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Summary:

The economy might not be booming but online labor platforms sure are. Last month, oDesk announced impressive growth and today rival Elance is doing the same. Elance says this is great news for US professionals who can export their services abroad. Is it really?

Elance CEO Fabio Rosati

The economy might not be booming, but online labor platforms sure are. Last month, oDesk announced impressive growth figures and Thursday, rival Elance is doing the same with its 2011 Online Employment Review.

Elance’s look back at the year reveals that online hiring has soared more than 100 percent from 2010, and the number of professionals working on the site is up more than 120 percent. Cumulative earnings this year should surpass $500 million.

And like his oDesk counterpart Gary Swart, Elance’s CEO Fabio Rosati (who is speaking at Net:Work Thursday) doesn’t feel the economic doldrums are the sole cause of the growing attraction of online labor platforms. What is? Structural change to work, Rosati told us in an interview:

The state of [the] economy and unemployment is acting as a catalyst. It’s forcing a large portion of the workforce to look for alternatives. It’s forcing business to remain more flexible. But what we’re seeing is a change in how work is done and it’s similar to commerce. What caused e-commerce? Did the rise of e-commerce result from problems in the economy? Not really.

E-commerce started to be more effective in some categories than regular commerce, and I think that’s exactly what’s happening in the world of work. Working online in many ways is more efficient, more effective and more immediate than traditional employment. Businesses that use the flexible work model have distinct advantages over businesses that don’t, and there are some departments within these companies that have always used a flexible work model anyway. Creative departments, marketing departments [and] IT departments have always approached talent in a very flexible way on a project basis. They’re just doing it online now. So I don’t think we’re going back. I think this is really structural.

And while some may feel this shift towards global, online labor platforms undermine American workers by opening them up to competition from lower wage workers abroad, Elance is predicting in its report that professional services will become “America’s next great export.”

“The global demand for US talent has increased steadily over the past year and is set to grow even faster as online platforms like Elance break down global barriers,” says the release that goes along with today’s numbers. But Rosati is a little more understanding of those who feel the rise of these platforms is a mixed blessing for American workers.

When you create a global workplace and a global workforce, the dynamics are very different. Suddenly, you have a lot more competition cross-border. I know that is a very strong reality, and at the same time, there’s the other side of it, which is that for the first time, a very capable, talented, U.S.-based professional can access work and have clients all over the world, and we’re seeing exactly that on the U.S. platform. I feel that it’s an important side of what’s happening, because Americans have amazing talents. We’re seeing companies that may be hiring in some parts of the world for certain types of tasks, but for others, they love the opportunity to hire people based in the U.S.

I don’t doubt there are strong pressures when you compete with someone who is living in another part of the world. For example, it doesn’t even have to be someone who is in a lower-wage country. It could be simply someone who has access to public health insurance. So if you’re working in the U.S., and you have to pay for your own health insurance, you may be at a disadvantage to someone living in Norway who absolutely doesn’t because it’s all covered by the government. So that dynamic is definitely real and a challenging aspect of what is happening, but there are also many positive things.

You have to hand it to Rosati for acknowledging that, for all the psychological and lifestyle benefits of independent work, it does offload tasks and expenses ( (like obtaining health insurance, dealing with tax issues and building retirement savings) entirely onto the worker. Also to Elance’s credit is their partnership with eHealth to help U.S. community members compare health coverage options. “I wish I had the magic wand to address the problem, but I don’t,” says Rosati.

But health insurance isn’t the only external cost shifted from employer to worker in the paradigm shift these platforms are pushing. Though Elance clearly tries to make verifying work, billing for it and sorting out logistics as simple as possible with everything from an internal file management system to built-in virtual meeting facility, one can’t help but feel independent workers are more burdened with what Craig Lambert recently dubbed “shadow work” in the New York Times.

Lambert defines the term as “all the unpaid labor — including, for example, housework — done in a wage-based economy,” and muses that all of us, not just independent contractors, are being saddled with more and more of it in the name of corporate profits:

Science fiction novels of a half-century ago dramatized conflicts between humans and robots, asking if people were controlling their technologies, or if the machines were actually in charge. A few decades later, with the digital revolution in juggernaut mode, the verdict is in. The robots have won. Although the automatons were supposedly going to free people by taking on life’s menial, repetitive tasks, frequently, technological innovation actually offloads such jobs onto human beings.

The conventional wisdom is that America has become a “service economy,” but actually, in many sectors, “service” is disappearing. There was a time when a gas station attendant would routinely fill your tank and even check your oil and clean your windshield and rear window without charge, then settle your bill. Today, all those jobs have been transferred to the customer.

From automated airport check-in terminals and the near extinction of travel agents to understaffed retail outlets where we find our size ourselves, more and more places are shifting work, with all its attendant costs in time and energy, from companies to individuals, argues Lambert. In its well-intentioned way, Elance and its competitors appear to be doing the same.

Do the larger markets for our services and increase in lifestyle flexibility make up for these extra costs?

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  24. Exciting news. I’ve been offering the Elance and oDesk stories to my organizational design students for years. For many years this approach was seen only skeptically by that audience – love the changes we get to see.

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  28. Elance and oDesk may be fine for a certain class or level of contractor. But there’s a whole lot more that has to happen in this space to support higher-level knowledge workers and specialized, experienced consultants, in a wide variety of verticals and professions. Huge opportunity yet to be tapped.

    1. Hey Graeme,
      Check out ExpertBids.com (disclosure: I am the founder). We are newer, but going after the exact market you describe.

  29. Jessica Stillman Wednesday, December 7, 2011

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  32. I’ve dealt with eLance and it is the worst job-posting website that I know of. Their customer service is literally non-existent. I posted a job at two other job-posting website and then found out from one of my bidders that someone had posted my project over at eLance. The only thing I can think they were trying to do is get some sucker to enter a bid, they then add a bit more for their profit, and then bid that sucker’s inflated bid at one of the other job sites. Very moronic as the deception would have eventually and easily been discovered. I tried contacting eLance to get them to remove that deceptive job posting and they didn’t even reply. Eventually, I posted the project to eLance and ONLY then did eLance remove this other posting. Because of this, I have been posting my projects to eLance to prevent deceptive bidders from doing the before-mentioned. But even doing this, the latest project I posted to them, I had problems, contacted eLance, and they never replied back. They are VERY anti-employer. They once removed one of my job listings saying it violated their Terms and Agreement but won’t say why it did. When I read through all of their T&A, I couldn’t see how my job posting violated it and send an email asking for explanation. No reply back. I know very likely one of the bidders register a complaint. The bidder was bizarrely upset that I wouldn’t change the job posting to how he wanted me to word it. I’ve had bidders at eLance change their bids to outrageous sums when I have turned them down to screw with the “average bid”. I complained to eLance and, once again, no response.

    If you are an employer, avoid eLance at all costs.

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  34. Valuable insight. I particularly appreciate addressing the flip side to the benefits: offloading tasks and expenses to the worker. We are living in a new age, that is for sure.

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  37. I’ve been contracting on and off Elance since approx. 2002 so am a longtime provider/contractor on their system in the marketing, online marketing, social media and business/media writing niche areas.

    It’s up to both the buyer and the provider to speak in advance and carefully structure the parameters and budgets of the project, to arrive at the best possible chance of a great outcome for all. Elance’s helpdeck/arbitration processes are an excellent safety net for both parties.

    There are an enormous quantity of buyers hopeful of hiring highly skilled workers for pathetic low rates, plenty of under-cutting from other bidders, and a scary number of impossible clients with unreasonable, patronising, or just plain impossible wish-lists for their budget ceilings.

    But I also work with a regular stream of great clients from the US, Canada, Australia, NZ, England..and non-english speaking countries and do some fascinating projects at respectable and competitive professional rates.

    Set your own value and rates on your profile and the right kind of project buyer increasingly seeks you out over the months and years. While you start to stand out from the sea of clamouring ‘pick me’ providers with their breathless hype and lofty claims on what they can deliver.

    I’m currently working in another country, while I spend time with elderly family… and continue working virtually without a hitch, mostly via Elance for international clients.

    ODesk and others slice budgets way more viciously than Elance, which increasingly has professional pricing for top-end projects and realistic expectations.

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