As we pass Labor Day, it is a good day to look at the changing labor force in the US, and how that affects startups. In April, I wrote about 'Virtual Workers as a Start-Up Resource' and the trends we saw then have accelerated. Independent workers make up 30% of the nation's workforce, according to the Freelancers Union.
I spoke with Gary Swart, CEO of ODesk (#286 on the INC 500), a marketplace for online workers and companies that hire them. With over 715,000 contractors and 215,000 employers, ODesk shows an increase (up until the past quarter) (correction) of Small and Medium-sized Businesses (SMBs) utilizing contractors via their online marketplace. They report that contractor earnings were up 82% from this time last year. The average overall rates that ODesk contractors make is pretty low compared to US minimum wage – but that reflects the global nature of their business, said Swart. "Jobs like software development have a much higher average cost-per-hour, and you can see US rates in the stats [above].'
'Demand for tech skills is very active and always has been,' said Swart. 'Early adopters are there, and things can be done internationally. New products like mobile development, Photoshop (with special interest around latest release), iPhone, iPad and Android development [are popular]. We're also seeing a spike for project management – up 70% for this skill set. If I'm hiring a team of remote workers, I'd like to be in control, but have someone to manage the project. Lots of start-ups are hiring teams of developers all managed by a single resource.'
Swart also told me that Search Engine Optimization, Search Engine Marketing and Social Media Optimization are all marketing functions that small companies are outsourcing via ODesk. Additionally, many are now trying 'home-shoring' instead of off-shoring. They are using talent here in the US to get jobs done. 'Our growth in the US has been spectacular. We hit a low for wages in January 2009 but the average has risen about 20% since then.'
As noted in the previous article, trust is often difficult when you're outsourcing a job, but ODesk provides feedback and reputation scores. It also lets you pay workers as complete contractors using a W9, or as employees with benefits using a W2 system. Your company pays ODesk and they handle the taxes and payments without you having to manage that. ODesk takes a percentage of the paid hourly rate, and to contractor it offers guaranteed payments. Via their team room platform, employers can see what contractors are working on at any time, via screen shots. There is significant growth in this outsourcing market – ODesk reports an increase of 2% per week in hours contractors are billing, and the company's growth is up 500%.
At press time I received some stats from ODesk competitor ELance that confirm this growth – they note '62% of service providers stated that their income has increased in the past 12 months and 58% feel that they will find more online work in the coming 12 months.'
Has your startup used outsourced labor via ODesk or a similar site to save money or find skills you couldn't find locally? Let us know how it went in the comments below.