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Home > Business > Columnists > Guest Column > Business Standard

Outsourcing: Now a people's project

July 04, 2007

The debate over offshoring has become a regular feature in high-wage countries that fear large-scale job losses. While informed observers argue that offshoring benefits corporations and the entire economies of the high-wage countries, others argue that while this may be true, it is nevertheless going to be detrimental to the large, white-collar middle-class working in the services sector.

Now, a new trend shows how offshoring is beginning to go mainstream, moving beyond companies into a regular marketplace, and thereby touching the upper- and middle-class alike.

Evalueserve, a global research and analytics services firm, calls it "person-to-person offshoring", which is showing a compound annual growth rate of over 26 per cent.

PPO consists of those services that can be offshored by (to take one instance) entrepreneurs who are trying to bootstrap their business as efficiently as possible. The value proposition of receiving such services at a significantly lower cost and "just in time" is clearly irresistible, thus helping offshoring strike deeper root.

The offerings being used by small businesses and home businesses under such services range from "live" homework assistance over the web to essay-writing guidance. Even invitation cards for weddings and other parties, and personal secretarial services like scheduling appointments and maintaining calendars, are now being outsourced to professionals who work from their homes in low-wage countries, often with just a broadband connection as investment.

Though each PPO contract is often of low value, usually between $100 and $500 (Rs 4,100 to Rs 20,500), the large number of end consumers involved means that the total addressable market in the US alone exceeds $20 billion.

While PPO makes rapid strides, two factors may play spoilsport. The first is data confidentiality, which is a matter of enormous concern in the West. Some of the services being provided in the PPO domain are pretty basic - helping someone write out a resume, or graphic services - and confidentiality is not a big issue here.

But in several other services, India's less than perfect track record in maintaining data confidentiality may prove to be a drag. The other issue is quality control. Experts like Alok Aggarwal of Evalueserve say that online marketplaces like Guru, Elance, Rentacoder, etc can play a fruitful role here.

They are successful because they have a mechanism for mediating between a vendor and a client, where the desired service level is indeed provided by the vendor.

Evalueserve's research estimates that there are currently more than 90 online marketplaces on the World Wide Web, and it projects that there are over 500,000 vendors and freelance professionals who are providing these services from low-wage countries.

In the online marketplace model, vendors providing PPO services enrol themselves in an online marketplace by paying a monthly subscription fee plus a fixed percentage of the revenue if they win the project. When an individual client posts his or her requirements for a new project, the marketplace communicates these opportunities to the selected vendors and freelancers and requests proposals to be delivered to the client.

The client then awards the work to the appropriate vendor, depending on price (which may be on a per hour or a fixed cost basis), delivery time and a quality score provided by other clients who have been served by the same vendor. The result is that outsourcing is indeed becoming a people's project, and acquiring a range and depth that no one had anticipated when BPO first took off.

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