Online freelancers remake outsourcing industry
Not far from the world of regimented cubicles and headset-toting call centre operators, a quiet revolution is stirring in its slippers.
University librarian Sheila Ortencio, for example, was so poorly paid that half her salary went for childcare, and her meals amounted to dried fish and one fried egg per day. Four years on, she juggles two daughters, a husband and two Pomeranians as she catalogues ebooks online from her parents' couch.
In her freelancing job, she's earned enough money to buy land for a house nearby and make down payments on a condo in the capital.
"I have double the work but, it doesn't bother me because it doesn't feel like work," she says.
Ortencio is one of more than half a million Filipinos registered on freelance website oDesk.com - more than are currently employed by the country's growing business process outsourcing (BPO) industry.
While it's early days, proponents of so-called commercial crowdsourcing contend that a swelling army of global freelancers is already disrupting traditional outsourcing - from preparing tax statements to conducting research on pediatricians.
"This is all about cost arbitration across borders," says Siou Chew Kuek, a Singaporean researcher who works with the World Bank. "Now you can farm out your work to anyone in the world."
Driving this trend are a dozen mostly U.S. startups that let other small and medium-sized companies carve projects into chunks and then recruit individuals or teams of freelancers to do the work. By leveraging a faster, more ubiquitous and cheaper Internet, the startups can pluck the low-hanging fruit of IT and data-entry outsourcing that big BPO players such as Infosys and Wipro once considered their own.
Australian-U.S. startup 99designs, for example, has paid out $40 million to some 180,000 graphic designers, with its largest user base outside the United States being in Indonesia. Elance has 266,000 freelancers in India who have earned nearly $150 million. Odesk has 2.4 million registered freelancers and more than 480,000 clients - companies including Cisco and HP.
"This is moving the entire BPO industry - that was dominated by these large middlemen organisations that take most of the profits - to the cloud," says Anand Kulkarni, an academic-turned-entrepreneur. "Now you no longer need to be able to afford Infosys rates to be able to get quality results out of an outsourcing system."
For sure, the BPO industry is not necessarily quaking in its boots. The industry was worth $150 billion last year and is growing at 5-6 percent a year, according to Pradeep Mukherji, an Indian IT consultant and adviser to the World Bank.
Crowdsourcing companies admit it's still an uphill struggle to persuade firms to experiment with outsourcing work to freelancers rather than keeping it in-house or sticking with established BPO players.
For freelancers, many face a precarious career: not always getting paid for work completed, going without healthcare insurance, and job opportunities not always being available. Indeed, many freelancers who have signed up with oDesk have never received feedback from clients - suggesting they have either not tried to pitch for work or haven't won any yet.
"It's true to say that it's hard to get that first contract," says Panos Ipeirotis, an associate professor at New York University who studies oDesk data.
Such imbalances are feeding a second wave of innovation in the industry. The first outsourcers focused on what oDesk.com CEO Gary Swart calls the eBay model using recommendations, feedback and trust to create a market where companies find good freelancers and freelancers can build a reputation.
But as freelancers build closer relationships with clients, both sides prefer a more structured model where trusted freelancers hire their own team, prompting oDesk and others to tweak their software to accommodate them. Ortencio, for example, manages several other oDeskers on behalf of long-term clients.
In the past couple of years, other startups have tried to mend weak links in the chain. A potential employer posting a project on Elance or oDesk, for example, can be overwhelmed by applicants - making it difficult for them to find the best freelancers quickly, and harder for freelancers to stand out from the crowd.
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