Hotmail Co-Founder Refines Online IT Consultancy

Sabeer Bhatia, co-founder of the Hotmail e-mail service, announced a newer version of his Internet marketplace, in which experts advise buyers and sellers of software services. Bhatia, whose free e-mail service was sold to Microsoft in 1997 for $400 million, said his firm, Arzoo.com, was betting on "knowledge arbitrage.''

He told a news conference he was counting on thousands of experts' willingness to use their spare time, skills and experience to feed a hunger for software expertise in big firms. Arzoo would charge its clients a flat monthly fee linked to usage and number of questions asked. The experts who answer technical questions and provide solutions will get paid according to the bids for their services.

The business model unveiled on Wednesday was a refined version of a broadbased marketplace for information technology skills Bhatia launched in September. Arzoo, which has six software categories, under which, clients can post questions, is targeting IT departments of big firms as clients. Users will be able to rate software experts and Arzoo's in-house team of moderators will check the advice for quality and farm out work to its pool of experts.

"The rating system makes the whole thing work,'' Bhatia says.

The company, which began with four small clients in its trial stage, has signed up two Fortune 500 firms as clients from January, Bhatia said. He did not name them. Arzoo, has around 2,200 experts. They bid for projects that are based on client specifications and assessed by moderators who can close a deal without a regular auction if an early bidder meets customer requirements.

Arzoo has competition from Internet sites like Hellobrain.com, in which experts bid for software projects and elance.com, a broader marketplace for freelance services. Bhatia said his site was unique on account of its moderators who assess the accuracy and precision of incoming answers before sending them along to clients.