Weigh in on the Pros and Cons of Outsourcing Small Jobs

Posted by: Nick Leiber on August 2, 2009

This is a guest post by BusinessWeek contributor Vivek Wadhwa.

vivek_wadhwa.jpgOutsourcing has become such a toxic issue in the U.S. that even the President has rallied against it. The assumption is that outsourcing means firing full-time workers and shipping their jobs to a less developed country where wages are lower and labor laws are more lax. With the economic slump, some were hopeful that the outsourcing industry would simply go bust on its own. And last year, Forbes.com and the Wall Street Journal published articles which predicted the death of Indian outsourcing, because of its high growth rates.

I had challenged all these predictions and wrote that I expected the R&D outsourcing market to gain its second wind once the economy recovered. The final results aren’t in yet, but it is beginning to look like I was right. However, there is another trend happening which I didn’t predict—the emergence of a new lower end “smallsourcing” market where India isn’t the dominant player. I learned about this in meetings with a Menlo Park, California company called oDesk which provides a marketplace for small scale outsourcing. (I wrote about it in this column, “Outsourcing Benefits U.S. Workers, Too,” posted today.)

I was a little surprised when oDesk product manager Amit Bakshi wrote to me to tell about his new employer which was thriving in the middle of the recession. Skeptical, I met his company’s CEO, Gary Swart, and reviewed detailed data on their growth rates and markets. I was completely blown away when I learned that the fastest growing destination for small-scale outsourcing was actually the U.S. And that in their feedback system by which companies rate the work that was done for them, American workers received amongst the highest feedback scores. They even trumped the Indians!

I know that many will argue that this is causing salaries to drop and forcing American workers to accept paltry wages. But $17.50 per hour isn’t really a bad wage for a mother who does some data-entry work from her home in Greenville, North Carolina. And a computer programmer in Casper, Wyoming may be happy to be earning $40 per hour writing Java code, even though his counterpart in Silicon Valley may demand more.

Small business owners who can’t afford expensive design firms to build their Web sites or the full-time technicians to maintain their computer infrastructure can now simply outsource these activities for a fraction of what it would otherwise cost. They can locate specialized talent on an as-needed basis: they can hire a writer to manage their corporate blog, bring in a team of developers to build a new Web site or update an existing one, or even rely on remote workers to handle their customer service needs.

Gary Swart gave me examples of workers who had benefited from this kind of work. And he argued that his company has helped many American businesses become more competitive.

But is this the reality or an utopian view of the world? I would be very interested in learning about your experiences. If you are a small business owner who has had some positive or negative experiences with recruiting and managing remote workers, please post your thoughts. And if you are a computer programmer in Casper or anyone else who has been doing some of the outsourced work, I’d like to hear from you, too.

Vivek Wadhwa is a Senior Research Associate at the Labor and Worklife Program at Harvard Law School and Executive in Residence at Pratt School of Engineering at Duke University. Before joining academia in 2005, he was an entrepreneur who founded two technology companies.

Reader Comments

Eric LaBadie

August 3, 2009 12:06 AM

I run a popular website called NationLocation.com home to flash-based web games that I build in my spare time. Building games is a passion of mine that has proven to also be a lucrative hobby when I'm not at my regular job. With the popularity the iPhone, I decided to port my most successful game City Jumper over to the iPhone. I decided to hire a programmer to do the port, however getting quotes back from consultants via Craigslist and the like was discouraging. There was of lack talent and the price quotes I did receive for the project were in excess of $20K, plus they lacked the credentials and experience I needed to feel confident I was getting a quality programmer. Then a friend turned me onto oDesk. Upon posting my job on oDesk, I received 25 responses. Unlike researching on my own, oDesk aggregated each person's qualifications, certifications and experience in one place. It was easy, I did a few interviews, found a very qualified and eager programmer in China with just the experience I was looking for, so I hired her and she began work immediately. The tools to communicate and monitor her progress are what made this project a success. Each step of the way, I could review what she was working on, milestones accomplished and we had a central location to review requirements. I especially like the hourly screenshots of work so I can track the progress as closely as I want. And best of all, the payment tools oDesk provides let's me pay as I go with confidence that I'm getting my money's worth and avoiding any risk of payment confusion. I'm happy to report that the project was completed on time and under budget (total cost to build City Jumper iPhone including oDesk fees was under $3,000.) Today, City Jumper can be found on the iPhone App Store and is selling so fast that the revenues have already exceed the cost to build it! Plans are in the works to port more of my games over to the iPhone thanks to oDesk.

Michael Hope

August 3, 2009 12:08 AM

I signed up for oDesk on February 13, 2008. Thirteen days later I was hired on my first assignment without an interview. I woke that morning to find that I had been hired by a Buyer located in California without being interviewed. Well, that assignment lasted 4 months, 389 hours and yielded me $6,082.00. Yes, you heard right, my first assignment I made over six thousand dollars. I have been blessed to work constant since joining and I am looking forward to a profitable future utilizing oDesk services.

The oDesk platform is awesome! It allows the Buyer and Provider to connect as though the Provider is sitting right in the Buyers office. The Provider logs into the oDesk team room and the software calculates the Providers rate and time. The oDesk system takes screenshots of the Providers desktop, stores them into the Team Room Work Daily. The Buyer can view the screenshots to verify that the Provider is actively working on the assignment.

The oDesk support team is second to none! The support team has been there to answer every question that I’ve had. They are very quick to respond to questions with excellent clarification. I can truly say that I have not had any complaints since joining oDesk and I would recommend anyone seeking additional income to sign up and begin using oDesk services.

Best of all, oDesk allowed me the opportunity to make additional income and stay at home and take care of my son Ethan and his mother Mattie.

Jessica Martinez

August 3, 2009 12:40 AM

I just wanted to let you know that I've been using ODesk since about mid October of last year and love it. I'm a marketing communications copywriter and single mother and while I make somewhat less than what I'd make at a full time job doing what I do, I have yet to be hired as a full time copywriter anywhere; though I've sent hundreds of resumes.

So, for me, it's a matter of using ODesk to get paid a little less (and I do mean just a little less) or not have a job at all. The ODesk system is set up perfectly and runs very smoothly, or at least that's been my experience. And, I've used other freelance sites like Elance and wasn't nearly as happy as I am with ODesk.

Thanks for this article. It's good that the word is getting out to all of those big companies (and to freelancers like me) that smallsourcing really be mutually beneficial to both parties involved.

Aim higher,

Jessica Martinez
ODoesk Provider ID: (JLStanfield7)

Amy M.

August 3, 2009 12:41 AM

As a professional copywriter based in the southeastern U.S., I've had an excellent experience working for a Canadian start-up business owner via oDesk. My client was straightforward, accessible and a true pleasure to work with.

I always received my pay on-time with no hassles and will definitely continue seeking opportunities on oDesk.

Ronald Rocas

August 3, 2009 2:24 AM

I'm a freelance technical writer from the Philippines and I was able to augment, nay, double my income when I started on oDesk. It's great to have an opportunity to work not only for local employers but for international clients. Now my options have grown considerably, as I can choose which topic to work on, at what rate and for which client.

Misti Sandefur, Professional Freelance Writer

August 3, 2009 6:06 AM

Since I joined oDesk in July of 2008, I've gained four clients and added over $100 a month to my writing income. I've enjoyed working with the clients I've gained through oDesk, and they're all very friendly and easy to work with. The added bonus is when I charge an hourly rate, the pay is guaranteed, which is something every freelance writer likes. The guaranteed payment, selection of writing jobs, and the friendly oDesk staff and clients is why I've turned to an outsourcing service such as oDesk for the majority of my income.

If your interested in hearing more about my oDesk experience and/or freelance writing career, don't hesitate to contact me.

carlogabriel

August 3, 2009 6:24 AM

Let's face it. Outsourcing is part of globalization. As businesses seek ways to survive the slump, they see outsourcing as a way to bring costs down - allowing their businesses to stay afloat. And as they do so, they'll find that there are other talents out there, most of which are usually available at a lesser cost. Some people maybe right, once the slump is over, many businesses will go back to hiring locals. But, they'll also be glad they have a list of providers to rely on just in case.

gio

August 3, 2009 9:47 AM

I have to admit that, as a US-based oDesk provider, I was pretty skeptical at first about the service that oDesk offers. However, after having found multiple clients through oDesk (and many of them fiding me!), I have to say that my skepticism was unfounded. If you are a good designer who is able to present a strong portfolio, you will be able to find well-paid, quality projects on oDesk.

Tony Lael

August 3, 2009 10:07 AM

Shocker for the President - running a business means you do what works, not what feels good. I say if companies have a good relationship with overseas or near seas (Canada or Mexico) resources that produces quality product on time and it costs less to deliver this to customers then good for that business - it's taking care of its customers and shareholders.

We (http://www.coreconnex.com) have experience the other side of this coin in dealing with 'local sourcers' in the IT services industry for the last 5 years. There are IT service firms right here in America making a lot of good money for providing a wide range of day-to-day support for other small businesses in their region. Here is a blog your readers may want to take a look at - http://www.coreconnex.com/2006/08/04/10-good-reasons-to-outsource-it-infrastructure-support

Ross Kimbarovsky

August 3, 2009 5:32 PM

Hi Vivek - Like you, I too was surprised when I saw this trend in our own business. I co-founded http://crowdspring.com - we're a marketplace for creative services. Our marketplace works very differently from oDesk - instead of picking from among bids and proposal, buyers on crowdSPRING pick from among actual designs to their specification.

When we launched in May 2008, we expected that graphic designers from India and other traditional outsourcing countries would dominate in our marketplace. We were surprised to find that half of the designers who are awarded projects on crowdSPRING come from the United States. In fact, we were also surprised to see buyers from other parts of the world (our buyers have come from over 50 countries) hire U.S. based designers. We still get a kick when a buyer from India hires a U.S. designer for a design project.

Small business owners have traditionally been under-served because their budgets haven't supported using local vendors. But the Internet has helped to create new opportunities and new relationships, and both the designers and small businesses have benefited from these changes. Some of our most successful designers live in remote areas of the country that could not support a local design practice. Today, location has become far less important.

And this trend isn't impacting solely small businesses. Businesses of all sizes are starting to think creatively about R&D. For example, LG, one month ago completed a design competition on crowdSPRING. LG offered $80,000 in awards to U.S. designers to design the next mobile phone - and the work was outstanding - letting LG's customers suggest the next best thing in mobile phones, at a fraction of the normal R&D cost.

It's not a utopian view of the world. It's the modern reality.

Vladimir

August 3, 2009 5:49 PM

$17.50 for data-entry work? Guy doesn't know what he's talking about. Hiring talented data-entry worker from overseas for $1.75 would sound more realistic :)

Tina Burlingame

August 3, 2009 8:07 PM

I’ve been with oDesk as both a service provider and buyer since August 2008. In comparison to other outsourcing and freelance sites, I have been impressed and pleased on a continuous basis with oDesk.

The outsourcing industry is truly a global market. As a service provider, I am able to market my skills by utilizing the portfolio, resume, and taking the certification tests offered by the site. I have been able to land some great clients and projects. Also, using the “oDesk Team” interface has been a true advantage, as it eliminates having to track our time and produce billing statements for the clients, which means that the time I would have spent on billing, is now my own. In addition to the services that oDesk offers their providers, every month they acknowledge the top 20% performers of each category. I have had the honor of being in the Top 20% of Writers for the month of June.

From the buyer prospective, as a starting entrepreneur with no capital or credit, my limitations would have prevented me from moving forward ten years ago, but now, thanks to oDesk, I am able to work towards my goals without going into debt. I’m impressed with the pool of candidates and am pleased with the quality and affordability across the globe.

Tina Burlingame
oDesk Service Provider: tburlingame
http://www.odesk.com/users/~~f9fb8bf6cb3e6be0

Ivan Galvez

August 3, 2009 8:46 PM

It is important to note that Outsourcing is not the same as Offshoring. And while I am not stating that offshoring is good or bad (this will depend more on how is it done), what I can state is that Outsourcing continues to be a way on focusing on the core business, while letting the expert vendors focus on your non-core activities; they will do it better and cheaper for you.

Jenna

August 4, 2009 8:11 AM

One of my sites needed a serious facelift and I was facing a long and agonizing task of finding good programmer that knows the specific platform – Drupal.
Finding employees for specific tasks, within a budget, is hard. On oDesk, I am able to browse various resumes from all over the world and find the perfect person for the job. Not only has this made set up for projects fast and painless, but it has opened doors that I never knew existed.
Although I will admit, the original thought of hiring someone from another country via the internet made me nervous; I now prefer this method of employing the specialists I need over looking for someone in my local area. There are many different benefits to such a relationship, but perhaps the most prevalent benefit is the sheer fact that I am getting someone who knows what they are doing, and is self motivated enough to get the job done. This means that I have more time and energy to work on my own things, rather than consistently supervise those who are working for me.
I am proud to show off a truly international team, and an outstanding end product: http://www.movingservices.net

Michele Randolph

August 4, 2009 11:29 PM

As a Virtual Assistant in Ohio USA, I take on projects that would cost business owners time, money and resources; freeing them of time to work IN their businesses, not ON them.

This is saving many small businesses from closing their doors; businesses who have had no choice but to downsize their staff, or who may not have had a staff, and have felt a heavy crunch from the fall of economy.

Outsourcing benefits both parties!

Michele Randolph
Gold Force Administrative Support
http://www.goldforcesupport.com
"Virtual Assistance for Reliable Efficient Outsourcing"

Kelly Thomas

August 13, 2009 7:08 AM

Small Medium Businesses looking to hire a freelancer, outsource to established service providers, or offshore to small IT companies, can find Individual & SMB freelance services options from top outsourcing destinations like India, China, Russia, Ukraine, Malaysia, Philippines, Israel, Romania, Hong Kong, Bangladesh, Pakistan, Singapore, Indonesia, South Africa, Argentina to local outsourcing destinations even within United States, United Kingdom, Canada, Australia, Germany, New Zealand, UAE.
http://freelancerguru.com/

Robert Einspruch

August 13, 2009 10:18 AM

We first started using oDesk in 2007 because we were located in a "thin" market for development talent and it was the peak of the market. We simply could not find anyone via WoM. Our Craigslist postings generated a slew of spam from unknown offshore firms, and we had no way to asses their quality. Finally I gave oDesk a try and have not looked back. I have used it for numerous projects, ranging from a few hours to several months, and regularly hire offshore and onshore talent.

What is important to stress is that we use oDesk to scale-up and scale-down as needed, not to find low cost labor. In fact, we typically pay in the $20/hr - $40/hr range; this is below Silicon Valley but in line with other parts of the country. Sure, you can make the argument that contract workers are deprived of healthcare, but that is why I voted for Obama! :-)

I will share one classic oDesk success story. One Sunday morning I realized I wanted a new, small enhancement on our internal metrics portal. I spent an hour sketching it out and posted the job to oDesk. By the mid-afternoon I was interviewing developers and by late-afternoon had hired a junior developer in Mexico (at a roughly equivalent hourly rate to an entry level US developer). A few email exchanges and few hours later, the job was done. I am not sure how I could have done this without a platform like oDesk. Certainly not by using Craigslist. Certainly not by asking my friends if they knew someone with six hours to spare on a Sunday.

oDesk = flexibility.

DocuMaker

August 24, 2009 3:33 AM

Outsourcing Through Rentacoder explains the proper way to outsource online before making mistakes via trial and error.

Richard P. Farrell

October 9, 2009 11:46 AM

I go to India once a year for vacation and to kill 2 birds with one stone I outsource all my typing,printing and editing for an upcoming book and i have all my web design changes made there. It's even cheaper than using guru.com and it's fun to do a little business on the side

barbara grance

October 19, 2009 1:59 AM

Really disappointed here.

I was hoping to read some objective reviews and information and turns out is very likely just an advertisement!

Any savvy person can recognize 'plant' reviews! Very amateurish odesk. Maybe you need to review your paid posters.

No one should post in same syntax, GLOWING REVIEWS all on the SAME DAY! \

Your service may be excellent - but now it is suspect by this activity.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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