Some were inspired by the “The Dawn of the E-Lance Economy” manifesto, some were HR Consultants looking to reinvent themselves by embracing the eBusiness manifesto, and others just thought it was self evident that what eCommerce was doing for Goods you could also apply to Services.
The idea was that if you could provide a real time, online “body shop” auction hub then you would corner the “ManPower” market by automating the HR contract resource industry. Although it was about bringing Contractor and Client together online to complete the advertised work packets the underlying objective was to build a bank that managed the transactions between Client, Prime Contractor and Sub Contractor
As I say many tried. Few succeeded. Most didn’t get past offering clients access to online timesheets. Many made the mistake of focusing on managing bodies rather than work packets or projects.
In the end it was the high touch market of HR client services coupled with the specialist online career classifieds that won out. Hiring people was after all about people so how could you automate people discovery when it was all about hiring the right people?
Two companies that did emerge in the US from this era of experimentation were the Guru and Elance Telelancing hubs.
Today Elance has just over 200,000 Active Clients and Members with total earning last year of US$245 Million.
Elance publish an annual Online Talent Report describing the state of the nation for Telelancers. Not suprisingly mobile development was the fast growing market last year with 8,800 iPhone jobs.
What I find interesting is how the Elance business model works. It’s a Freemium based offering that allows 10 free bids per months to get you started. After that you can purchase bid packs at various prices depending on the size of your business and the number bids you want make each month. On top of this monthly access charge Elance deducts between 6.75% and 8.75% from each payment to cover its Service Fee and Payment Processing costs. Plus there is an additional 2.75% payment processing charge.
The industry average for contract management by the traditional Body Shops is between 15-33% of the contract rate. So clearly Elance is offering a significant discount on the high touch HR providers and IT Outsourcers. What I find more interesting however is the use of the Pay per Bid model to fund the auction process.
Most of the models tried in the late 1990’s asked contractors to pay a membership fee to belong to the hub and required the client to fund the “Job Advertisement” along the lines of the traditional newspaper classified business model. As a result most of the Service hubs failed to reach critical mass.
This Pay per Bid model pushes the advertising cost onto the pool of contractors bidding for the role and masks the monthly membership fee as a prepaid bid pack.
Posted on February 22, 2010
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