One-on-One Off-shoring

Posted by: Steve Hamm on June 07

Up until now, most off-shore tech services are being delivered to large organizations by large organizations. Say, IBM working for American Express. This is industrial-strength outsourcing. Left out of the equation are individuals as programmers and small businesses as clients. But one Silicon Valley startup is out to rectify the situation. oDesk, of Menlo Park, has taken the eBay idea and applied it to tech services. At last, industrial-strength off-shoring from the little guy to the little guy.

And the concept seems to be working. The company has about 5,000 active customers, most of them small and medium-size businesses. It operates a network of about 13,000 contractors, half of them individual practitioners. About one-third of the contractors are in India, another third are in Eastern Europe, and the rest are scattered around the world. oDesk's revenues are growing at double-digit rates monthly. "SMB's now are starting to take advantage of global labor arbitrage," says CEO Gary Swart.

oDesk has plenty of competition. A lot of programmers or companies that want to hire programmers advertise on Craigslist. Web sites like RentaCoder.com focus on hooking individual programmers with clients for small projects.

But oDesk also has some attributes that help it stand out from the pack. It's not just a middleman where service providers and clients find each other. Additionally, the company provides a technology infrastructure that enables sellers and buyers of services to establish long-term relationships with one another. Once they strike a deal, they can communicate, collaborate, and manage their relationship on pages set aside for them within the Web site. oDesk keeps tracks of hours worked and handles billing and paying. And, so buyers are assured that they're getting what they're paying for, oDesk provides them with a "work diary" where they see screen shots of the desktop computer of their contractor taken at random six times per hour. oDesk gets paid 10% of each transaction.

The company eats its own dog food. It has only 18 employees--mostly in marketing, finance, and product design. It staffs its entire customer service desk and most of its software programming team from its network of contractors.

It's heartening to Swart to see the effect oDesk is having on programmers scattered all over the world. One programmer in Moldova was making just $2 per hour for an outsourcing company. He started moonlighting on oDesk for $6 per hour. And he later quit his day job to work for himself fulltime. He's now making $17 per hour via oDesk. "We think we can help democratize the world," says Swart. "It's a meritocracy and people can get paid what they're worth."

Indeed, rather than bringing Western pay down to Third-World levels, the opposite seems to be happening. If that holds up, it will be a surprising new wrinkle on the globalization saga.

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Reader Comments

Rajesh Dhuddu, PMP

June 9, 2007 01:12 PM

Steve,

By this are you alluding to Person to Person offshoring in Tech support area? While signs of this offshoring is evident in areas such as Web Designing, Publishing, Graphic Design on sites such as Guru.com, Get A Free Lancer.com, it will be interesting to see how the remote tech support services evolve in this space.

There seems to be a good and latent potential for tech support services in B2C space (Business to Customer)especially for those who have gadgets with an IP address and that are out of support from OEMs.

Additional details can be obtained from www.qresolve.com - a service provider in this space.

Regards

Remi

June 13, 2007 07:21 PM

This is funny as I just posted today on my Blog an article on IT outsourcing and the long tail, where I mentioned oDesk. Here it is:

Outsourcing companies have traditionally been focusing on large contracts (i.e. multi-years, multi-million dollars). Thanks to the emergence of new destinations in the offshoring industry, like China, outsourcing vendors have started to discover the virtues of the SMB market, which is good.

But it still leaves one major segment to be addressed yet: the long tail, one of the largest ones, but certainly a tough one for vendors to address successfully.

I read recently an article called “Ooohs! & Aaahs?!! of Outsourcing” and posted by Ilya Lichtenstein on www.foundread.com.

In a nutshell, the post relates the experience of an individual who picked a freelancer on Internet to develop a very small application (40 hours of development).

Individuals as described in the abovementioned post, together with a myriad of small projects within organizations of all size, are just below the radar screen, and therefore invisible to larger providers.

Some companies (eLance, Guru, etc.) have been targeting this segment, relatively poorly in my opinion, since selecting a good provider looks like playing lottery; the same goes for freelancers, who are often faced with people with no significant experience of subcontracting. At a glance, these first-generation companies provide a list of freelancers and projects, a secure payment system (not guaranteed) and a rating system.

A second generation of solutions led by oDesk provides additional tools to secure the relation between suppliers and clients (basic matching system, secure work environment, guaranteed payment, etc.).

I am still unsure about this format. People with projects are snowed under with potential providers from all sizes; providers have a similar problem, as there is still very little information available about their potential client.

In a way, these sites have problems similar than dating sites’, which is to match efficiently and rapidly requests with a few best offers. A major difference with dating sites is that users are certainly not to devote the same amount of time and energy finding an outsourcing match, as they would do finding a personal companion. I have been using some of these sites for a while but I finally gave up, since I found the results were not worth the effort. That said, I do not want to generalize since there are many positive experiences too.

Outsourcing vendors could offer a very valid alternative to these sites. In fact, customers would benefit from the various commitments a larger company can make (replacing / adding resources, methodology, warranty, etc.). Moreover, the relatively low cost involved in promoting this activity would result in a lower overhead, and therefore a better price/quality ratio.

Emerging leaders would be perfect candidates to make the required changes in their organization to tackle this activity successfully, which yields me naturally to look at China. I am watching carefully a few cases to see how they will develop. Stay tuned.

John Jim

July 11, 2008 05:27 AM

oDesk is about expanding opportunities for us. At nanoLogos.org we envisage a future where oDesk would also be able to boost the quality of the software solutions. While the test benchmarking is great, they should take it to the next step by democratizing code knowledge. I would love to see them offering coding templates, tutorials and more. May God bless their work in our Lord Jesus Christ as they play their role in bringing logos to each one of the billions of people in the world.

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April 14, 2009 08:15 PM

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Innovation is happening everywhere these days. Companies operate without borders to find the best talent and the best ideas wherever they may be. Meanwhile, new business models are arising that just might make it possible to turn large swaths of this contentious world into something approximating a true global village. Tune in for Senior Writer Steve Hamm's dispatches from the intersection of globalization, innovation, and leadership.

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