What challenges do organizations face when adopting online freelancing platforms as part of their business models?
Digital technologies have enabled the rise of online labour platforms that transform contemporary organizations and the way work gets done. In Part One of this blog, I introduced a typology of online labour platforms and described the motivations of organizations to work with online freelancers. In Part Two, I further outline an organizational perspective on online labour platforms. I will discuss new ways of organizing with online freelancers and the questions that organizations should consider when adopting online freelancing platforms as part of their business models.
New ways of organizing with online freelancers.
Economists, sociologists, industry analysts, and policy-makers have all been concerned with how online labour platforms are shaping the future of work in the online gig economy. But what’s often missed-out in the societal debate is how platform technologies are adopted by organizations and transform how work is structured and managed. By viewing platform adoption as unproblematic, important questions about the practical opportunities and challenges of online labour platforms are not asked. Consequently, current predictions about how platforms will affect the future of work in the modern economy are informed more by estimations rather than actual practice. A focus on the organizational implications of the platform economy complements other ones, and allows us to better assess how the future of work is taking shape.
“Current predictions about how platforms will affect the future of work in the modern economy are informed more by estimations rather than actual practice.”
To address this issue, I study how organizations, ranging from SMEs and startups to Fortune 500 companies, adopt online freelancing platforms. Broadly, online freelancing works as follows. The platform offers a marketplace where client organizations and freelancers can connect and interact with each other. A client posts a project on the marketplace and interested freelancers can bid on the project. In their proposal, they indicate the price they will charge to complete the project. The client then evaluates the proposals and selects the freelancer that best fits the project. After an interview, the client then decides to make an offer to a freelancer or to continue her search. Upon acceptance of the offer, the freelancer can start the work, which upon completion, is submitted and evaluated through the platform. After evaluation and approval by the client, payment is released to the freelancer.
As described in more detail in Part One, organizations adopt online freelancing platforms for various reasons. SMEs and startups tend to use platforms to access freelancers with specific skills while reducing risks. Other companies report the use of online freelancers because of the flexibility it offers for project-based work. Platforms such as Toptal, focus on specific categories of work. Others offer a wide range of categories, such as Upwork and Freelancer.
Further, startups and SMEs tend to interact directly with the marketplace. Some platforms have started offering managed services systems for large corporations, whereby interaction with freelancers is mediated by a human-service layer. For instance, Upwork’s enterprise offering comprises a white-glove service that assists in recruiting, the classification compliance, deployment, and onboarding of its elite freelancers.
Organizational challenges for working with online freelancers
Along with these strategic advantages, platforms also present organizations with new challenges. One question that remains to be addressed is how platform adoption transforms the structures, processes and practices of organizations, when freelancers get involved in everyday operations. This not only concerns traditional hiring, talent sourcing and procurement strategies, but also the way work is coordinated, administrated, and managed. How do organizations decide about which work tasks to outsource online and how are such work processes organized, managed, and coordinated? Further, how does the very nature of work change when it is carried out by team members that are partly working onsite and partly remotely? These are pressing issues that ask for updated frameworks about contemporary work and organizing.
“A question that remains to be addressed is how platform adoption transforms the structures, processes and practices of organizations, when freelancers get involved in everyday operations.”
Based upon preliminary analysis, I have identified five organizational challenges that organizations should consider in order to make online freelancing a sustained part of their business models. For sustained adoption, organizations need to:
- Overcome internal resistance. My findings indicate that at present the utilization of online freelancers is focused on worker augmentation on an on-demand basis (e.g., to temporarily scale-up teams, get work done that otherwise would not get done, and prevent excessive overwork) rather than the replacement of internal employees. I further anticipate that the uptake of online freelancing will be in the type of jobs that are already outsourced. It will also create new types of jobs as expertise is urgently needed on how to work with online freelancers and manage teams on internal and external workers.
- Come to tailor-made solutions to address legal issues and information risks that accompany the involvement of external workers. For instance, increased usage of online freelancers presents organizations with new risks of information flowing outside firm boundaries as well as around intellectual property rights. Organizations may therefore have to develop new solutions to address such issues.
- Prevent increases in coordination costs by finding out what work can be outsourced online and developing an internal infrastructure for the online freelancing process.Traditional transaction cost economics explains the existence of organizations, arguing that economic activities with high coordination costs should be organized in hierarchies rather than markets (see Coase, 1937; Williamson, 1981). Digital technologies have significantly reduced the costs of organizing economic activity in markets (e.g., Malone et al., 1987). Platform technologies have significantly reduced the coordination costs of outsourcing work through online freelancing marketplaces. However, there may not be a one-size-fits-all solution to this question. Instead, it is more likely that the utilization of freelancers differs for different types of companies (e.g., startups, SMEs, and multinationals), as well as across industry sectors.
- Learn and share best practices for working with online freelancers. As Malone and colleagues aptly summarize, the use of online freelancers for knowledge-intensive work calls for new management skills, for instance around how best to divide work into concrete tasks, recruit and onboard freelancers, ensure the quality of work, and integrate workflows and outcomes. However, further research is necessary to fully comprehend how the work of online freelancers can be integrated with what is being done inside the organization.
- Find novel solutions for integrating the internal work processes, collaboration tools, and work management systems with the tools and technologies offered by platforms. Online freelancing platforms have built work management solutions and offer dedicated enterprise offerings that give companies new capabilities in managing work online. However, for organizations to truly benefit from the skills and expertise of online freelancers, they need to be able to facilitate integration between internal and external workers, as well as related administrative and reporting processes. This is a delicate balancing act, where platforms strive for standardization while organizations seek tailor-made solutions that fit with their company culture and socio-technical infrastructure.
In this blog, I argued that while organizations and their members increasingly tap into the knowledge and expertise of external workers hired through online labour platforms, we know surprisingly little about how this takes place in actual practice. This is problematic as organizations form one side of the markets that platforms create. Hence, to make informed statements about how platforms are transforming the future of work in the modern economy requires updated frameworks of work and organizing with platforms.