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Why Microsoft should acquire Upwork

Our first brush with Upwork was exactly 2 years ago, 15th Oct 2013. We needed to add functionality urgently to our product, for which we did not have enough engineers in-house.  We posted the requirement (aka Job) on Upwork, waited … and got zero responses.  

Our first success on Upwork came 9 months later, when one Job was completed in June 2014.

Despite regular attempts thereafter, it wasn’t until June 2016 that we started seeing regular success; ability to find the right talent for the various Jobs we posted on Upwork.

What has likely happened is that the Upwork network has reached some sort of critical mass, plus their processes to match talent to Jobs have matured.

Many more Jobs posted ever since, I’m struck by how Upwork is becoming the Uber for Work.  

Uber shifted focus from buying vehicles, to buying rides (what the vehicles DO).  Upwork is forcing companies to rethink the hiring of employees, and instead focus on the Jobs they would do.

What’s Upwork?

It’s a trusted network of Freelancers looking for work and Clients who have work to give.

Skills being traded range from story-writers to artists to engineers to testers to project managers to machine- learning gurus.

The trust is in the platform Upwork has built.  Freelancers start work with no advances and have no fear sharing their work in progress.  The Upwork platform is geared towards both parties maintaining their reputation, with Upwork playing the role of Escrow agent and handling accounting paperwork.

And the network pays:

The 17 million users on Upwork generate about 3 million jobs, valued at $1 billion, from which Upwork earns about $100 million (conservatively 10%) in commissions.  

Imagine plugging this revenue engine into a larger network.

 

Enter Microsoft

The Talent Cloud?

The Talent Cloud?

Microsoft recently acquired LinkedIn, a enterprise network of 450 million users, generating revenues of $3billion in 2015, largely due to traditional hiring (job listings, resume screening, resume trading).  

Imagine Microsoft looking ahead and pivoting from a “hiring solutions” provider, to being a talent cloud.

Even if 20% of this talent cloud participated in the Upwork revenue engine, that’s  90 million enterprise users potentially generating about $0.5 billion in revenues.  And this is just a conservative estimate.  

With Microsoft’s futuristic vision on artificial intelligence, virtual reality and the enterprise, it’s practical that Microsoft will want to be at the forefront of how enterprises get work done.

Why will a Microsoft <> Upwork partnership work?

Let’s discount any futuristic visions of how Microsoft could use all its technology to making remote working seem like you’re talking to a colleague sitting next to you and focus on what can work, now. 

Network Scale

Every time a Job is posted on Upwork, we need to pray the right talent sees it.  This depends on the network size that Upwork has built and the data they have mined on their Freelancers and the matching against the kind of Job I have.

My reach to talent is restricted to how fast people move to Upwork.

On the flip-side, I have 4,500 connections in LinkedIn and the most I get from them are Invites or links to articles they’re mentioned in.

Imagine being able to post a Job direct to the 450 million on LinkedIn and leveraging all that mined data to match the right skills.  (In fact, LinkedIn already offers a service to do this, which I will touch on later).

Unlock Revenue Opportunities

As we posted more Jobs on Upwork, it became evident we needed help in managing these projects.  

What are the deadlines?  Who’s not delivering on time?  What other projects do we need to write specifications for, in order to start short-listing Freelancers?

Our solution now is to track everything in Google Docs and use platforms like Asana / Github / JIRA / Basecamp.  

Microsoft has these same tools in their arsenal, but they’re hidden under layers of Microsoft’s salesman-will-sell-license approach.  (I tried signing up for Microsoft’s cloud-based version control system and am yet to hear a response from them after 2 weeks).

Imagine once a Job is contracted on Upwork, project tracking systems are automatically deployed for the Client, with Skype for communications and Microsoft Azure for deployment (as defaults).  All available on a unified Upwork dashboard, charged on a per-user or per project basis.  

A new sales channel for Microsoft to leverage for its software and cloud.

Establish Global Footprint

Upwork is a US based entity and plays the role of an agency.  They adhere to all US laws pertaining to being an agency of work. The onus of respecting any other laws that may lie for freelancers and companies outside the US, is not with Upwork.   

Upwork does not have the global presence to be able to address global laws effectively (which they will have to, if they are to increase their reach).

Microsoft crossed that hurdle decades ago, even having contracts globally with telecom providers to collect Rs.10 from your mobile phone billing.  

Network Intelligence 

Upwork isn’t without pitfalls.  Choosing the right Freelancer is a very important task.  Although Upwork has all the necessary tools to help me choose the right talent, I always find myself wishing I knew more about the Freelancer; are they genuine freelancers, are they moonlighting, do we have common contacts, are there recommendations I can seek? The kind of answers that a LinkedIn has many of the answers to.

If Upwork could include this data to its match-making process, the Jobs would get closed faster and better decisions can be made. Resulting in more efficiency in the network.

Subject Matter Expertise

Upwork is not the only company thinking of “Jobs” as the unit of engagement.

freelancer.com has a large database of freelancers and talent, but it falls short in processes. fiverr is what I’d use to maybe design my t-shirt, but it doesn’t exude the confidence for the enterprise.  behance is a traditional classified listing site.

In fact, LinkedIn has an early product called ProRecruit which helps pair jobs to individuals on the LinkedIn network.

I copied one of the Jobs I posted on Upwork, and was told the solution is still experimental and LinkedIn’s research has shown it’s best to find talent that’s in the same locality.  My suspicion is this research is biased, due to the job-matching culture LinkedIn has grown with over the years.

There is also a lot to build on top of just matching jobs to people; from contract management, to communication tools, to workflow processes and even a fundamental understanding that talent pool can include agencies and not just individuals.

Work – 2025 

Managing virtual teams is not an easy task.

Despite significant outsourcing having begun 20 years ago, it was all about trading in people and having managers of these people over-seeing the work performed.

As enterprises demand varied skills to cope up with change, employees demand more independence and managers wanting greater control in the entire engagement process, trading in jobs is a logical progression.

Rather than build their own solution, it makes sense for LinkedIn to acquire, like they did when they acquired learning provider, Lynda.  Microsoft may have lost out to Android when it came to controlling the future of devices, but there’s an opportunity to leap-frog to a larger role in the future of people.

 

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4 Comments

  1. Profile photo of asha chaudhry

    hey mk, i really loved how you analysed the hits & misses of outsourcing via different platforms. this is a pot of gold for anyone who is looking at hiring & managing a virtual team!
    i hope someone at microsoft is listening to you.
    and i also hope the folks at upwork give you some free goodies :)))
    you should write more often, whenever you have a breather of course! thanks much for this one….

  2. Profile photo of Anil Rajan

    -enterprise hiring workers from online site is very unlikely unless of course someone has branded (in this case as you say Microsoft). Labour laws become very messy when enterprise hiring happens. If a celebrated company like Microsoft get into this space , more suing cases will start appearing.

    -Then the obvious question would be why LinkedIn is be brought by Microsoft. The main reason is the 400 million registered enterprise users which can be related to their cloud office 365 suite; I know does not looks a great use case but somehow Microsoft want to relate it with Enterprise Social networking in collaboration with there enterprise suite of product like Office and SharePoint, Microsoft CRM.
    -The user data for 400 million user for any CRM related activity is a huge gain -Even if we are taking business a revenue of $2.9b in year 2015 is not a bad reason to buy a company. I know the $26b price tag may not justify that but in big league of social networking where you are competing against Google and Facebook, the price tag was primarily a need of hour.

    Coming to upwork, what i think is upwork solves a very good problem, i.e to connect remote workers with remote jobs. In this market the laws are loose, payments are not all 100%, work tracking is not proper, trust is at loose. The reason such a market exist is it is win-win for both the party. The remote worker can save on travel and time, the remote job provider does not need to hire an employee for a quick need. Quality of work may or may not be all great, but at the end of day if the quality was the primary need then you would have gone for more regular employee model.

    Considering this why would a software giant like Microsoft enter a market where revenue model is commission based and margins are very low.

    • Profile photo of Mahesh Khambadkone

      Being in the recruitment space, LinkedIn is already where the revenue model is commission based and margins are very low.

      That the LinkedIn acquisition was followed up by additional investments (e.g. Lynda for learning) and that the management at LinkedIn continues to operate somewhat autonomously, Microsoft seems intent to allow the LinkedIn product to build its’ own course.

      The LinkedIn model of enterprise recruiting with job listings and resume searching is what a Monster to a Naukri can do. With all the meta-information that LinkedIn can gleam from the users on this network, there are ways to change hiring is done and to be a innovator.

      Microsoft makes a lot of strategic bets ; some of them large and successful (to build the XBox), some large and unsuccessful (Nokia), with lots of in-betweens. Not everything always folds into the ‘enterprise’ space.

      And the more I think about it, the standard practice of recruiting resumes

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