More Power in Net Economy May Shift to the People

FRAMINGHAM (03/27/2000) - First it was Beanie Babies up for auction. Now it's people. Privately held startup eLance Inc. is gearing up to officially launch its Web site, which has been in beta testing since last summer. It allows independent contractors like graphic designers, editors, translators and even lawyers to peddle their services to the world.

We may end up looking back at the 20th century's integrated firm as a transitional structure that flourished for a brief moment in history. The fundamental unit of the economy seems to be reverting from the corporation back to the individual.

Soon, independent contractors, rather than full-time employees in big companies, will perform most work. Such networked "e-lancers" will join fluid and temporary webs to design, produce, market and support goods and services.

Corporate IT systems will have to be flexible enough to enable highly functional and secure links among a constantly changing cast of outside contractors.

ELance.com shows how the Internet collapses transaction costs between different entities. Potential purchasers can issue requests for proposals (RFP) for the jobs they want done. Examples would be a company wanting a new logo or a sales brochure translated into a foreign language. Companies post their requirements on eLance and wait for bids to come in.

RFPs or calls for tenders for big-ticket expenditures are commonplace for governments and large companies. But until now, the practice didn't make sense for small purchases. Any savings captured by the bidding process was overshadowed by the time, cost and energy of assembling the proposal and alerting potential bidders.

No more. Answer a few questions on the eLance RFP template and bidders from around the world can compete for your business, no matter how small. Need a couple of professionally written job descriptions? You can have specialists around the world bid for the job. The cost to issue the bid is essentially zero.

ELance offers a reputation rating system similar to eBay's hugely successful Feedback Forum. On eBay, buyers and sellers acquire credibility by pointing to a prominently displayed history of successful transactions. Their online reputation is a critical asset and essentially constitutes a form of digital capital.

ELance is a type of business web I call the agora, or marketplace, where buyers and sellers come together to collectively "discover" the price of a good or service. A successful agora requires a critical mass of buyers and sellers who wish to exchange the same good or service during the same time period, and use the same mechanism to communicate and conduct price discovery.

This isn't as easy as it appears. It's why physical world transactions tend to be fixed-price retail or one-on-one haggles. But as eLance illustrates, the Net is perfectly suited to creating prime agora conditions.

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