New horizon for small businesses

RICHARD MEADOWS
Last updated 05:00 29/06/2013
Nikki Parker
LOOK OUT: Freelancer.com Australasia region director is encouraging business owners to consider finding labour worldwide.

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For a bunch of tiny islands tucked away at the arse-end of the world, globalisation came as quite a shock.

First the multinational companies arrived. Then the kiwi dollar was floated. Shortly afterwards, the internet launched us kicking and screaming into the big wide world.

Now web-based companies like Freelancer.com are starting to trample down the last barriers of the global job market.

The world's largest online crowd-sourced marketplace, founded in 2009 by Aussie entrepreneur Matt Barrie, has hit 100 per cent year-on-year growth rates.

Freelancer connects businesses with a workforce of almost 8 million people, who bid for the opportunity to take on micro-projects.

Most jobs average around the $200 mark, and run the gamut from writing to web development, marketing, graphic design, photography, data entry and engineering.

Freelancer's regional director for Australia and New Zealand, Nikki Parker, flew over from Sydney this month to meet local businesses.

"People are starting to warm up to the idea of going global, and realising that they don't just have to go to their local area," she says.

Fifteen thousand New Zealanders are already on board but Parker wants the company to become as ubiquitous as Trade Me.

In many respects, Freelancer is similar to the popular auction website.

Businesses post a job with a detailed description, timeframe, and target price range.

Interested freelancers then place bids on the "auction" for the lowest price they will accept to do the job. The business reviews the bidders' work history, skills and experience and makes a choice.

The cash can then be drip-fed from client to freelancer as certain milestones are ticked off. Just like Trade Me, both parties post feedback afterwards.

The market Freelancer is aimed squarely at the small to medium enterprise (SME) market, which includes the vast majority of Kiwi businesses.

Most are far too small to afford in-house designers, marketing teams, or IT specialists, and the cost of going to an agency can be prohibitive.

"Sometimes these exorbitant prices we see some providers charge - they're just not going to fly any more," says Parker.

"That's the real shift that we're seeing."

The price difference in many instances is mind-boggling.

A quick browse of the site revealed workers from the likes of Pakistan, India and Indonesia willing to do data entry at an hourly rate of US$3.

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Meanwhile, a design contest for a company logo had attracted more than 300 entries. Most of them were extremely professional looking - and all were competing fiercely for the princely sum of US$59.

Compare that, for example, to Auckland's infamous "frayed A" logo, which somehow cost a staggering $174,000 before being discarded.

Affordable small-scale outsourcing could open all kinds of doors for Kiwi SMEs.

But how will local agencies react to competing with people working for peanuts in developing countries?

The Freelancer "Some businesses might push back, but what we're typically seeing is that quality over-rides price," says Parker.

She stresses that the winning bid will not always be the cheapest - you get what you pay for.

"That's why we have quite a large number of freelancers from New Zealand."

Charlotte Leslie is among them.

The Christchurch graphic designer started out by picking up the odd contract on top of her fulltime job at an agency.

Now she's looking after her baby daughter, Riley, and freelances from home part-time to bring in a bit of extra income for the family.

Leslie says there's no way she can compete on some jobs, and bids only on those offering more than $100 or so.

"Here in New Zealand, design companies charge heaps for a logo," she says.

"But people are only bidding sort of $30."

Leslie says she enjoys being able to choose her own work, and with a young one to look after, it's handy not to have to commit to anything.

But she can't see it working out as a fulltime gig.

"I can have a good month, and then I might not get anything for months," Leslie says.

"A couple of my friends tried it, but what they were looking for was more guaranteed income - so they stopped using it."

She's also had problems with not being paid. These days she sticks to the jobs with milestone payments.

Parker claims the incidence of fraud is very low, and due diligence filters out the dodgy characters.

All payments go through the website itself, where Freelancer clips the ticket on both ends. Rates vary depending on membership status, but it takes roughly 6-10 per cent of any given transaction.

The client Forsyth Thompson is an ex-Google man and has worked in digital for years, so he's seen the writing on the wall.

Most IT firms have a fulltime team of developers sitting around on $100,000 pay packets chewing up expenses. Thompson's Digital Hothouse has thrown that model out the window.

"We've built up a network of freelancers literally all over the world - we do development 24 hours a day now," he says.

"What it means is we can develop on pretty much any platform you can think of."

That gives the company massive flexibility in both skillsets and time zones.

"When we've had mission-critical stuff for clients that have gone wrong or whatever, we can just flick from one team to the next and keep going around the clock."

The company racks up costs only when it has projects on the go, which makes it hugely competitive on price.

"Honestly, I don't think there's a development job we've lost on cost, ever," says Thompson.

The pitfalls Digital Hothouse has built up long-standing relationships through sites including Freelancer.com, but it wasn't always plain sailing.

"I think there's loads of pitfalls with using freelancers - absolutely heaps," says Thompson.

His company has become a professional freelancer wrangler, so it knows what to look for and has trusted "staff".

But it's not for everyone, says Thompson.

One of the main problems - especially in IT - is that small businesses often don't really know what they want.

And an unclear brief combined with language or cultural differences can be a recipe for disaster.

Freelancer does offer a concierge service to help businesses select the right bidder and explain their job correctly. That's fine for basic stuff like a company logo, but more technical jobs may be challenging.

The new model Have you ever watched an ad which is so obviously produced for Americans that it's jarring?

There are still plenty of areas where cultural-specific knowledge is crucial. Digital Hothouse, for example, does almost all its design in New Zealand.

It also employs New Zealand developers, copywriters, project managers and digital assistants, some as freelancers.

While some less skilled jobs are almost inevitably going to end up overseas, that's not necessarily a bad thing.

"Why do we want to have a whole lot of guys who are just cutting code?" says Thompson.

"That's like factory-line assembly.

"What we want to have is more companies like Orion, Xero... where they're doing the IP, the development, the concepts, and taking it to market."

His company is still in the early stages - almost three years old - but has experienced huge growth through its unique staffing model.

For New Zealand agencies wanting to thrive in an increasingly globalised market, the Digital Hothouse model could be the logical next step.

Says Thompson: "We hope lots of people don't figure that out, frankly."

- BusinessDay

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