The e-lance economy?

In 1937, economist Ronald Coase published an article, The Nature of the Firm, in the journal Economica. Within the article, Coase argues that firms exist because there are costs inherent to free markets – such as costs of communication, of sharing information, of trying to find goods and services. Given these costs, Coase suggests that firms are formed because it is more efficient and less expensive to complete many of these tasks internally within a formal organization rather than outsourcing them to the market and thus incurring these added costs.

Alex Slawsby on the Innosight Blog looks at the nature of the corporation and how advances in information and communications technologies may be enabling a more modular approach to work, especially networked free-lancers, or e-lancers.

… the ‘e-lance economy’ may represent a modular stage of organizational evolution – indeed, an architecture of easily swappable or plug-and-play components (e.g. individuals or resources). In an age where closed, proprietary systems are recognized as inhibiting the ability of organizations to respond to or even identify innovation-borne change, modularity seems a promising answer; virtually every element of the value chain could come together on an ad-hoc, objective, modular basis without being hamstrung by the subjectivity and myopias brought on by business process and the long-term commitments to physical infrastructure, a capital investment in which innovation may quickly make irrelevant.

An example of this economy would be open source software development, with its lack of organisational structure and the ability for anyone with the right skills to plug in or out of the project, yet maintain the integrity of the code. A key question though is whether e-lancing will become the dominant economic model, as the corporation is, or only suitable for certain industries, such as the film industry’s project-based work model. If e-lancing is more effective in most industries and becomes our dominant work model, then organisations will have to rethink everything from HR to supply chain management.

2 Responses to “The e-lance economy?”

  1. Gilbert

    “A key question though is whether e-lancing will become the dominant economic model,
    as the corporation is, or only suitable for certain industries,
    such as the film industry’s project-based work model.”

    The corporation is mainly a mechanism to raise capital. Shareholders put in cash and expect profits. Where there is not a need for large amounts of capital investment the corporation loses efficiency.

    Cost of capital and cost of energy will be important factors in determining if other models will weaken the corporate model domination.

    Many mechanisms certainly are in place to support the transition towards smaller units of production. International Standards exist in almost of fields and advances in the field of quality and supplier management have opened the door for effective outsourcing.

    As markets increase is size because of globalization we will see opportunities for moving away from mass production or mass delivery of services. Advances in marketing technologies also makes it possible to tap into niche markets at reasonable costs. In the Global Village there is a place for artisans.

    So for those who hope to function outside of the corporation pray that interest rates remain low.

    Reply

Leave a Reply

  • (will not be published)

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>