Note: The data about the talent markets in this blog post is outdated but the core concepts still apply. We would love to hear your thoughts on what has changed over the years.
I often suggest that readers learn how to manage distributed teams, built through global advertising and competitive trials. You can mix this “single global team” tactic in with your existing on-site recruiting and/or outsourcing. To do this, you need to find candidates, put them under contract, and pay them. You can get all of these capabilities from online talent markets, on-demand, at a very reasonable cost. In this article we will review some of the bigger markets that give you access to more than 1 million technical workers.
What Talent Markets do
They match “buyers”, who post jobs, with workers or “providers”, who post resumes and offers. This requires six different steps:
1) Recruiting: They sign up workers or “Providers”, who may be individuals or consulting and outsourcing companies. This gives you a large number of bidders to look at your job.
2) Advertising: You can advertise your job to the providers. Some services offer this as an unbundled option, where you pay $100 to advertise. After that, you don't need to use the talent market's contracting services, with their rigidly defined rules, and payment services, with their commissions. That is a valuable option.
3) Qualification: They may provide some sort of skill testing services, and they always provide a system where previous buyers post rankings and comments about providers.
4) Contracting: They provide a standard contract that covers payment terms, assignment of intellectual property rights, etc. This contract also insulates you from the tax and labor law compliance of an employer. And, it puts you under the market rules, taking away some options for direct communication and payment.
5) Time tracking and deliverable tracking: They collect information about the work that is done so that they can pay accurately. Some of them have sophisticated time tracking software.
6) Payment: You pay the market, and they pay the worker, within the rules that are set up for time tracking, release of funds on fixed price projects, and dispute resolution. There are many different payment arrangements, ranging from paying in advance into an “escrow” account, to paying automatically on a credit card every week.
What I look for
Business model: Does this exchange specialize in fixed price, or hourly work? I prefer to qualify people with hourly work, but there is a significant market for small, fixed-price projects. Does the exchange make money by charging fees to the provider, for providing leads, or does it work only for the buyer?
Typical job sizes: Is it the right place for a $100 Website upgrade, or a $50,000 new application?
Type of workforce: Is the workforce mostly individual contractors, or small outsourcing companies? We get better results with individuals, but some people prefer the packaging that an outsourcer provides. What is the mix of higher priced “consultants”, compared with low-cost “offshore” workers?
Rules: This is one of the most important things for me. Each of these exchanges has a user agreement that acts as a contract that covering essential terms such as assignment of IP, so that you actually own the code that you pay for, and payment process, and dispute resolution. This agreement can be very controlling about how you work with your providers. They are very specific about how you track time and deliverables. And, they prohibit payments outside of their system, unless you pay for a “buyout”. You need to be sure that you can live with the rules.
It's not easy to read the user agreements and find out what these exchanges are really doing. So, our analyst, Alexandr Smirnov, has read the agreements for you and compiled a chart.
Andy's insider notes
I think all of these markets have a bright future. Payment volume is doubling each year. They have signed up a lot of talent. The main limitation on their growth is the lack of knowledge about how to manage distributed teams.
The markets make their money on payment services. They want you pay all of your workers through their systems. To make this attractive, they provide services at surprisingly low cost. They provide contracting and payment services for 10% or less, and it costs them (or you) 3% out of those 10% just to move money. They are also offering options like employee leasing, where they will pay employer taxes and benefits.
Most of the markets now offer both fixed price projects and hourly payments. However, they have very different mixes of business. oDesk is almost all hourly, and the others have a long history of fixed price projects. I am happy that they have all started to offer hourly payment. Fixed price jobs are a good way to do something small. However, fixed price jobs need to be small, because they are inflexible, and they cause delays. They are especially risky for the worker, who won't get paid if the buyer loses interest. Hourly payments are less risky for the worker, and they give the buyer the flexibility to do a small trial followed by a long-term relationship.
I am looking forward to the day when there is more unbundling of services for recruiting, qualification, contracting, time and deliverable tracking, and payment. This will make it easier to mix these services into your existing management structure, and it will benefit the markets because they will participate in bigger, longer-running projects. Here are my comments on the current state of the art.
oDesk is the leader by volume, a VC funded, Silicon Valley operation. oDesk pioneered hourly payments and does the most hourly deals. They also introduced the idea of time-tracking software that take a picture of the worker's desktop every 10 minutes. This innovation has been controversial, and some people see it and other rules as overly controlling. However, it does help oDesk guarantee payment to workers who track time this way. They have a lot of "affililates" - individuals who work for outsourcing companies.
Elance is another VC funded, Silicon Valley operation with state-of-the art software and Web UI. They have attracted a big following of outsourcing companies that use Elance to find and bid on jobs. Outsourcers have not been the best source of talent in Assembla's tests, but if you are looking for more of a packaged experience, Elance providers can deliver it. Traditionally their jobs were fixed price, but Elance now matches oDesk with hourly time tracking and payment. Elance offers an API, and a low $750 buyout price, so there are now more ways to use them effectively.
Guru is unique because it has a lot of US-based providers. The other exchanges specialize in lower-cost "offshore" workers. Guru has more providers in non-coding categories like design, writing, and business consulting. And, they have more individual contributors, which have been better in our tests. If you want to work with individuals in the United States, you should look at Guru. On the other hand, their contracting is primitive and limits the ways that you can integrate team members. They only offer fixed-price jobs with no buyout option.
I have been using vWorker (formerly Rentacoder) for ten years, and I used it to find several of our core team members, including our chief architect, who is now a partner in the business. It is still mostly a site for small, fixed-price jobs. The strength of Vworker is the huge community of individual contractors, many of them “offshore”, who are available to try out on small jobs. vWorker does not have a buyout option, and their communication rules are restrictive, so in the past I usually used it just for advertising, an obscure option that they called a “bulletin board” ad. However, with the new hourly payment option, it can fit into our qualification process.
I like Freelancer (formerly GetaFreelancer) because of their unbundling. They don't force you into any particular business model. You can get fixed price, hourly, or just buy an advertisement, which they call a fulltime project. Freelancer is a business from Australia that has been quite aggressive about adding new sites and features. They claim to have 1.9 million registered workers. Freelancer does not seem to offer any protection for workers.
Looking for software to help you manage all these projects?