The Recruiting Industry Is Broken II: Free

(December 15, 2008)
"Nothing ain’t worth nothing
But it’s free."
Kris Kristofferson

Undercapitalization plagues the recruiting industry. The folk wisdom that says you can open a recruiting business with a computer and a phone. Planning, which implies long term investment, is rarely a part of the Recruiting Department game plan. Recruiting is usually a forum for cost reductions in a reactive transactional climate.

The lack of a coherent financial structure is the reason behind the industry’s reliance on so called "free" software and services. Suggesting that a product is "free" (and therefore, preferable) because it has no immediate usage charge is the sort of sophomoric silliness that gives the industry a bad reputation. Unfortunately, cash strapped recruiting operations have little choice but to turn to alternatives that have no upfront charges.

Total Cost of Ownership (or Life Cycle Cost) is the conventional way of thinking about how much something actually costs. Everyone understands the basic razor blade marketing scenario. Razor blade companies have always distributed razors at less than market costs in order to create a market for the blades. While the cost of buying a razor is low, the purchase locks the buyer into a stream of razor blade purchases.

Similar dynamics are in play in the Recruiting Industry. While there are an enormous number of free services (many with a very high value), investing in their use comes with some serious risks. From repeatability of results to irrational changes in usage terms, free services pose a high priced hazard to smooth flowing commerce.

Two kinds of risks are involved when you use a "free" service:

  1. The risk that` the service will be terminated. Without a contractual service guarantee, you are always at risk of disruption. At a minimum, recovery from service disruption means finding an alternative and coming up the learning curve.
  2. Configuration control. Any useful service delivers data to be used in and by other applications. With free services (and often with low cost services), data output configurations are changed at will. The disruptive and unplanned costs can sabotage other critical efforts.
  3. The risk that the usage agreement will be changed. Without a working contract, usage agreements are likely to have seismic shifts. Our industry has a number of notable case studies in which the user agreement was redefined and an ambitious user was cut off.
  4. Integration with other services. As long as the data flow from the free or low cost provider is not clearly defined, systems which depend on the data are at risk for modification.

The cost of using a piece of software or a web based service is hardly limited to the "acquisition cost" or license fee. Learning curve, replacement analysis, hardware costs and other usage aspects make the idea that a web based tool is "free" pretty laughable.

Sadly, many independent Recruiters and small underfunded recruiting departments have little choice but to use these tools. The industry is brokenbecause we don’t raise concerns over the impact of undercapitalization.

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