The Economist on online freelancing and the future of work: crowdsourcing goes mainstream


The Economist this week addresses the wonderful world of online freelancing and crowdsourcing, under the rubrik Work in the digital age. The full article is well worth a read.

The article points to the potential for online freelancing and piecework to account for a substantial part of global labor. While The Economist has touched on the issue before, this is now something that is a significant business issue which is going to start attracting a lot more coverage. The Economist notes:

Millions of workers are embracing freelancing as an alternative to full-time employment or because they cannot find salaried jobs. According to IDC, a market-research firm, there were around 12m full-time, home-based freelancers and independent contractors in America alone at the end of last year and there will be 14m by 2015. Experts reckon this number will keep rising for several reasons, including a sluggish jobs market and workers’ growing desire for the flexibility to be able to look after parents or children.

Technology is also driving the trend. Over the past few years a host of fast-growing firms such as Elance, oDesk and LiveOps have begun to take advantage of “the cloud”—tech-speak for the combination of ubiquitous fast internet connections and cheap, plentiful web-based computing power—to deliver sophisticated software that makes it easier to monitor and manage remote workers.

One of the key issues is that work on these sites is no longer limited to graphic design and web development – larger, more sophisticated, more complex, and better-paid work is shifting on to these sites.

Gary Swart, the boss of oDesk, says the number of freelancers registered with the firm in America has risen from 28,000 at the end of 2008 to 247,000 at the end of April.

That may, in part, be a reflection of American bosses’ ruthless cuts in full-time jobs, forcing those laid off to scramble for whatever work they can find. But it is also a sign of another notable trend: the range of work available on “e-lancing” sites is growing to encompass more complex and better-paid tasks. “We’re starting to see legal and financial work coming online,” notes Mr Swart, who says he has recently been talking with a big American insurance company that is thinking of farming out claims adjustments via oDesk.

Confidence in remote workers is a key issue, which is being addressed in a variety of ways:

oDesk guarantees them payment for any work they complete, saving them the hassle and risk of attempting to collect money from employers. Other sites are also experimenting with payment models. Australia’s 99designs, which matches 70,000 designers—40% of whom are in America—with online tasks, collects money upfront from customers and only pays it out when projects meet agreed targets. It also gives employers a money-back guarantee if they are dissatisfied with the work done, though refund rates, it claims, are very low.

There are no shortage of critics of online outsourcing, and I anticipate that the current mutters will rise to a massive outcry that could dwarf the earlier response to large-scale outsourcing as that came into play. Yet that will not slow the shift to the power of a global talent economy.

The industry also has to overcome frequent criticism that it is running little more than “digital sweatshops” that drive down wages and humiliate workers. The regulatory environment, too, is uncertain. Alek Felstiner of the University of California at Berkeley’s school of law predicts that some governments will draw up rules that make it harder for firms that regularly tap workers in the cloud to label them as independent contractors rather than employees with more rights.

E-lancing sites are confident that their model of work will find a way through the regulatory maze. They fiercely reject claims that they are exploiting online workers. Repeated surveys in rich and poor countries alike, they claim, show that people appreciate both the autonomy and the breadth of opportunity that the model gives them.

The granddaddy of online services marketplaces, eLance, was founded in 1998. Freelancer and oDesk, two of the largest services globally, were founded in 2004 and 2003 respectively. However most of the services have seen the massive growth which has created the firms of today over the last few years. These services are now a major feature of the global economy, and the mainstream is paying attention.