Outsourcing Essentials

What is Outsourcing

Outsourcing has a bit of bad reputation in the media. Wholesale export of American jobs to India, China and other remote sources doesn’t go over so well with the public. Anybody who has had to suffer through an endless litany of pointless questions in broken nearly incomprehensible English while trying to get support for a product they’ve purchased, has seen the worst of outsourcing.

I sat in on a meeting with the President of a previous company and an executive from Motorola while they discussed their current outsourcing projects. These were multi-million dollar efforts that were not going exactly as planned. Our CEO mentioned that the team in India typically needed 3-4 workers to get the same results they would get in the home office, negating most gains from cheaper labor. The Motorola executive agreed with the estimate and mentioned that one of his projects was testing doing work in China. It was even cheaper, but the results were dismal. Those projects were requiring 6-8 worker to get the same amount of work done, because of problems in language, oversight and cultural differences. On top of that, the labor costs in India had gone up almost 50% in the last 12 months.

Ouch!

If that were my results, I’d suggest you give up this outsourcing thing and take up knitting.

For me, outsourcing is a case of taking some small, easily bounded task, and making it available to freelancers from all around the world. Once I’ve selected the provider, I manage the project until it’s exactly what I want done. Then that project is over. I rarely spend over $300, and the projects rarely take more than two weeks. I’m off-loading tasks, not entire corporate infrastructure.

In the outsourcing world, you might hear discussions of insourcing, nearsourcing and outsourcing. I don’t differentiate. Whether the person is in the next building over, across town, just across the border, or half-way around the world, the work they are doing has been outsourced.

My outsourcing partners are from all over. On the last project I worked on, my freelancers were from the USA, Canada, Iran, India, Russia, the Philippines, and Estonia. The most I spent on any one task was $380. The longest task took 6 weeks, but it was designed to submit articles 50 at a time for 6 weeks. I’ve spent a lot more, and some projects have taken a good bit longer, but these numbers are a pretty good idea of a typical effort.

Micro-Sourcing Vs. Outsourcing

I think it’s important to understand the difference between micro-sourcing and outsourcing. Micro-sourcing uses freelancers you manage, to perform the task you define, under you direction, one task at a time. Outsourcing typically involves companies working together, employing numerous staff full-time, to perform work that the buyer hopes to get done cheaper, under very specific contract and service level requirements.

This simple table should give you a good feel for what I mean by Micro-sourcing.

For the average entrepreneur or small business owner, we use micro-sourcing for two reasons.

Ø To perform tasks which we don’t have the skills for

Ø To perform tasks which we don’t have the time for

We’ve all heard the platitude, “Work Smarter, not Harder.” It’s especially true in the micro-sourcing world. You can work on your business, managing its direction and success, without bogging yourself down on the details of every little task. Or you can work in your business, tackling every task personally, burying yourself in the details. The choice is up to you.

One outsourcing site, the OutsourcingMyth.com, estimates that a thorough job of eBusiness marketing can take in excess of 350 hours. That’s right, full time for over two months. Or you can give them the work, and go on to the next task. It’ll cost you a couple of thousand dollars. Then again, what is TWO MONTHS of your time worth?

I find that there are 6 very important reasons to micro-source more and more of my projects.

1) You can leverage specific skills which would often take you years to develop to a similar level

2) You can leverage the work of many, making money off the efforts of each

3) You can concentrate your efforts on the areas that you LIKE to do

4) You can concentrate your efforts on the areas that will make you most money

5) You can have the time to enjoy the fruits of your labors

6) You can have the time to enjoy the fruits of their labors

Micro-sourcing History

Micro-sourcing in its present from has been around since around 2000, when elance.com opened its online doors.

Before elance, you could always do what I did, search the internet for individuals with websites that claimed to do the work you were interested in. You might find a few good websites, take a look at the work they claimed they had done, and start an email exchange with them to get them to do some project for you. I hired out a few website designs that way, some graphics work, and even some customized programming.

With elance, suddenly you had hundreds of freelancers looking over your work, providing you offers to do the work at some cost, either fixed or hourly. The benefits were huge and immediately obvious.

1) You had many more freelancers to choose from

2) You had prices to work with, if you weren’t sure what you should be paying

3) You had an infrastructure to work with, when it came to paying

4) You had the reviews of others to give you an idea of who was best to work with

5) You had a system in place to deal with problems

It’s no wonder that the business took off, and look-alikes sprung up by the dozens. Now there are probably several dozen freelance sites out there, I know of at least a dozen with Alexa rankings of under 100,000. That means that according to Alexa (which is admittedly notoriously inaccurate) these sites are among the top 100,000 most frequented sites on the internet.

Micro-sourcing has suffered its growing pains, with scamming and abuse prevalent on some of the sites. Several of them have less than perfect records of dealing with problems, tying up funds for months, or even failing and disappearing with the cash. Some sites are more popular among freelancers getting started in a business they would probably be better off avoiding. The maturing of the industry, better tools, and better management have resolved most of these issues at the most reputable sites. Don’t worry, we’ll steer you in the direction of the least pain and failure.

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