Managing the Human Cloud

Companies have increasing opportunities to tap into a virtual, on-demand workforce. But the organizational challenges of this latest wave of outsourcing require new management models and skills.

Chase Rief runs a small media company in Newport Beach, California — or, rather, from Newport Beach: Rief Media’s 14-person workforce is scattered around the world, all independent contractors he hired through an online service called oDesk. At the other end of the size spectrum, life insurance giant Aegon has an on-demand workforce of 300 licensed virtual agents managed through another online intermediary, LiveOps. They are not Aegon employees but are scheduled for inbound and outbound calling through LiveOps’ routing software.

First came outsourcing of IT and business processes. Next came offshore outsourcing. Now comes the human cloud. A third-generation sourcing ecosystem already being used by companies as diverse as Rief Media and Aegon, the human cloud is centered on an online middleman that engages a pool of virtual workers that can be tapped on demand to provide a wide range of services to any interested buyer. Although jobs involving content generation, sales and marketing, and design and optimization currently top the list of tasks that can be performed by cloud workers, a recent industry report identifies at least 15 major labor categories that could be sent to the human cloud.1 (See “Categories of Work Common in the Human Cloud.”)

The human cloud is growing rapidly. Year-over-year growth in the global revenue of human cloud platforms was 53% for 2010 and 74% for 2011. The number of platforms and middlemen has also skyrocketed. Using a narrow definition, we counted more than 100 active platforms in 2012, up from perhaps 40 in 2011.

Some analysts see the human cloud as potentially more disruptive than the previous two sourcing waves. They believe it will reshape established business processes, redraw organizational boundaries and — most importantly — profoundly change global labor markets. After studying the evolution of human cloud platforms over the last few years, we share these analysts’ excitement but also think that the road ahead will be bumpier than some advocates would have us believe.

Source: MIT Sloan Management Review

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