Is HourlyNerd disrupting the consulting industry the way Uber changed the taxi world?

What started as a way for MBAs to make a little extra cash has evolved into an elite freelancing marketplace with over 10,000 consultants or “nerds” bidding on projects for the likes of GE, Microsoft, and Au Bon Pain, among others. HourlyNerd is disrupting the traditional consulting industry by providing businesses access to inexpensive but highly skilled labor.

Business Overview

What started as a way for MBAs to make a little extra cash has evolved into an elite freelancing marketplace with over 10,000 consultants or “nerds” bidding on projects for the likes of GE, Microsoft, and Au Bon Pain, among others. HourlyNerd is disrupting the traditional consulting industry by providing businesses access to inexpensive but highly skilled labor.

 

Crowd Management

HourlyNerd’s approach to building this two sided platform initially focused on top quality talent with plenty of spare time…the MBA student. As business school students themselves, the founders found it easier to start with the supply side of their marketplace because they could easily leverage their network. It was also a compelling pitch to MBAs because there was little downside in setting up their profile. Once they had sufficient supply, they targeted small to medium size businesses, a group that has historically been unable to hire expensive consultants.

As businesses post projects in the HourlyNerd marketplace, nerds can then bid on the projects by setting their own price. Businesses then rate and recommend nerds so a consultant who delivers a great product at a reasonable price for a small business can leverage positive reviews and start moving up the latter to higher paid work. The rating and reviews are key to managing the nerds and the quality of their work.

 

Key Challenges

They key challenges facing HourlyNerd are (1) quality assurance and (2) negative network effects. HourlyNerd has tried to create a network of high-quality nerds by exclusively recruiting from the top business schools. They can also rely on the rating and review system to do some of the policing but occasionally when a nerd fails to deliver as promised, HourlyNerd must mediate the dispute and resolve any complaints by the nerd or company that hired them. The second challenge facing HourlyNerd is the negative network effects associated with becoming so large that it’s difficult for nerds to sort through all the projects. They raised $7.8MM earlier this year to address this problem by making technology improvements to better match nerds and their jobs.

 

Value Creation

The value creation for nerds is the ability to work on side projects to make additional cash as well as the flexibility of choosing when and where to work and at what price.

Companies see value in this two sided market place because it gives them access to fast and inexpensive consulting advice. Previously many of the small and medium size businesses were priced out of the consulting industry and this gives them the ability to solve some of their complex business problems.

 

Value Capture

HourlyNerd takes a 14.5% cut of the nerd’s bid. I found it interesting that they charge the nerd, as opposed to the company, but believe this is because they’re facing a demand shortage rather than a supply shortage.

 

Future Potential

Is HourlyNerd disrupting the consulting industry the way Uber changed the taxi world? I don’t think so. As we discussed in the Upwork case, there are a number of reasons Uber was able to grow so quickly while freelance skilled labor like HourlyNerd will take more time. Companies are hesitant spend money on unknown outcomes and the process of posting a consulting project and selecting a nerd takes time. Having said that, I still think HourlyNerd has huge potential and look forward to seeing what they are able to do with this latest round of funding.

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7 thoughts on “Is HourlyNerd disrupting the consulting industry the way Uber changed the taxi world?

  1. Great post! I think your point about HourlyNerd not being able to scale and disrupt as rapidly as Uber is right on. One of the contributing factors is the fact that while Uber is a simple, transactional service that anyone can provide (get consumer from point A to point B), labor is a much more complicated need and it’s very hard to trust that someone you find through clicking online will be able to satsify these complex and high-level requirements.

    I also find it particularly interesting how many of the projects now available on HourlyNerd are for large companies (i.e. GE, Microsoft, as you mentioned) instead of small or medium sized enterprises that HourlyNerd initially wanted to target. This “upscaling” of the demand market may very well serve to oust these SMEs who still don’t have the financing to access expensive consultants. I worry that their initial goal of providing access to quality labor for SMEs is being hampered.

    1. I agree with RFD123 that the value proposition of HourlyNerd may be getting diluted in their quest to monetize through large companies. The appeal of having talented MBAs work on the project at a lower cost makes more sense for an SME or emerging market company, but i do think that the pricing schemes of consulting model may be ripe for disruption as HourlyNerd and similar competitors enter the space. If quality work can be delivered at a fraction of the cost, the powerhouse consulting firms may have to run leaner teams to compete in the long-run.

  2. Thanks for the post! I think other than the trust issue, another issue about talent crowdsourcing is the fact that the outcome of the job is somehow hard to measure vs. Uber where it is much more transaction based. For example, how could you determine someone is doing a good job in its consulting project? You might be able to have the clients comment on professionalism and attitude but harder on the actual outcome.

    Also wondering how their privacy protection is like. I worked for a consulting firm before and they have strict rules on not working in engagements of clients that are directly competing with any previous clients you have worked in. Do you know how they make sure nerds follow similar rule?

  3. Great post. My concern with the business model is that I don’t think that the platform is really sticky. Multihoming in this business is very easy and makes sense for both, the nerd and the client. Especially since they have the matching issue, a new competitor with a better product and maybe a smaller fee could disrupt their business.

  4. I enjoyed reading through these comments. As it relates to the issue of privacy protection, HourlyNerd has a services contract that basically limits the sharing of confidential information. I don’t think it’s feasible for HourlyNerd to really enforce this policy so I assume they largely rely on the ratings system to police the sharing of confidential information. I agree with the comment about multi-homing, nerds will be incentivized to multi-home. The ratings system will make the platform a bit stickier but nerds can easily advertise their HourlyNerd ratings through competing platforms. Companies may be less likely to multi-home though, due to the convenience of using a platform that (1) they are familiar with and (2) has already been approved. I also wondered if companies like GE would push out the SMEs but think they provide a level of validation to a relatively new concept. As long as there is plenty of supply in the HourlyNerd marketplace, large companies like GE shouldn’t pose a threat to SMEs.

  5. I think connecting consultants (freelance MBAs) with small or medium sized businesses is a great idea but, like others, I worry about the stickiness of HourlyNerd. Since consultants have an “established” track record (reason for hiring), they will be more inclined to multi-home or take their services elsewhere, whether full-time employment or commit to a new platform. SMEs will also multi-home, since they are desiring top talent with established credentials. As long as the freelancer fits there criteria, they will use whatever platform necessary. Now, you can say that ease of use and familiarity will keep an SME with HourlyNerd but I’m somewhat convinced that most of the interaction in these jobs occurs off the platform, rather than on the platform like TopCoder or oDesk. For this reason, I’m inclined to think stickiness will be a big problem once this “freelance consultant-for-hire” trend becomes more mainstream.

  6. Thanks for the post, Julie! I think you’re spot on about HourlyNerd needing time to “disrupt” the consulting industry, as Uber has done with the taxi industry. As you mentioned, it does take much more time with HourlyNerd – there is no option to “push a button” for a consultant; you’ve got both a proposal process and a vetting process, which takes time and requires expertise. Plus, most of the time, you don’t necessarily know what you’re going to receive. The proposal may be great, but the output may not be that great, whereas in Uber, you’ve got a basic transaction that needs to occur.

    With HourlyNerd, I wonder if there is space for more specialized HourlyNerd equivalents, such as a “CPG Nerd” or an “Oil and Gas Nerd” – apologies for the lack of creativity with the naming. HourlyNerd is somewhat like our Cragislist example, as it’s open to multiple projects, multiple industries, etc. If each of those industries (or perhaps functions – e.g., marketing vs. strategy) were broken into new platforms, it could be much more relevant for users and businesses alike. I think the value may be even greater for businesses, since “Oil and Gas Nerd” can be more targeted with the type of expertise it recruits on its site, versus the generalist MBA we see across the current HourlyNerd platform. You get to work with people who deeply understand your industry and could use some extra cash on the side. I think the major questions here, however, would be:

    + Are there enough “Oil and Gas Nerd” MBAs out there that would be interested in this? There are a lot of MBAs, but not necessarily a lot of Oil and Gas MBAs.

    + Are there non-MBAs who have strong oil and gas expertise/backgrounds/experiences and who may be interested in providing support to some of these companies seeking help? If so, will they be as cheap as the MBAs (which is the current value proposition of a HourlyNerd-type of platform).

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