Online Outsourcing: Still Cheapskates vs. Scamsters?
It has been over fifteen years since the famous Thomas W. Malone and Robert J. Laubacher wrote about “The Dawn of The E-lance Economy” in their famous HBR article. And one would think that fifteen years in, the online outsourcing industry should be a household name. Fifteen years in, online distributed teams should be defacto. Fifteen years in, we should all be architecting our 4-hour work weeks and outsourcing our day jobs. And yet, online outsourcing is still predominantly the domain of niche-tech and greyhat marketing content.
What’s stopping the broad consumer and SME adoption of a model that brings the promise of increased productivity, access to global talent, and lower overall labor costs? Both sides of the equation face real-world challenges of working and extending trust online – the customers and the workers. I believe the problem is threefold – the approach to hiring by customers, the contractor’s ambitions and dilemmas, and the need for “managed” outsourcing to ease wide consumer adoption.
Customers new to outsourcing meet significant on-boarding challenges, and the learning curve is sometimes steep and expensive. Many customers looking for technical work are not technical, so screening of and communication with workers breaks down at step one. A website for your small business? Sure – Joomla, Drupal, Django, or Wordpress?
The customers ability to tell good from bad, or detect true competence, is also challenged, even with the best of rating systems, as skill tests are often gamed, or ratings faked or omitted. Then there’s collaboration, which is also hassle – across multiple tools, workrooms, chat sessions, and at odd hours, with freelancers spanning time zones. Keeping pace with the technical team is a drain on time. Now that money saved turns into time wasted.
And lastly, the expectation on price and value. When thinking of outsourcing tasks online, the immediate expectation for many is that the work must be cheap. Regardless of the locale of the workers, the tools at their disposal, or the technical complexity of the project, the myth is that online work must be cheap. Surely I can get this done for $5 dollars!
These attitudes and expectations lead to conflicting behavior by the customers that creates a mix of disincentives for the workers. But worst of all, they lead to high “bounce rates” – abandoned projects and job listings that customers give up on an never come back to.
The intention of the freelancer is almost always good – to do honest work and deliver what the customer wants, or thinks they want. The community of global workers that freelance on-line full time is in the millions and growing. Many supplement their income, or work while going to school. There’s genuine talent and depth on-line. And as more workers join, the competition for quality work and larger projects heats up.
Many truly skilled workers struggle to cut through the noise and spam in bidding for online projects, and are almost always disadvantaged by their higher hourly rates. Others hope to get a greater return on their investment of time, and end up advertising skill sets tangential to their core knowledge, but perhaps not their true expertise – they’re casting a wider net, so to say.
But not everyone is a good guy – some workers disappear mid-job with source files, some walk away with pre-payments, and others just learn on the job and “run the meter”. And many quality workers are often simply disparaged by the process, faced with customers that often don’t articulate precise requirements, and underestimate the true amount of work required.
And there’s the question of cost. With the world becoming more connected every day, true skills are finding a global benchmark. Quality developers from Pakistan to Ukraine, to the rural U.S., have a great way of calibrating their true worth. No longer is a geographical location the constraint. And many refuse to engage with customers that don’t understand this.
How to Make Outsourcing ‘Work’
So how do we bridge the gap between consumers and SMEs looking for end-to-end solutions, and contractors looking to do real work for real wages?
Let’s take a page from the big boys - how do large enterprises success in outsourcing project offshore? First, they start small: pilot projects that test the true capability of the service provider. At low stakes, you can observe the communication style, work quality, and the overall ability to deliver. Using projects with known outcomes so that you can benchmark performance across multiple pilots is a good way to find the best athlete. While this may seem like an expensive and time consuming proposition, a bit of time upfront will save a ton of grief down the road. And you can be transparent with the workers that this is an audition. Quality service providers will understand.
Second, for enterprises, scoping and execution are often separate engagements. One provider, or project manger, can be used as a technologist to scope the engagement, prepare draft budgets, hone technical requirements, provide approximate schedules and milestones, and be compensated for this work. And then a more detailed project can be bid out again. You need an architect before you need a builder.
Third, enterprises filter for depth of capability and not just price. They look for value players. You are, ultimately, solving the hours x rate = price equation, and what most clients underestimate is the hours. While price does not always equal quality, a cheaper and less experienced worker will drive up the hours, learn on the job, will work-shift, and ultimately be a draw on your time, which skews the balance. Hiring a more expensive, and more experienced worker will often be cheaper all-in.
Lastly, a crucial practice within large enterprises is the presence of in-house project managers. A project manager assembles the team, finalizes the specs and budget, drives the calendar, runs the collaboration process, and keeps the client up to speed. At a smaller scale, the client can create this synthetically on existing labor platforms, or use a “managed” outsourcing provider.
Using these enterprise techniques creates a a win-win for customers who have avoided in-house, full time employees, and for quality workers that have all the resources and tools to deliver successfully. The client benefits by shifting the general contracting aspect to those with depth and experience in managing this type of work.
As broader adoption of on-line labor occurs, will we see a vertical model emerge to add value and managed services to the outsourcing process, and make it more palatable for consumers. And as a result, less and less will it be perceived just as a playground where scamsters meet cheapskates.
Stan Alex Miroshnik is the COO of Ziptask (www.ziptask.com), a fully-managed outsourcing platform.