Improved software and services allow the smallest businesses to outsource work around the globe
From the outside, the gray Victorian with the stained-glass windows on a gentrified block in Dorchester, Mass., is a typical middle-class dream house. But it also is the headquarters of what you might call a micro-multinational. Randy and Nicola Wilburn run real estate, consulting, design, and baby food companies out of their home. They do it by taking outsourcing to the extreme.
Professionals from around the globe are at their service. For $300, an Indian artist designed the cute logo of an infant peering over the words "Baby Fresh Organic Baby Foods" and Nicola's letterhead. A London freelancer wrote promotional materials. Randy has hired "virtual assistants" in Jerusalem to transcribe voice mail, update his Web site, and design PowerPoint graphics. Retired brokers in Virginia and Michigan handle real estate paperwork.
Global outsourcing is no longer just for big corporations. Increasingly, Main Street businesses from car dealers to advertising agencies are finding it easier to farm out software development, accounting, support services, and design work to distant lands. Elance, the Mountain View (Calif.) online-services marketplace that is the Wilburns' main connection to the cyber-workforce, boasts 48,500 small businesses as clients—up 70% in the past year—posting 18,000 new projects a month. Sites such as Guru.com, Brickwork India, DoMyStuff.com, and RentACoder also report fast growth.
Forecasts that the Web would revolutionize work by creating a vast global market for professionals have been around since the early '90s. Venture capital legend John Doerr thought so much of the idea in '99 that his firm, Kleiner Perkins Caufield & Byers, bet nearly as much on Elance as it did on Google (GOOG) and Amazon (AMZN). Kleiner managing partner Raymond J. Lane is chairman.
But while other forms of e-commerce caught fire quickly, Web sites for freelancers have only recently begun to generate much momentum. Market researcher Evalueserve estimates that revenues for online service marketplaces will grow 20% in 2008, to $190 million, far from the initial hype.
Why has it taken buyers and sellers of services longer to get comfortable trading online than companies dealing in physical goods? An eBay (EBAY) for services, says Elance CEO Fabio Rosati, "was a brilliant idea that started too soon." But improved software, search engines, and new features are boosting the industry. Several sites now allow buyers to view detailed work samples and customer ratings for thousands of service vendors. Guru launched a payment system to mediate disputes and lets buyers put funds in escrow until work is received. Elance developed software to track work in progress and handle billing, pay, and tax records.
MOVING WITH THE MARKET
Those upgrades are starting to make a difference. Elance, which makes money by charging subscription fees and a 4% to 6% cut of each project, expects total billings to rise 50%, to $60 million, this year. Guru predicts similar growth, to $26 million.
Small entrepreneurs are the biggest source of growth. Queens (N.Y.) Lincoln Mercury dealer Ariel Tehrani hired Brazilians to develop a multimedia Web site to sell cars online. San Francisco real estate agent Jonathan Fleming uses graphic designers in Portugal, database managers in India, and writers in Hungary for his blog.
The Wilburns began buying graphic designs through Elance in 2000. They say they shifted to radical outsourcing after reading the 2007 Timothy Ferriss best-seller, The 4-Hour Workweek: Escape 9-5, Live Anywhere and Join the New Rich, which extols the merits of freeing up time by hiring cheap offshore "virtual assistants" to handle scheduling and other routine tasks.
Remote help has allowed 38-year-old Randy Wilburn to shift gears with the economy. His real estate business has slowed, so he spends more time advising nonprofits across the U.S. on how to help homeowners avoid foreclosure. Virtual assistants have handled routine correspondence and put together business materials while he's on the road, all for less than $10,000 a year. He figures a full-time secretary would run $45,000. Nicola, a 35-year-old designer, decided to work from home after she had their second child. Nicola now farms out design work to freelancers and is starting to sell organic baby food she cooks herself. She is setting up a Web site for that business and offered $500 for the design work. Of the 20 bidders who responded via Elance, 18 are from outside the U.S.
The couple uses two main offshore vendors. One is GlobeTask, a Jerusalem outsourcing firm that employs dozens of graphic artists, Web designers, writers, and virtual assistants in Israel, India, and the U.S. It generally charges $8 an hour. The other is Kolkata's Webgrity, which has a staff of 45 and charges $1 to $1.20 an hour. Five years ago, says founder Amit Keshan, 32, his company designed Web sites for Indian clients. Now he does all his business through Elance, handling up to 300 jobs each month for U.S., British, and Australian clients. For $125, Webgrity designed a logo for Wilburn's real estate business that Wilburn says would have cost as much as $1,000 in the U.S.
A worldwide market where even mom-and-pop businesses outsource could still be years from attaining wide appeal. But micro-multinational entrepreneurs like the Wilburns may not be rarities for much longer. "People will do it the old way until it becomes a no-brainer to do it the new way," predicts Elance's Rosati.
Many small outsourcers say they were inspired by the 2007 book The 4-Hour Workweek by Timothy Ferriss. Described as a "manifesto for the mobile lifestyle," it includes a chapter on how to find offshore "virtual assistants" to handle everything from daily office tasks to writing business plans. One tip: Don't hire based solely on the lowest hourly rate—focus on the total cost of the job.
Business Exchange related topics:EntrepreneurshipGlobal OutsourcingSmall Business OperationsTelepresence