From Elance to eBay, Lime Exchange to Craigslist, today's online labor exchanges offer resource-strapped businesses easy, on-demand access to workers with specialized skill sets -- and you pay only for what you use.
A decade ago, service exchanges were among the first "e-business" marketplaces that sprouted up on the Web. But the sites were unsuccessful: Buyers weren't ready, and B-to-B exchanges were lambasted as difficult to navigate or trust.
Flash forward to today: There's a plethora of labor exchanges where small and midsize businesses source and engage contractors both locally and globally. And with increased competition comes more choice and -- finally -- innovation. The new generation of labor exchanges provides automated sourcing tools to help with contracts, project management, payments, and even resolve disputes, if necessary. The latest wrinkle is a proof-of-concept option to help build trust between buyers and providers.
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Small and midsize firms that prefer not to add head count use labor exchanges when they seek specialized skills, usually on a project basis. The critical test for labor exchanges is whether they can effectively automate the sourcing process and save SMBs from hiring lawyers and sourcing advisory firms, much the way that large corporations negotiate with service providers.
The leaders in this still emerging field include Elance, Guru, oDesk, ki work, and Lime Exchange. Yet millions of dollars worth of contracting work also flows through eBay and Craigslist, even though those sites lack project management features found in more specialized exchanges. One of the key advantages of labor exchanges is that the "employer," or SMB customer, pays nothing for using the system; fees are collected from service providers, who pay, in some instances, to be listed on the exchanges plus a percentage of the invoice.
That's not to say the exchanges aren't trying to collect money from SMB buyers. For instance, ki work offers buyers a $20 monthly fee to become a "certified" buyer, granting them an "improved" chance of sourcing good service providers. While such fees are optional, service providers are forced to jump through flaming hoops to reach buyers -- lending further credence to the process.
Not surprisingly, buyer feedback ratings -- so prevalent on eBay and Amazon -- are pivotal to success for independent service providers. A good rating can make purchasing decisions, while bad ratings chase away buyers.
Next Page: Savvy On The Buy Side
