In 2015, a new concept hit the media: the gig economy. In a gig economy, work is of a temporary nature and companies hire consultants and freelancers instead of full time employees. Every limited task to be solved is considered a “gig.” Just as musicians have a gig at a certain place and then continue to their next tour city, the gig economy means that temporary assignments are preferred to traditional forms of employment.
Freelancer.com is an example of a platform service that connects freelance labor with gigs. It is a global platform that connects buyers and sellers of services, where one can find just the competence that one is looking for. If you want a text translated to Japanese, someone to create a mobile app, or help designing a logo, you create an inquiry and can quickly receive offers from service providers all over the world. Freelancer. com claims that 80 percent of assignments receive a proposal within 60 seconds. The cost is usually a fraction of what it would cost to hire a local company or to have permanent employees. To date, over 13 million assignments have been negotiated via Freelancer.com.
TopCoder is a specialized variation of Freelancer, with a network of over a million programmers. If they were to be employed, TopCoder would be the world’s third largest private company. They can solve everything from concept development and complex system design to narrower tasks such as interface design or software testing. There are also people with expertise in leading and integrating complex development projects.
The gig economy phenomenon is taking hold rapidly. For example, 28 percent of Swedish laborers work entirely or partly as consultants, freelancers and temporary employees – a figure that appears to be increasing.1 The gig economy is attractive because it can provide greater freedom: the opportunity to work for different clients, to work with something one is passionate about, and to break free from traditional 9 to 5 jobs. Having one’s own business is no longer required either. The group of self-employed individuals who invoice via agents without having their own companies has been growing by about 30 percent annually.2 In total, 44,000 people are currently self employed in Sweden.
There is no longer shame in having a temporary job. These days all jobs seem to be more or less temporary. And you can find smart people anywhere, anytime and in many ways. | Olga Mizrahi, lecturer and author of “The Gig is Up”
Why is the gig economy growing so strongly? Why don’t companies want to do everything themselves anymore, as they have done traditionally? The Nature of the Firm, written in 1937 by the British economist Ronald Coase, provides one answer. In the book, Coase describes the fundamental logic of the firm. He asserts that companies per se are necessary because the transaction costs that would otherwise be incurred for finding the right competence for every individual task on an open market would be too high. The necessity of reviewing others’ knowledge and negotiating a price and conditions for delivery would be far too time consuming and expensive. The pursuit cost would cause too much friction. It is considerably easier to do everything internally. Lack of flexibility must be weighed against low internal transaction costs.
Ronald Coase was right, at least in 1937. Today it is not as self-evident. The reason is that transaction costs have dropped drastically with digitalization. Finding freelance labor is only a click away today, via brokering companies and advanced search services. In addition, to avoid buying a pig in a poke one can easily review a freelancer’s reputation through previous ratings and references. Agreeing on a price and signing a contract are also straightforward, making the process of hiring external competencies efficient.
How will the gig economy influence the future of marketing? Will sales and marketing be considered a task that can increasingly be outsourced to external talent? The start-up company Universal Avenue invested heavily in becoming an “Uber for sales reps,” where the idea was that freelance sales reps could offer their services to companies striving to increase their business. However, after acquiring 14 million US dollars in venture capital Universal Avenue was unsuccessful in promoting their business concept. But the day when gig sales produces better results than traditional sales, a new paradigm will likely be ready to emerge. External sales representatives will be seen as a form of resource pool that one can utilize on demand.
Professor Robin Teigland with the Business and Economics department at the Stockholm School of Economics believes that this future is not far away. She expects that the number of freelance sales reps will increase, particularly for selling simpler products.3 On the other hand, it may be more difficult selling more complex solutions that require more extensive knowledge and more developed customer relations. One consequence of the gig economy is that many companies may need to re-evaluate their way of organizing their business. The business of the future will increasingly involve coordinating global networks of innovators, designers, product and service developers, manufacturers, logistics companies – and sales representatives. Instead of doing everything one’s self, companies will assign tasks to those who do them best.
1 McKinsey Global Institute. (2016). Independent Work: Choice, Necessity, and the Gig Economy. McKinsey & Company.
3 Widman, P. (2017, 10 May). Gig-jobben tar över. [blog post] Downloaded 2018-10-22 from https://www.saljarnas.se/salj/artiklar/2017/05/gig-jobben-tar-over