Uber-Ola: Business model which offers high scope of ‘exploitation’


Business is no more a pure entrepreneurial activity. It has become more of a shared service where everyone gathers together as a community to work on the core activity. The most successful business model today has been more of a match making service than a simple owner employee relationship. For instance, Facebook brings people together motivating artificial interaction between them. Airbnb uses the strategy to connect interested people to businesses offering lodging services. Washio is another company which brings people together for satisfying their laundry needs. Uber and Ola are service providers who offer streamlined commutation services to people to reach from one destination to another in a hassle free safe manner.

Business models have changed

Business strategies have undergone a major change in the past couple of decades. Uber and Ola business models are a clear proof for the same. Yesteryears witnessed businesses taking a lot of responsibility to provide their services to people. Today, businesses just need middlemen to take their services to the end customer. For Uber and Ola, the drivers acted as the perfect middlemen to reach their streamlined driving services to the general public.

The service, driver and customer combination was seen more as a community than as a business. This directly meant that the drivers were not in their roles and these companies were not responsible for their sustenance.

Salient features of Ola and Uber business models

Ola and Uber were the forerunners to exploit the new business model which was totally divergent to the traditional ones. The model did not require any licensing aspects which tend to complicate things through the journey. The business model was clearly out of regulations since such things were yet to be exploited when they entered into the market. No insurance was required to be done for the labour since the companies carried none on their roles.

The cost of labour was low but experienced which had high scope for exploitation by the Companies. On the infrastructure part of it, Ola and Uber were not required to make any type of investments since the vehicle was the only requirement and the drivers brought it along with them. All this relieved the owners of Ola and Uber from all sort of responsibilities towards either the drivers who drive for them or the customers who avail the service. Ola and Uber owned nothing and so risked nothing too.

Operational tactics involved in Ola and Uber models

The initial offering given to drivers by Ola and Uber were absolutely profitable for them. The drivers were earning more profit than the companies. This enticed more and more drivers to ride their vehicles for Ola and Uber. The profit margin was so high for the drivers that many professionals shifted their base from IT companies to driving for Ola and Uber.

However, the drivers were the worst affected lot when Ola and Uber increased their margin levels. On the insurance aspect, Ola and Uber offered Commercial Auto Insurance to its drivers. This however depended upon the availability of Personal Auto Insurance for them. The hitch here is no Insurance company offers personal Auto Insurance to Ola or Uber drivers. Ola and Uber drivers thus neither get the commercial Auto Insurance nor personal auto Insurance. This deprives them of driving their vehicle at their preferred timing or for commercial purposes.

The global perspective

Looking at the Ola and Uber business model from a global angle, the ‘on-demand economy’ style acts more as a punishment to the workers than as a revenue earning stream. By clearly classifying the ‘drivers’ as ‘contractors’ Ola and Uber have exploited them to the maximum possible extent. This misclassification has deprived the workers of all benefits that they are legitimately eligible for. There is no ambiguity in the fact that business startups like Ola and Uber have unleashed creativity introducing newer concepts for customer satisfaction. However, enough care has not been taken in terms of the safety of the workers, in this case, the vehicle drivers.

Uber and Ola have evaded clearly from the responsibilities pertaining to leaves to drivers, insurance, allowances, fuel expenses and payroll liabilities. Globally, there are many lawsuits filed against this trend and courts across the globe have condemned calling the ‘Drivers’ as ‘contractors’. They have given a clear verdict that the drivers cannot be termed as Contractors but must be considered as ‘Employees’ who are eligible for many benefits.

The winners and the losers

Ola and Uber Management have won the race by misclassifying the drivers as mere ‘Contractors’. Contractors, as per the employment laws of many countries do not deserve any regular allowances or salary. Employers are not bound to pay them for their expenses in the form of reimbursement. When drivers are classified as ‘Contractors’, they need to pay companies like Uber and Ola the agreed percentage of revenue earned every day.

Even this revenue sharing being the commitment made by the ‘Contractor’, Ola and Uber enjoy utmost freedom without getting bound on any legalities or statutory formalities. Unfortunately, drivers who just live by putting into use their driving skills are ignorant about such nitty-gritties involved in being termed as ‘Contractors’. Their agreement with Ola and Uber has made them the clear losers in all possible manners.

The other set of losers are the customers who avail the services of Uber and Ola. Both the brands have constantly been hiking up prices playing the blame game on petrol cost and many more reasons. The service which was once the best solution for the unorganized travel mode is becoming more of a menace to general public, making them resort to the clumsy old travel methods.

The final word

The strike that is going on now is just not against the cost aspect of the business but the whole model which is highly feudalistic in nature. The commercial aspects which were friendly at the time of introduction of the business model have become highly lop sided in the current scenario. No doubt, customers are enjoying streamlined and safe journey thanks the business model.

It is high time that Ola and Uber exhibit some responsibility towards the ‘working class’ which earns them the money for the leads that comes through them. If the business model fails, the drivers will get back to their original independent working style. In such an eventuality, it is going to be a huge business loss only to Uber and Ola which is solely dependent on this model.