in this space, but he certainly seems to have ambition and access to capital to fulfil his ambition of Freelancer becoming the ‘eBay of services’.
 
Traditionally the matching of demand and supply in the job-to-be-done-on-our-premises market has been the primarily the domain expertise of recruitment agencies. If organisations had work to be done, the only options were either hiring an employee (temporary or permanent) to work onsite or outsourcing to specialist local firms (eg accountants, lawyers, ad agencies etc) who, primarily, worked offsite.
 
Either way the person who finished up doing the work would be the best available in the local market for the salary/rate/price. Just as good but cheaper options were available but the time and cost of accessing and assessing these skilled people made it prohibitive for 99.9% of businesses.
 
Matt Barrie changes all that because Freelancer’s functionality enables verified skill to be matched with availability, no matter the location, age, socio-economic circumstances or time zone of the person possessing the skill. Accounting skills that might only be scarcely available in the local market at $50 per hour become easily available on the global market at $5 per hour.
 
As Deloitte put it:
 
The distributed workforce allows the very best talent to be sourced from across the globe to work in virtual teams. Organisations and operations in remote or less-populated locations that have historically found it difficult to attract and retain talent are finding some reprieve in these workforce-model changes. (page 17)

This option for sourcing skills then directly impacts the traditional business model of the local supplier (recruitment agency or specialist firm) and creates some three key cost issues identified in the Deloitte report as; the cost of goods sold through the supply chain; staff costs; and administrative overheads.
 
Deloitte then goes onto to suggest the following three primary responses leaders can implement, both to minimise threats posed by digital disruption and, to maximise their organisation’s digital potential: 
  • Recalibrating cost structures – making changes in terms of people, supply chain and overheads to better control costs and compete with digitally-powered, low-cost newcomers
  • Replenishing revenue streams – building new sources of revenue across segments, geographies and business models as legacy streams dry up in the wake of digital disruption
  • Reshaping corporate strategies – reconsidering assets, risk and corporate agility to position the organisation for success in the increasingly digital world.
If you are a leader in any recruitment agency anywhere in the world I’d be suggesting that if you aren’t looking very closely at your cost structure, potential new revenue streams and the risk-return ratio on your assets, then you sure-as-hell should be, right now because Matt Barrie’s coming to get you.

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2 comments:

  1. Hi Ross

    Nice article, and very topical. I believe this is a hugely growing area for employers, policy-makers and job-seekers. But one that doesn't get much attention(!).

    I covered some similar concepts in a post earlier this year: http://recruitloop.com.au/blog/small-employers-regulation-and-a-declining-middle-class/

    Note, I understand Freelancer has had startup funding of significantly more than 'a few million dollars'.

    Cheers
    Michael

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  2. Nice article Ross. Having been in recruitment for six years things like Freelancer.com are positive changes that the industry really needs, I believe it allows good recruiters to differentiate themselves far easier whilst the bad recruiters will be pushed out of the industry.

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