Monday, July 11, 2016
Upwork: A (Costly) Piece of Work to Be Avoided
While crowdsourcing in general has proven to be ineffective in both broad and specific terms, Upwork is turning out to be a particularly costly and frustrating example of the concept. Upwork was created by the merger of Elance and oDesk — and this is a huge part of the problem. For both clients and freelancers, Elance had a relatively “good” reputation while oDesk was typically viewed at the other end of the spectrum with low quality and low costs usually found together.
The First Upwork Mistake: Adopting oDesk Instead of Elance Philosophies
The initial troubling sign with Upwork was the adoption of oDesk fees and procedures. For example, oDesk charged a standard 10 per cent fee while Elance used 8.75 per cent. The standard Upwork fee was quickly fixed at the higher oDesk rate of 10 per cent.
With Elance, payments to freelancers were made immediately upon project approval by the client. Upwork has decided that is much too fast and has slowed freelancer payments to a glacial speed of 6-7 days after work is accepted by the client.
The Second Upwork Mistake: Greedy (and Greedier) Fees
As if 10 per cent was not enough to take off the top of each and every project, Upwork has recently (May 2016) chosen to double the fees for the first $500 of every client’s work with a specific freelancer — that’s 20 per cent for every single project to start with and then 10 per cent for amounts from $500 to $10,000.
What does Upwork do for this 20 per cent? I would argue that they are largely acting as a glorified Craigslist of jobs listings and freelancers and facilitating payments to be made from clients to freelancers — and they charge a separate fee (about 3 per cent) to cover credit card processing expenses, so that’s not even covered in the 20 per cent! Quality control is still the responsibility of clients, so quality is something else that is not covered by the 20 per cent fee.
The Third Upwork Mistake: A Name That Everyone Seems to Hate
While Elance was a popular brand that also happened to be a name that perfectly reflected the combination of e-commerce and freelancing, the name was ditched in favor of a new name: Upwork. It was a dumb move by all accounts — on a par with “New Coke” in the annals of marketing failures.
Other than the Upwork employees and investors who are seemingly required to say that they like the brand name of Upwork, who actually thinks it is an effective and appealing brand?
The Fourth Upwork Mistake: Inability to Retain Quality Freelancers
The Upwork team supposedly placed an early priority on retaining the “best” freelancers in their large community — and then proceeded to ignore this important goal at virtually every turn.
First (and very quickly), fees were increased by 15 per cent (for those previously using Elance) and then by another 100 per cent a few months later. Second, the time to be paid for completed projects was increased from immediate to a week or so — and during the past couple of weeks, there were periods when payments via PayPal were not functioning at all (even after patiently waiting for a week). Third, there were feeble internal attempts to create “higher quality” assignments for “high quality” freelancers, with little to show for the meager efforts by Upwork. Most of the high quality freelancers are still waiting for even one assignment that makes any economic sense.
What Can Be Learned from This Upwork Overview?
One lesson: Avoid Crowdsorcing — Clients and freelance consultants should probably avoid crowdsourcing websites (and Upwork in particular) for anything but low-quality and low-cost assignments. In fact, this is probably already occurring on Upwork, as many argue that the move to double fees to 20 per cent for projects under $500 was a direct indication that is where almost all of Upwork’s current business is (i.e., small projects under $500).
Another lesson: The Return of Legitimate Consulting — In many respects, attempts to crowdsource projects was an attempt to use the internet to replace business consultants hired directly via other means (like talking to them first by phone). The anonymity of crowdsourcing has a long list of painful and costly disadvantages, and Upwork is performing a valuable service by illustrating almost all of them.
Labels: consultant, consulting, crowdsource, crowdsourcing.Upwork, Elance, freelancers, freelancing, outsourcing
Stephen Bush is the Founder and Chief Executive Officer of AEX Commercial Financing Group. Steve is a graduate of Miami University (Oxford, Ohio) and obtained an M.B.A. from the University of California, Los Angeles. Prior to founding AEX, Steve served as an officer in the U.S. Navy Supply Corps and as a business/government advisor. AEX Commercial Financing Group is based in Ohio and provides business consulting that focuses on (1) commercial lender negotiations on behalf of business owners; (2) practical solutions for avoidable business problems and risks; and (3) business communications with lenders and businesses throughout the United States and Canada.