With the war for technical talent as fierce as ever, more and more companies are turning to outsourcing. But little has changed in the outsourced labor market in the last 10 years, with most companies in the space seemingly content to throw more bodies, often at ever-declining hourly rates, at their clients’ technical problems. But, particularly for first time users and in the small- and mid-sized business (SMB) arena, this often turns out poorly.
Santa Monica-based ZipTask, which relaunched its outsourcing platform just last week, has taken an entirely fresh look at this $ 480 billion per year customer experience problem.
Where other platforms like Elance and Odesk (which recently merged) have fallen short, according to ZipTask co-founder Shawn Livermore, is by helping inexperienced or non-technical customers manage their projects and the outsourced labor working on them. ZipTask’s answer to this issue is to assign a seasoned project manager (PM) to each customer to act as a liaison to the technical talent.
“Everyone else has mostly thrown bodies at the problem, but they’re not innovating on the model,” Livermore says. “We are taking a hybrid approach of software and human facilitator – someone who solves the knowledge gap and someone who stays up late, talking to the developers, and making sure things go according to plan.”
The ZipTask process begins with the customer conducting a live video chat with an onboarding specialist, who is one of the company’s more than 100 PMs. After entering the basic scope of work the customer then views the profiles of multiple available PMs to select one whose experience, portfolio, and hourly rate – which can vary from as low as $ 50 to upwards of $ 150 – matches their needs.
It may seem like PMs on a platform like this, more half of which are based in the US, would be by and large those who couldn’t get a “real job” elsewhere, but that’s anything but the case according to Livermore. Rather, they tend to be highly experienced individuals who for family or other reasons need the flexibility of a freelance model. Typically they’re already freelancing or consulting successfully before even joining ZipTask, some as their full-time source of income, and others to supplement another full-time job. The top earning PM on ZipTask made $ 24,000 managing multiple projects last month, according to the company.
Once the customer engages a PM, this individual, operating remotely, takes in requirements and specs from the customer, refines them into an estimated workflow, and delivers a fixed-bid estimate for the project. The PM then engages the appropriate number of technical freelancers given the scope and timeline of the project and manages their work based on a milestone arrangement through completion. Payment is only released at each milestone after the customer signs off on the completed work.
ZipTask charges customers a flat 10 percent fee on top of the total cost of each project. On the surface, this seems to be more than the 8.75 percent that eLance and Odesk charge, but what most customers don’t realize is they charge the labor an equivalent fee on the back-end, a tax that ends up getting baked into the bid price. If a customer wishes to hire a PM full-time during or following a successful project, they can do so for a $ 2,500 buyout fee, a relative pittance in the recruiting world.
Livermore and his co-founder Jeff Sherwood, who are veteran software consultants and thus have first hand experience with the nightmares of managing an outsourced software development team, have been iterating at this outsourcing problem since 2010. But it was only when they added the project manager at the beginning of this year that the ZipTask platform really began to take off. The latest update, which added the live video chat and intelligent onboarding flow just over a week ago, further separates ZipTask from its legacy outsourcing competitors and makes it far more approachable for SMBs.
The company crossed $ 100,000 in monthly revenue in May of this year, a figure that is growing slowly but steadily, Livermore says. Roughly 50 percent of the projects started each day are from new customers with the remaining 50 percent coming from repeat usage. Livermore expects ZipTask to gross $ 1 million for this fiscal year and to reach a cash flow break-even point early next year.
ZipTask has raised a bit more than $ 550,000 to date, including backing from both TechStars and Amplify.LA, as well as several angels, including most recently Paige Craig. The company is in the process of raising a seed round. According to its AngelList profile, the goal is a $ 650,000 convertible note at a $ 5.4 million cap.
The typical ZipTask customer has between 10 to 15 employees and $ 1 million to $ 50 million in revenue, Livermore says, a similar audience that makes up the bulk of the legacy outsourcing platforms’ business. Most of these customers have tried outsourcing on other platforms and found the experience to be less than pleasant, Livermore adds.
There are over 10,000 freelancers on ZipTask today and counting, and the company has contracts with other preferred talent vendors should it ever exceed its capacity. “There are an estimated 10 million freelancers out there online,” Livermore said. “It’s not finding the talent that’s the issue. It’s corralling and managing that talent to get a project completed efficiently and effectively.”
Despite the practical appeal of its platform, ZipTask is still fighting an uphill battle against several more established giants in its category. Building brand awareness and educating the market on its differentiated offering won’t come cheap, and isn’t the kind of thing ZipTask can do effectively on a few hundred thousand dollars. The company’s next challenge is will be to raise enough cash to lever up its marketing and customer acquisition efforts, its founders admit.
“We are riding a broad wave of globalized internet access and labor in the crowd,” Livermore says. “We’ve actually been holding out on taking on too much funding until we had this latest version of our product in the market. There are a lot of frustrate customer out there who have had terrible experiences with outsourcing and who are looking for a better way. We feel like we’re perfectly situated right now.”
Ziptask is ‘outsourcing, reimagined’: 1) Instant engagement (video chat focused, starts in seconds) 2) Fully managed (centered around a seasoned project manager in the cloud to scale smoothly) 3) project-based. (fixed-bid, milestone-based payment model to protect the customer)
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We’ve seen over a half a million dollars go through our platform between january and july of 2014, still growing.