Two years ago, even some of the most progressive minds in IT saw virtual working communities as futuristic. When Tom Malone, professor of information systems at the Massachusetts Institute of Technology, published what is now recognised as a ground-breaking article in the Harvard Business Review in May 1998, much of the theory was still speculative.
In The Dawn of the E-Lance Economy, Malone argued that a radically different business organisation and way of working was already emerging. Loose, informal and entirely network-based, Malone predicted that this new kind of economy could be responsible for the end of big business as we know it.
"The fundamental unit of such an economy is not the corporation, but the individual," Malone wrote. "Tasks aren't assigned and controlled through a stable chain of management, but rather carried out autonomously by independent contractors. These electronically connected freelancer 'e-lancers' join together into fluid and temporary networks to produce and sell goods and services. When the job is done... the network dissolves and its members become independent agents again."
More than just a new spin on the contractor market, these working communities could have a big impact on the way individuals and teams work together. They unite customers and experts from around the world to work on one-off projects, and then disband when the project is completed.
The development of Linux and the internet has already demonstrated that unstructured collective efforts can work. At the same time, the growth of outsourcing shows that companies have already embraced some aspects of the model. "In some industries, such as investment banking and consulting, it is easier to understand the existing organisations not as traditional hierarchies, but as confederations of entrepreneurs, united only by a common brand name," Malone wrote.
In for the skill
Malone's article had one immediate effect: it provided the intellectual stimulus, as well as a basic business model, for a new breed of business-to-business (B2B) internet service. It opened up new opportunities to individuals, small teams and even entire organisations to fundamentally change the way they work. This new business model goes far beyond matching clients to contractors. Instead it revolves around global marketplaces for skills and services - the professional equivalents of eBay, if you like - a sort of online auction for skills, a forum through which projects are defined, bid for, agreed upon, completed, and paid for.
Last year alone, two major players launched into this global services sector. Smarterwork.com and eLance both boast a formidable array of financial backers, including Silicon Valley-based Kleiner Perkins, the organisation behind Netscape, AOL and Amazon. Both also claim to have signed up an impressive number of customers (typically small to medium-sized organisations), and experts (usually individuals or small contracting firms) located around the world.
Both provide a common platform or 'virtual office space' for buyers and sellers to use throughout a project, where completed work can be uploaded and the performance of individuals monitored. Smarterwork also claims to be developing an online collaboration tool to make it easier for virtual teams to bid for work.
Today, most projects involve small businesses and startups. But, eLance's European development director James Fulton is confident that it's only a matter of time before medium-sized and large companies start using the site, and the average project value rises. So even if you work for a large company, you're just as likely to be drawn into the global services market model. In the short term, however, the likely candidates will be companies looking for a more efficient way of getting established suppliers to tender for new work. "We'll also have individual departments from large companies using it for projects. The model's already there for it: the virtual office could act as a powerful collaborative tool," says Fulton.
One of the major selling points of both eLance and Smarterwork as forums for virtual teams is the diversity of talent they expect to attract. eLance, for example, divides its main streams of business into three groupings: IT skills and programming; business services, including consultancy, project management and marketing-related disciplines; and finally creative. In theory, at least, it's possible to assemble a complete project team from this one site.
Observers such as Keith Bedingham, chairman of Verax - a specialist adviser on corporate teamwork - agree that this is a model which might well be popular with larger organisations, if only because so many are already used to putting together such teams internally. "Most of the virtual teams we've come across are based in-house," he says. "Typically they might be project teams consisting of external consulting firms and multinational clients working across sites in different countries. But I can certainly envisage virtual teams being put together by a group contractor."
What's the likelihood of individual employees from large organisations signing up to such sites? eLance and sites like it might well provide a useful means of reaping a little extra income on the side, but whether companies would be prepared to formally endorse individual participation is another matter. There is, however, evidence of some companies setting up similar initiatives for internal projects. BP, for example, has been operating a virtual team network between its separate business units for some time. As part of that initiative, every employee has the opportunity to create a personal home page with the potential to participate in group-wide projects.
So far, the implications for individuals are unclear, although it's likely that the ability to sell yourself and your capabilities to those responsible for putting together project teams is a skill you'll need to develop.
Such a model is also likely to have a profound impact on the roles of managers within large companies, as Malone points out. "In an e-lance economy, the role of the traditional business manager changes dramatically and sometimes disappears completely," he wrote. "The work of the temporary company is co-ordinated by the individuals who compose it, with little or no centralised control ... The key role for many individuals, whether they call themselves managers or not, will be to play their parts in shaping a network that neither they, nor anyone else, controls."
Both sites have already attracted pragmatic individuals who sit on both sides of the fence. "When I first started using eLance I was a skills seller," says web designer Steve Dennison. "But as the site grew, I discovered it was more advantageous to switch to the buying side - there were just too many sellers competing for the same work. You come across Indian programmers charging $12 per hour for a job which would be charged at $50 to $100 in the UK."
Consequently, Dennison has re-invented himself as "a middle man, an international agent, a people manager - putting together online teams and profiting from the disparity of prices. For example, I recently used a seller from Kiev who charged $2000 for a job that would have cost me between $10,000 and $20,000 in the UK," he says.
At the moment, therefore, it's individuals and small companies ("microbusinesses" in Malone's terminology) that are getting the most rewards from the model. "As value for money, it's absolutely excellent," says independent web designer Peter Thomson. As a skill-seller, or 'expert' for Smarterwork, it cost him nothing to sign up - an important saving compared with the sums he'd been shelling out to advertise in the print media, an area also losing favour for web development projects.
The bidding war
Thomson is also well aware of the threat posed by some of the "ridiculously low" bids from programmers elsewhere in the world - usually Russia, eastern Europe and India. Like Dennison, he believes this will have serious consequences for western IT contractors. "Either we compete at the same rates, or we don't get the work," he warns.
Some say, however, that buyers are choosy, and Smarterwork chief executive Bruno Monteyne insists that few contracts are awarded to the lowest bidder. Moreover, Monteyne argues that by opening up the field globally, this will also help restore the equilibrium in the chronically over-inflated western markets. "In London at the moment, there's a huge shortage of people," he says. "This way you ensure that talent is spread out, and that means project turnaround times are faster."
If nothing else, the comparative cheapness of the technical expertise on offer is likely to provide a powerful incentive for larger organisations, and could mean your involvement in these communities is a reliable and varied source of employment, although not guaranteed.
Thomson has won two contracts through Smarterwork - a Vancouver-based project and another for UK electronic design automation company Auto PD. But he has bid for some 20 other projects that came to nothing - in many cases, the client simply withdrew. Thomson believes many suffered cold feet on seeing the responses their posting had attracted. "Many of these projects are so badly defined. They look glossy on the surface, but underneath the clients don't know what they're doing," he says. Thomson believes the most important factor preventing this from becoming 'the ideal model' for IT skills contracting is that "businesses still don't understand exactly what they want from it".
Raising the standard
Both Smarterwork and eLance recognise that having a standard set of definitions will prove critical to the success of their ventures. Both promote the proactive role their staff play in helping buyers define projects in a manner readily intelligible to serious bidders - although the experiences of users such as Thomson would suggest there is still some work to be done in this area. Getting these definitions right is not just important to ensure a good match between buyer and seller, it also reduces the possibility of subsequent disputes.
But as Fulton points out, the best means to prevent disputes is to give both parties as much information on the other as possible via a system of ratings. "At the end of the project, both buyer and seller provide feedback on each other," he says. "In time, therefore, we will have a market that regulates and judges itself." Yet the site's users claim the company has already proved itself quick to step in as an arbitrator at the slightest whiff of trouble.
An important selling point for both sites is guaranteeing payment to service sellers, provided they complete the job satisfactorily. Here, Smarterwork is ahead of the game: setting up a system of online banking for its customers. Once an expert is selected, the buyer pays into a 'deposit' account while the work is undertaken. On completion, these funds are released into the expert's online account. "By using a platform such as ours, if you do good work, I'll guarantee you're paid for it," says Monteyne.
Judging from the reaction of customers, these framework services are likely to prove important tools for boosting customer loyalty. "Smarterwork is valuable in terms of the structure it gives to negotiations and payments. It plays an important role as a trusted intermediary," says Tony Curzon-Price, managing director of Auto PD and one of Peter Thomson's online employers. Curzon-Price also appreciates the site's ability to rate its experts' skills and past histories.
Determining precisely how much structure to impose on users is clearly going to be a tricky balancing act. None of the users we canvassed from either site had made use of these virtual office facilities - once the deal was struck they all communicated independently via email and seemed happy with the arrangement.
Is it worth registering with either of these operations? If you are a 'service provider', yes - you have nothing to lose and potentially a great deal to gain. For businesses, however, the cultural implications of heading down this route are much more profound. Widespread acceptance of the model, if it comes at all, is likely to be a much slower process.
As Malone says, if the network model is to win out over the characteristic "centralised mindset" of the average large company, it will have to demonstrate significant advantages over the established business model - but many of these are already in evidence. "What is lagging behind is our imagination," he concludes.
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