Taking the friction out of a fast-and-loose work economy

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I had a call this week with the CEO of oDesk, Gary Swart. Swart caught me up on oDesk’s growth: more than 540,000 companies are using the service to gain access to contractors skilled in technical, design, marketing, customer service and administrative services.

I was honestly rocked back by some of what Swart laid out. For example, 30% of the work by US contractors through oDesk is by non-US companies, specifically interested in using US workers. That a real counterexample to what I had considered the baseline: US companies hiring lower-cost overseas talent. While that’s a solid use case for the company, Swart described some aspects of what he calls ‘lift, not shift’ — the idea that US companies are not exactly offshoring work, but are creating work in both the US and overseas. He described a small startup, whose CEO explained that he had five US employees and ten overseas contractors. But without the economics of those 10 overseas workers he would have zero US employees, because his business would be unviable. So, rather than a single model of US companies hiring customer support staff in Manila or programmers in Estonia, there is a broad spectrum of use cases. For example, the Malibu California financial management firm that hired a woman as a bookkeeper who lived several hundred miles away in northern California.

Swart also described the benefits that oDesk offers to its contractors, such as group health insurance at a very competitive rate, because of the buying power of so many contractors. In this way, oDesk acts much like the Freelancers Union, to which I belong, although acting as a for-profit corporation instead of a non-profit.

Along with filling me in on the current status of oDesk, we discussed some recent news stories, like ‘Bob’, the Verizon programmer that outsourced his own job to China (see Outsourcing your own job). I offered the observation that Verizon shouldn’t have fired ‘Bob’, since he had the best ratings of any developer there, and his code was well-documented and well-designed. I suggested they should have promoted him and put him in charge of development. Swart recounted a story about a senior manager that tried something similar, Alex Gourares. Gounares is now the CEO and founder of Concurix, but he was the CTO of AOL’s Online Services division until the first quarter of 2012. He set up a meeting with oDesk while at AOL, and explained his situation. The Online Services Group was having real trouble getting the sort of technical talent that it needed, and he had over a hundred outstanding job reqs unfilled. So he set up a relationship with oDesk where every AOL developer could hire up to two contractors, and the AOLer would ‘manage’ their work as a mini-team. Gournares believed this would counter the huge shortfall in labor, at least in part, and also allow developers to learn skills in architecture, management, and planning.

My biggest takeaway: the freelance economy is growing quickly, and there is a broad spectrum of motivations and work structures for both the companies and contractors involved, and it’s clear that trusted intermediaries like oDesk can do a great deal to take the friction and potential downsides out of a fast-and-loose work economy .