Tapping into freelancers online

Starting a new company does not mean you have to hire from scratch. More start-ups are scouting for temporary workers through websites which offer a global pool of freelancers ready to take on tasks that range from Web design to software development.

Take Roomorama, an online service that offers rooms to travellers who are willing to stay at someone's home while on a vacation, for instance. In 2008, the company, which competes directly with the likes of AirBnB, hired a project manager, two developers and a designer to build its prototype website.

"We are not technical people and we have never built a website before," said Roomorama co-founder Teo Jia En. "We had not raised money at that time, so we did not have any cash to pay someone full-time."

Ms Teo trawled the Internet for expertise and found Elance, an online job website that matches companies with freelancers. She posted a Web design job, along with a design brief, for freelancers to take up.

Roomorama received several proposals and awarded the job to a design firm in India that was registered with Elance. "That helped us to get off the ground quickly without hiring someone. It also let us test our business concept before hiring a team," Ms Teo said.

Besides tapping the pool of freelancers who will work remotely from any part of the world, work websites also help cash-strapped entrepreneurs lower their manpower costs. Through Elance,

Ms Teo believed she saved half the cost of hiring full-time employees during the company's early years.

Gushcloud, a digital marketing company, also reaped cost savings by hiring freelance intellectual property (IP) lawyers in India to draft its patents. It paid about $3,000 to draft each patent, which co-founder and chief executive Vincent Ha said could cost up to $11,000 in Singapore.

With the cost benefits, it is not surprising that companies which hire freelancers through online work websites tend to be small- and medium-sized enterprises (SMEs). At Elance, they make up 90 per cent of employers.

In a recent Elance study, 82 per cent of Singapore employers said they hire online freelancers to enjoy cost savings, while 52 per cent said they hire freelancers to fill talent shortages in the tight labour market.

Mr Gary Swart, chief executive of online work portal oDesk, told CNBC in March: "There are a lot of small businesses which cannot find talent or cannot compete for talent in their local area."

He said technology plays a big role in fuelling the growth of online work, a market which staffing analysts said will grow to US$5 billion (S$6.37 billion) in five years. "It is not only the bandwidth available today, but also the tools and technology available on the Web," he said.

"Other factors for the growth include the fact that companies are trying to get more work done, workers want freedom and flexibility, and globalisation as well."

Freelancers are usually paid by the hour or a fixed amount decided by employers. Online work websites will take a cut of the earnings. oDesk gets 10 per cent of every hour billed, while Elance deducts an 8.75 per cent service fee from all invoices submitted by freelancers.

During the first quarter of this year, Elance signed up 100,000 employers, a 30 per cent increase compared with the same period last year. Freelancer earnings also grew 36 per cent to reach US$54 million.

As alluring as it may be, hiring freelancers through work websites is not without its challenges. First, employers have to give as much details on the tasks as possible to minimise misunderstandings.

"We made a few mistakes at the beginning and did not scope our project properly," Ms Teo said. With no experience in Web design, Roomorama merely provided a basic sketch of its website in its design brief. That led to some miscommunication and more time was needed to get the prototype right.

"We often think other people can read our minds, but they cannot," she said.

Hiring freelancers who live in a different time zone also means having to stay up late to talk to them. Without physical oversight of the freelancers and the tasks in progress, employers may need to scrutinise their work more closely.

There are also cultural nuances to grapple with. "In India, people use phrases in e-mail messages that you may not be familiar with," she said.

As with all outsourced jobs, there is a chance that a company's IP might be stolen. To eliminate that risk, Gushcloud drafted a non-disclosure agreement that forbids its freelancers from using its IP in other projects.

"We told our freelancers that we would own the assets," said Mr Ha, who also hired freelance Web designers from Argentina and Ukraine to develop Gushcloud's website in 2011.

To help employers establish the credibility of freelancers, most online work websites publish comments about the quality of their freelancers' work from past employers. Mr Ha said his company looked at the reviews of the freelancers and checked out their portfolios before hiring them.

Just as e-commerce has shaken up the brick-and-mortar retail model, the online work market is set to disrupt the market for freelance jobs, which have largely been sourced through business contacts, word of mouth and specialised job agents.

"We think this is a very disruptive business," said oDesk's Mr Swart, adding that online work is not different from e-commerce.

"E-commerce is about getting the right goods, delivering the goods and paying for them via the Internet. Online work is about the same thing, also via the Internet."


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