LIPA CITY, Philippines, Oct 11 (Reuters) - Not far from the
world of regimented cubicles and headset-toting call centre
operators, a quiet revolution is stirring in its slippers.
University librarian Sheila Ortencio, for example, was so
poorly paid that half her salary went for childcare, and her
meals amounted to dried fish and one fried egg per day. Four
years on, she juggles two daughters, a husband and two
Pomeranians as she catalogues ebooks online from her parents'
In her freelancing job, she's earned enough money to buy
land for a house nearby and make down payments on a condo in the
"I have double the work but, it doesn't bother me because it
doesn't feel like work," she says.
Ortencio is one of more than half a million Filipinos
registered on freelance website oDesk.com - more than are
currently employed by the country's growing business process
outsourcing (BPO) industry.
While it's early days, proponents of so-called commercial
crowdsourcing contend that a swelling army of global freelancers
is already disrupting traditional outsourcing - from preparing
tax statements to conducting research on pediatricians.
"This is all about cost arbitration across borders," says
Siou Chew Kuek, a Singaporean researcher who works with the
World Bank. "Now you can farm out your work to anyone in the
Driving this trend are a dozen mostly U.S. startups that let
other small and medium-sized companies carve projects into
chunks and then recruit individuals or teams of freelancers to
do the work. By leveraging a faster, more ubiquitous and cheaper
Internet, the startups can pluck the low-hanging fruit of IT and
data-entry outsourcing that big BPO players such as Infosys
and Wipro once considered their own.
Australian-U.S. startup 99designs, for example, has paid out
$40 million to some 180,000 graphic designers, with its largest
user base outside the United States being in Indonesia. Elance
has 266,000 freelancers in India who have earned nearly $150
million. Odesk has 2.4 million registered freelancers and more
than 480,000 clients - companies including Cisco and HP
"This is moving the entire BPO industry - that was dominated
by these large middlemen organisations that take most of the
profits - to the cloud," says Anand Kulkarni, an
academic-turned-entrepreneur. "Now you no longer need to be able
to afford Infosys rates to be able to get quality results out of
an outsourcing system."
For sure, the BPO industry is not necessarily quaking in its
boots. The industry was worth $150 billion last year and is
growing at 5-6 percent a year, according to Pradeep Mukherji, an
Indian IT consultant and adviser to the World Bank.
Crowdsourcing companies admit it's still an uphill struggle
to persuade firms to experiment with outsourcing work to
freelancers rather than keeping it in-house or sticking with
established BPO players.
For freelancers, many face a precarious career: not always
getting paid for work completed, going without healthcare
insurance, and job opportunities not always being available.
Indeed, many freelancers who have signed up with oDesk have
never received feedback from clients - suggesting they have
either not tried to pitch for work or haven't won any yet.
"It's true to say that it's hard to get that first
contract," says Panos Ipeirotis, an associate professor at New
York University who studies oDesk data.
SECOND WAVE OF INNOVATION
Such imbalances are feeding a second wave of innovation in
the industry. The first outsourcers focused on what oDesk.com
CEO Gary Swart calls the eBay model - using recommendations,
feedback and trust to create a market where companies find good
freelancers and freelancers can build a reputation.
But as freelancers build closer relationships with clients,
both sides prefer a more structured model where trusted
freelancers hire their own team, prompting oDesk and others to
tweak their software to accommodate them. Ortencio, for example,
manages several other oDeskers on behalf of long-term clients.
In the past couple of years, other startups have tried to
mend weak links in the chain. A potential employer posting a
project on Elance or oDesk, for example, can be overwhelmed by
applicants - making it difficult for them to find the best
freelancers quickly, and harder for freelancers to stand out
from the crowd.
Kulkarni hopes to solve this problem by having his startup
MobileWorks train workers to guarantee quality, and by breaking
down projects into micro-tasks to lift less-skilled workers onto
their first rung. Tasks range from transcribing hedge fund forms
to generating sales leads.
Once they're proficient at micro-tasks, Kulkarni says, "they
would be let loose on sites like oDesk or Freelancer.com" where
they can earn higher fees.
Ortencio similarly multiplied her pay. She started out
charging $1.50 an hour - the same she was earning as a librarian
- but is now billing $8.50. Her experience is far from unique:
The average contractor on oDesk, the company says, has seen
monthly income grow 190 percent after three years.
Nearly all crowdsourcing companies make their money by
charging a fee to contractors for each successful transaction.
All declined to share detailed earnings, but oDesk, which claims
to be the biggest online workplace, said that its contractors
earned about $75 million in the first quarter of 2012, against
$40 million a year ago.
While crowdsourcing is global - Elance boasts clients in 180
countries and freelancers in 155 - much of the growth is coming
from Asia. Indonesians, for example, flock to 99designs.com,
where instead of up-front contracts they submit graphic designs
in the hope of winning a prize.
Recently dozens gathered in the Javanese city of Yogyakarta
to thank 99designs in a video. The first the company's
Australian president and CEO, Patrick Llewellyn, heard about it
was when it was posted online. "I was moved to tears," he said.
Such growth is prompting crowdsourcing companies to set up
operations nearer to where the action is. Taskus, a boutique
outsourcing company, and Freelancer.com, for example, have both
based their Asian operations in the Philippines.
Some are going further afield. On a trip to Nepal, Canadian
Mark Sears saw so many engineers and MBAs sitting idle that he
saw a business opportunity and moved his family to Kathmandu.
Now CloudFactory trains teams to complete micro-tasks on behalf
of clients back home, like annotating videos of amateur hockey
games. His latest recruit: Mohamud Juman, an English-speaking
Facebook addict who collects trash outside their office.
Indeed, companies like CloudFactory and MobileWorks say they
are out not only to turn a profit but also to battle poverty.
World Bank adviser Mukherji says this so-called "impact
sourcing" already employs 560,000 workers and could account for
nearly a quarter of the total BPO workforce by the end of the
Governments and organisations such as the World Bank are
taking note of the potential for an industry that generates
foreign exchange but requires very little capital outlay.
Bangladesh was one of the first countries to declare online
earnings tax-free, for example, and MobileWorks has recently
signed an agreement with the government of Jamaica to deploy the
service on a national scale.
All companies stress they're out to make money by mobilising
what Ajay Vinze, of the W.P. Carey School of Business at Arizona
State University, calls a movement of "micro-entrepreneurs."
Sheila Ortencio puts it more simply: "We want to be an
independent, modern Filipino family."