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By David Whitford, FSB Magazine

malone.03.jpg
MJM Sports CEO Malone (left) in Seattle

(FSB Magazine) -- Mark Malone is the harried CEO of MJM Sports, a Seattle startup whose machines allow bar patrons to compete in fantasy sports contests. Sales are brisk, the market is expanding coast to coast - and therein lies a problem. Every time MJM sells another unit, a technician has to visit the bar, install a computerized kiosk and a 42-inch plasma TV, and hook everything up to the Internet. "We have 130 installed in the U.S.," says Malone. "It would be easy to manage if they were all in one state, but we're spread thin."

Malone saw the problem coming. He and his operations VP, Guy Anderson, originally planned to subcontract installation and repair to a company that services ATMs or arcade games. But with sales exploding in late 2005, it was all MJM could do to keep up with demand. "We had every guy in the office thumbing through the yellow pages trying to find installers," says Anderson. Costs were high, and quality control was sketchy.

MJM turned to OnForce (onforce.com), a New York City - based service that operates like a virtual hiring hall for IT jobs. It's pretty simple: You describe the job, say exactly when you want it done and how much you're willing to pay, and submit a work order. More than 10,000 active service providers participate in the network. Median time from tender to first offer from a technician is less than 15 minutes, according to On-Force, and 95 percent of all work orders find a match.

Before you commit, you can check how much similar jobs cost in your zip code, compare qualifications, check customer-satisfaction ratings and even find service providers who have submitted to a background check that identifies convicted felons. OnForce takes care of all the (digital) paperwork, collecting an $11 fee per work order from the client and a 10 percent commission from the service provider.

Malone projects total sales of more than $5 million this year, up from next to nothing in 2005. MJM makes most of its money by selling ads, but OnForce has had a significant impact on costs. Installation jobs that once averaged $450 are now coming in at less than $300. As Malone gears up to install 370 new machines in '07, he anticipates overall savings - including administrative costs - of 40 percent per installation compared with 2005. "[OnForce] lets us provide service in all areas without having the overhead of a staff and having to fly them around," says the happy CEO, who can now promise repairs in 24 hours or less.

The innovations at OnForce represent a revolution in how companies are using the Internet: not just to buy stuff or look up information but to match specific tasks that need doing with human beings able to do them - in real time, at market prices, with near-zero overhead and at scalable capacity. That's pretty cool.

Jeff Howe, writing in Wired magazine, coined a term for it - "crowdsourcing" - which he defines as "the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call."

Some of the companies that facilitate crowdsourcing have been around for years but are just now building markets large enough and liquid enough to achieve critical mass. OnForce - founded as ComputerRepair.com in 2003 - has focused narrowly on system setups, equipment repairs, network wiring and other onsite IT tasks.

Two OnForce competitors, Guru.com and Elance (elance.com), offer a broader set of services; in addition to an IT repair guy, they can set you up with lawyers, Web designers, and free-lance writers, many of whom work from home. InnoCentive (innocentive.com) functions like a virtual R&D department, allowing companies to post laboratory "challenges" to scientists and inventors all over the world and offer cash prizes for their completion.

Then there's Mechanical Turk (mturk.com), one of several fresh offerings from Amazon's (AMZN, Fortune 500) new B2B division, Amazon Web Services. The original Mechanical Turk was an 18th-century chess-playing automaton that fooled spectators and opponents who didn't realize there was a flesh-and-blood chess master hiding inside the box.

Similarly, Amazon's Mechanical Turk lets companies enlist human beings to perform tasks computers can't -identifying details in photographs, for instance, or reading handwritten information on forms - and pay piece rates upon completion. (Amazon collects a 10 percent commission from the client.) Amazon describes the service as "artificial artificial intelligence," but other companies view it simply as a virtual hiring hall, much like OnForce.

Mechanical Turk customer iConclude is a two-year-old enterprise-software company in Bellevue, Wash. It sells scripts that automate troubleshooting and routine repairs on IT networks. "How are we going to build this library of repairs?" asked CEO Sunny Gupta. "We were doing a lot of it in-house, but we felt there was a big [labor] market out there we weren't tapping."

To test the waters, iConclude posted a request on Mechanical Turk for one simple procedure; 300 programmers responded from all over the world, 80 of whom iConclude deemed qualified. Gupta was thrilled, especially when he discovered that he could get the job done for one-tenth the cost of doing it in-house.

iConclude is building a library of 10,000 automated procedures. Gupta hopes to source about 10 percent of that work through Mechanical Turk. "Will I have to pay more [as the market develops]?" he wonders. "I think the answer is yes. And I don't think it's suitable for projects that require lots of supervision. But we think this model has a lot of potential for self-contained tasks. It could actually change the way lot of companies do business."

Does virtual hiring work? What methods do you use to ensure a good hire? Share your experiences at fsb_mail@timeinc.com.

Are you an entrepreneur who started your own company and now has a parent (or two) working for you? For a future article in Fortune, we'd like to hear from you! Please e-mail (afisher@fortunemail.com) and tell us about your situation - what kind of company you have, how your mom or dad came to be your employee, and how we can contact you for more information (phone or e-mail) during business hours. Many thanks!

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.