Upwork: Changing the way we work!

Upwork: How the digital revolution is changing the way we work!

Most of us think about work as a full-time employment relationship with one employer. Digital technology has however enabled major changes in the way we transact. For example, Uber has created a transportation-as-a-service model where people don’t need to own a car, and Amazon AWS pioneered the computing as a service model with their cloud offering. What if we lived in a world where people didn’t have to work for one employer? That’s the world that Upwork is contributing to build.

Resulting from the merger of the two platforms oDesk and Elance, Upwork is the largest online freelancing marketplace. With more than $1bn in transactions per year[1], Upwork brings together companies with freelancers from all over the world. Its vision is to “connect businesses with great talent faster than ever before”. Upwork creates value for both freelancers and employers. Freelancers get access to job opportunities that are not available in their city or country, and enjoy the flexibility of working from home and choosing the number of hours they want to work every day. Businesses get on demand access to a global pool of talent at very high speed, with effective collaboration and freelancer management tools. Several factors have contributed to the success of Upwork:

  1. A horizontal model

Upwork has chosen a horizontal strategy in which the marketplace covers various ‘verticals’. The platform provides a wide range of skills including for example computer programming, graphic design, translation, or business analysis. This strategy differentiates Upwork from some of its competitors such as 99Designs or TopTal.com who focus on a specific industry. The horizontal strategy allows freelancers who have multiple skills to access various job opportunities on the same platform and allows businesses to access a wide range of skills depending on their immediate needs. This model allows the platform to have a strong relationship with both business and freelancers.

  1. Network effect

Having pioneered the online freelancing industry (Elance was launched in 1999 and oDesk in 2003), Upwork has built a strong base of more than 12 million freelancers and 5 million clients [1]. This network effect makes Upwork’s position very defensible and creates value by making the market very liquid, with a very short time needed to find a match between a freelancer and a job opportunity.

  1. Tiered Pricing Model [2]

In the summer 2016, Upwork announced that it was changing its pricing model from a one size fits all 10% fee to a tiered pricing model. Freelancers will be charged 20% on their first $500 with a client, 10% for their next work up to $10,000, and only 5% thereafter. This pricing model allows Upwork to match its revenues with the costs incurred for each project depending on its size. It also reduces the risk of disintermediation by reducing the commission on established freelancer-employer relationships.

  1. Effective collaboration tools

The emergence of new cloud-based collaboration and productivity tools (such as Google Docs, Skype, etc.) has made remote work much more efficient. Building on its strong customer and freelancer base, Upwork has developed a series of product features to enable an effective collaboration and communication between freelancers and employers. Their Upwork Message Center chat service for example allows businesses to communicate in real time with freelancers.

Going forward, for Upwork’s vision to succeed and change the way we work, Upwork needs to proactively manage the regulatory environment. If it manages to do so effectively, Upwork can start tackling the $150Bn staffing industry [3].

References

[1] www.upwork.com/about/

[2] www.upwork.com/i/pricing/freelancers/

[3] americanstaffing.net/posts/2016/11/02/how-much-runway-remains/

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2 thoughts on “Upwork: Changing the way we work!

  1. Thank you for your post. Upwork -which I did not know about- is definitively taking advantage of a changing work place in most part of the world. I am wondering which are the leading sectors of the employment markets having already adopted this platform and also what kind of regulation pressure (such as the one we have seen with Uber) could possibly pose a threat to this App which might have the potential to disrupt the labor markets.

    1. Thanks changeme_47 for your comment. Some of the most popular verticals at this stage in the online freelance industry are computer programming, content marketing, customer service and design. Your point on the regulation is spot-on: regulation is going to need to adapt to these new forms of work in order to secure adequate protection for freelancers. It is upon companies like Upwork to make appropriate lobbying efforts in order to explain their services to regulators.

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