ODesk Charts the Future of Distributed Work

2/15/11Follow @wroush

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Canada, Russia, India, Pakistan, Ukraine, the Philippines, and Australia. (Connecting with banks in each country, and especially learning their tax codes so that oDesk can legally pay contractors, is a time-consuming business, so oDesk is expanding to new countries only gradually.)

As Swart says, there are three parts to the oDesk platform: hire, manage, and pay. The hiring part hinges on oDesk’s database of contractor profiles, each one including a skills overview and a work history with reviews from previous employers. Prospective employers browse the listings and make contact with promising contractors through the site. Unlike most job sites, oDesk doesn’t charge either party for making a connection. “We didn’t want to be in that business,” says Swart. “What we want is to monetize what happens after the match.”

During a contract assignment, oDesk’s work diaries come into play. They log the time when contractors are signed in at their computers, and at random times, they capture and record whatever is on the contractor’s screens for later review by employers. Contractors can see each new screenshot and delete it if they want to (if they happened to be watching a YouTube video, say)—but then won’t get paid for that segment of time. “What it really boils down to is trust but verify,” Swart says. “It’s the ability to trust that a remote worker was doing what they said they were doing.”

Then there’s the “pay” part. Every week, ODesk calculates how much each contractor is owed based on the work diary logs and their hourly rates, and issues payments via direct deposit, wire transfers, or Mastercard Payoneer deposits. It charges employers for the contractor’s fees plus its 11 percent cut—so if a contractor charges $10 per hour, oDesk bills the employer for $11.11 per hour. ODesk takes care of any required tax withholding. One crucial twist that makes oDesk more appealing for contractors is that the startup pays out of its own pocket for the full amount of work completed, whether or not it collects that money later from the employer. (That creates a definite business risk for oDesk; for one thing, it means the company has to be pretty careful about “kicking out the riffraff” employers, Swart says.)

Employers are using oDesk to farm out all kinds of work, from voiceover work to telemarketing. But the largest groups of contractors are in Web and software development, software quality assurance, software documentation, and technical writing—all pursuits that are easy to clock using the work diary software. “There is a huge international supply and demand for work that has to be done in front of the computer,” says Swart. “We are starting to see things like translation, legal, accounting, bookkeeping, any job that can be done remotely.”

It’s true that oDesk’s technology makes it even easier for companies to take work once done by U.S. workers and “offshore” it to lower-paid contractors in other countries. But before you get too worked up about that, consider that it’s also providing work to people here who would otherwise be left out of the labor market. “Our customer support is run by a stay-at-home mom in Tennessee who graduated from UT-Austin,” says Swart. “Her other local job choices were literally either Blockbuster video or a dentist’s office, both at minimum wage. She manages a team in the Philippines that got so big we ended up hiring her friend who lives in Texas, and then we hired a woman in Boston to help train the workers in the Philippines.”

From one perspective, that’s all just oDesk “eating its own steak,” as Swart puts it—it’s exactly this kind of outsourcing that has allowed the company to manage $250 million in contracts over the last five years with just 38 full-time employees. But it’s also a sign that oDesk’s platform is helping more people find paying jobs that fit their skills and their life situations. And in the long run that has to be good for U.S. competitiveness—and for U.S. workers.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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