Outsourcing 3.0

Outsourcing for survival

One of my favorite postulates is that in times of crisis, its the very strong and the very meek that survive. Whether its a crisis of nature, or a storm in the affairs of men, you need to have very strong moorings, or have the ability to lie low, be extremely flexible and innovate your way to survival.

Today's economic tsunami is one such crisis, and my thoughts went back to 2000/2001, when I had started Cerulean in the middle of the dot com meltdown and 9/11. Cerulean had, and continues to specialize in providing affordable technology and operations solutions to SMEs, especially in the US and I remember that we helped several startups get going by building their platforms for them. These were no ordinary non mission critical application maintenance and development jobs like HR and payroll functions that were being outsourced - we were building their core product offerings, stuff thats not supposed to be outsourced, if you go by conventional theories of capping risks in outsourcing, especially offshore outsourcing. These SMEs and startups were being exceedingly brave, in hindsight, but in reality, they had no choice - they HAD to outsource to offshore companies like us, since they had to economise on every bit of cash that they had.

I was betting that a similar trend should be applicable during the current crisis, and my first port of call was to check how Elance - the grand daddy of online outsourcing marketplaces, was doing. Judging by media reports, they seem to be in rude health

"Today, Elance does about a million dollars a week. It grossed $40 million revenue in 2007 and plans to gross $200 million in the next 2-3 years and get listed" (The Economic Times)

Now, this represents an opportunity for knowledge workers who are being laid off from larger companies to stop looking for the next 9 am-to-5 pm opprtunity and instead leverage their skills as a free agent. Elance is not the only online services marketplace - there's Guru, Odesk, Rent-a-coder, and even professional networking sites like LinkedIn are seeing traction in enquiries (and replies) on discrete project work. Just two facts can nail down the opportunity - (1) Elance currently has over 200,000 unfilled opportunities, and (2) unemployment levels in the US are at a 25-year high. It's a paradox that needs a resolution - and the way out is for capable individuals to get entrepreneurial - not with the objective of starting big businesses, but as knowledge workers who are a part of a vast services cloud, offering their service on demand and charging for just the bit of service that they have delivered.

Outsourcing is evolving to reach its logical culmination.

In 2007 I had written in The Economic Times about Outsourcing 2.0 -

"So far, IT Outsourcing has been perceived to be a big boy’s game. Most of the banner headlines have been about Fortune 1000 companies outsourcing their IT requirements to large, well known IT consulting and outsourcing firms, and increasingly to offshore locations. However, in the shadow of their big brothers, Small and Medium Enterprises (SMBs) have also been testing the offshore IT outsourcing waters for the last couple of years"

Outsourcing 3.0 will differ from the above in while Outsourcing 1.0 was about large companies outsourcing large chunks of work to large outsources, and Outsourcing 2.0 was about SMEs following a similar trend, we are now witnessing further disintermediation across the value chain - individuals and companies big and small are outsourcing their service needs to a "services cloud", which is formed by individuals, virtual teams and traditional companies. This wouldn't have been possible without the availability of online tools for project management, work allocation, safe and secure instant messaging, free (or nearly free) audio and video communication, online invoicing and payments, including the ability to process micro payments in a simple but cost effective way. Indeed, most online marketplaces have invested heavily in building these functionalities around the marketplace, thereby laying the basis for the services cloud.