Intermediaries should be worried about the platform economy

This interview by Claartje Vogel was originally published in Dutch on zipconomy.nl

Online labor markets for professional knowledge work is growing 30% a year. Established intermediaries, brokers and staffing agencies should be concerned about this, according to Dr. Gretta Corporaal (Oxford Internet Institute, University of Oxford).

“When the media reports about the gig economy of platform labor, they often talk about low-skilled, low-paid platform labor, such as at Uber”, tells Gretta Corporaal from the Oxford Internet Institute, University of Oxford. “Little security, low wages. Is that the future of work? I don’t think so.”

Indeed the labor market for online work is growing rapidly, yet our understanding of this phenomenon often is incomplete, the organizational scientist explains. Namely, the so-called ‘platform economy’ is much larger than platforms for low-paid gigs.

How then does the labor market for online work really look like?

Gretta Corporaal is a specialist in the area of online labor platforms and examines the future of work in the digital economy for three years already. Her research has been made possible by a grant from the European Research Council and focuses specifically on platforms for high-skilled professional knowledge work. Compared to gig economy platforms, the platforms she studies act as an intermediary for larger projects (hours to sometimes even years) with higher task complexity and higher compensation.

“Up to 200 dollars an hour, depending on your expertise”, she states. “Although these are international platforms, it concerns specialized work and so the number of candidates that is available for companies to hire tends to be smaller. This implies less competition and higher remuneration.”

Some examples of these types of platforms are Upwork,Toptal, and Catalant. The work is carried out remotely and delivered digitally, employer and worker never meet physically.

For young and old

According to Corporaal, “it can be attractive to work as a freelancer on these platforms. You have more freedom and autonomy to decide for whom you work, when you work, and oftentimes there’s more variation in projects compared to full-time employment”.

This is a good fit for some of the milennials, she says. And further, it can also be a solution for older generations of experts. “When you’re nearing retirement an less keen to continue working fulltime, you can now find projects through these platforms that match your knowledge and expertise”.

‘Quite a significant growth’

Gig economy platforms for low-paid labor such as Uber, Deliveroo, and Helpling are better known, but don’t underestimate the emergence of these sites for specialists. “Each year the phenomenon grows with 30 percent”, says the researcher. “That’s quite a significant growth compared to traditional labor markets.”

Her argument is based on the Online Labour Index, which can be found on the website of the Oxford Internet Institute. From that index it appears that the Netherlands is at number 11 worldwide regarding the use of these platforms by companies.

“It’s an English market”, Corporaal says. “You see that in the kind of projects, it is popular predominantly with professions where often English is spoken. In the Netherlands these platforms are mostly used for software and IT (41%), creative and multimedia (21%), and writing and translation work (19%).”

Alternative for staffing agencies and offshoring

Staffing agencies, outsourcing- and offshoring contractors have to be worried”, warns Corporaal. “For employers, platforms are an alternativefor staffing agencies and offshoring.  Via these platforms they bring the work back closer to the organization. The employer has more control in the selection of the worker as well as the execution of the work.”

She examined the motivations of firmswith over 10,000 employees to start using platforms. Why not a temp? First of all, these ‘Fortune 500 firms’ see platforms as a way to attract younger generations of workers. Millennials have different demands and expectations of work than babyboomers, states Corporaal. “A part of the younger generation of specialists and professionals chooses to work as an independent freelancer. Platforms make that way of working more accessible. When as a company you don’t go along with these changes, or the platform economy, you miss a piece of expertise and possibilities for innovation that your competitors do make use of.”

Further, the organizational processes of staffing agencies are oftentimes too slow and bureaucratic, she says. “Sometimes it takes one to two months before someone can get started. That doesn’t fit anymore with firms that operate in hyper-competitive markets where speed is key to stay ahead of the competition. Such a company actually already needed someone yesterday. With their technologies, algorithmic matching models, and international scope, platforms are able to meet firm demands faster.”

 Less administrative burden, more choice

A platform also has advantages compared to organizations’ own freelancer networks. “As an organization you can rapidly expand your network”, says Corporaal. “Through these digital platforms, companies can work with people from the other side of the country or even the world. Furthermore, payment is much easier, especially for American companies in her study which oftentimes had complicated procedures. For them the administrative burden is lowered.”

And finally, these type of networks are also often used for shorter tasks. You can think about making quick changes to a logo or flyer for your company’s Christmas drinks. For very small tasks you don’t go to a staffing agency but you do need some help to get them done. Whereas  before you might be dependent on your own network, for instance someone’s brother who’s handy with Photoshop. Now with such a platform you can hire a professional.

The role of intermediaries

Intermediaries should be worried, but they will not disappear because of platforms. Corporaal: “The balance has yet to be found, but there is definitely a role for both. Namely, you cannot solve everything with technology. Hiring managers sometimes just want to walk to a person who can find the right candidate for them.”

But actually, platforms are finding solutions for this. They learn from staffing agencies, the researcher observes. “Upwork and probably also other platforms offer the option for companies to hire a project or program manager”, she says. “Often that is a freelance professional who can write the job description for you and search the platform for candidates. Because he/she knows the workings of the platform inside out and is experienced in managing freelancers, a suitable candidate is found faster.

Challenges for organizations

Despite the rapid growth of online labor markets, large organizations often experience difficulties with the digital transformations necessary to participate in the platform economy. Her current research is aimed at understanding the challenges and change management strategies of firms who start working with online freelancers.

“It only starts after you have subscribed as an organization”, she says. “Not only you have to figure out how such a platform works, you also have to get your organization with you in this change process.”

Corporaal further sees different models emerging within organizations, and to work with online platforms and freelancers. “One manager sees them as just another staffing agency, while another sees them as an alternative. And again another company uses platforms to find and access specialist expertise unavailable in their current network. You can think of a care institution that needs a data scientists or wants to build a website.”

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