Personal offshoring

Economic theorists typically conceptualize the world’s goods and services as falling into one of two bins: tradable or non-tradable. Let us make a bold prediction. In the future the key distinction for international business will no longer be between things that can be put in a box and things that cannot. It will, instead, be between services that can be delivered electronically over long distances with little or no degradation of quality, and those that cannot. There is little doubt that the fraction of services that can be delivered electronically will grow.

Globalization empowers individuals to collaborate and compete individually, which has been described as the 'flat-world platform' by Thomas Friedman in his seminal work The World is Flat. Globalization, the internet, and the virtualization of work environments allows for a new type of workforce. The majority of these new business models incorporate outsourcing and offshoring.

Outsourcing is now a major factor in most business models. McDonalds is outsourcing drive-through ordering. Even Japan is outsourcing to Japanese-speaking Chinese cities such as Dalian. A report released by management consulting firm McKinsey & Co. and Nasscom has forecast that India's outsourcing industry can grow at an annual rate of over 25 percent to generate export revenue of about $60 billion by 2010.

Precisely because the economy has changed, businesses have figured out how to produce more goods, services and profits with fewer full-time workers. Outsourcing is one such trend. About 90 percent of outsourcing actually takes place inside the United States and creates jobs at home. Only 10 percent of “outsourced jobs” are created overseas.Businesses are also relying more on free-lancers, temporary workers and contract employees. Many work off payroll (and without benefits) and simply aren’t tracked by the government’s payroll survey. Employers also leverage technology to streamline and automate operations, which can also reduce the need to payroll workers.

Personal Offshoring

Personal Offshoring [cite web |url= http://online.wsj.com/article/SB118073815238422013.html |title= Outsourcing your life |accessdate=2008-08-17 |format= |last= |first= |work= Outsourcing your life |language=English] refers to a business model where individual consumers or small businesses (often sole proprietorships) directly outsource their work. Such Personal Offshoring is still new and represents a tiny fraction of the more than $20 billion overseas outsourcing industry. But management consultants and economists say it's likely to evolve into a larger niche as offshore workers identify the opportunities.

Personal Offshoring can potentially be a dangerous business model if not managed appropriately. Problems include language barriers, communications issues due to differences in time zones, and other such issues. [cite web |url= http://www.itpaa.org/modules.php?name=Content&pa=showpage&pid=28 |title= My Personal Offshoring Story |accessdate=2008-08-17 |format= |last= |first= |work= My Personal Offshoring Story |language=English] But when done correctly the financial savings can be quite large. For example, many web developers in the USA charge between $1000 to $1500 for an informational website. But a vendor located within Eastern Europe, India, or China may be able to do the same website for half the price.

Business Model Variants

There are variations on Personal Offshoring worth mentioning. But as this is an emerging trend, there is not a consensus on the spelling or practices of each sub-category of Personal Offshoring.

Crowdsourcing

Crowdsourcing is where web portals provide the marketplace for the work of amateurs. Instead of outsourcing the work of big business to India or China, the work is outsourced to talented people with spare time who often have day jobs. These individual vendors do the work for additional income or sometimes even as a hobby if it's in another field besides their day job.

Homesourcing

JetBlue does what they term "homesourcing", where US-based housewives are hired to handle reservations and other small jobs. A few years ago supposedly 16% or 23.5 million of all US employees now work from home. Other companies say homesourcing to US-based personnel is preferred because the quality of the employees is better compared to India and China even though a bit more expensive.

Litesourcing or Lightsourcing

In a nutshell, Litesourcing could be called “managed personal outsourcing”. Typically, outsourcing involves only two parties: the client and the vendor. Litesourcing is where the difficult aspects of outsourcing are managed by an independent 3rd party. The consumer, being the client, merely needs to communicate a basic vision of what they need and pay for it. The Litesourcing provider is the interface between the consumer and outsourcing vendors.

Within business circles Litesourcing is sometimes referred to as "Lightsourcing", which should not be confused with the 3D rendering technique in computer graphics.

Microsourcing

"Microsourcing" denotes employees of large companies outsourcing their workload to individuals in India or China. In the business world this is considered a gray area ethically.

Smallsourcing

"Smallsourcing" [cite web |url= http://www.portfolio.com/news-markets/national-news/portfolio/2007/10/03/Outsourcing-for-Small-Businesses |title= Outsourcing for Small Businesses |accessdate=2008-08-17 |format= |last= |first= |work= Outsourcing for Small Businesses |language=English] is very similar to Litesourcing, but smallsourcing refers to small businesses while Litesourcing refers to individual consumers.

The process

Prospective employers post jobs on these sites and vendors respond with bids. There are often reviews and rankings of contractors posted by former employers and vice versa so it behooves both sides to behave professionally and responsibly. However, the websites do not indemnify the work of contractors.

The websites typically take a 6 percent to 10 percent cut of the fee negotiated between the two parties. Some sites offer to hold funds in escrow until the job is completed to the employer's satisfaction. In some cases, employers negotiate to pay a portion up front, a portion halfway through the job, and the rest upon completion.

References