By Dan Berthiaume
Crowdsourcing, or the outsourcing of typically (but not exclusively) lower-end business processes to individuals and service providers throughout the globe via open call on the internet, has recently been receiving increased attention from BPO analysts and media. Companies can post outsourcing assignments on crowdsourcing sites such as the Amazon.com-operated Mechanical Turk, or post them through proprietary means, and then select from whatever pool of applicants results.
According to a recent white paper from Everest Group, “Every Crowd Has a Silver Lining,” large corporations such as AOL and Google are leveraging crowdsourcing for low-end tasks including keyword optimization, while Procter & Gamble is performing more than 50% of high-end processes such as design, research and engineering via crowdsourcing.
Cost Proves Major Factor in Crowdsourcing Growth
Looking at the rationale behind outsourcing business processes via crowdsourcing, Everest Group finds that a comparatively low cost is a critical driver. Everest Group estimates that domestically outsourcing a data entry project via crowdsourcing is 60% cheaper than domestically outsourcing it through traditional means.
Looking at offshore outsourcing activity, crowdsourcing is even more comparatively cost-effective, with the same hypothetical outsourced data entry project costing 65-70% less using India-based crowdsourcing than using a traditional Indian BPO provider. The significant cost differential is attributed to low wages, lack of benefits, absence of facilities or support costs, and elimination of any need for spending relating to recruitment, training, supervision or turnover.
Everest Group notes that some of the same issues with difference in perceived quality of work from domestic and offshore providers exist in the crowdsourcing market as do in the traditional BPO market, but to a much higher extent for low-end tasks than for more complex and creative tasks.
Labor On Demand
Another advantage provided by crowdsourcing is the constant availability of on-demand labor. As pointed out in the Everest Group white paper, there is a “non-utilization” component inherent in any traditional BPO relationship as a result of factors such as training and business development which the service provider recovers in its billing rates. In contrast, crowdsourcing offers 100% utilization due to its on-demand nature, creating cost savings estimated to run as high as 10-15%.
Crowsourcing economics do vary considerably based on factors such as nature of work, whether crowdsourced resources work full- or part-time, and location of crowdsourced resources (non-utilization savings are typically higher with the offshore crowdsourcing model due to higher BPO utilization rates in the US).
The Third-Party Intermediary Option
Companies using the crowdsourcing model of outsourcing may want to consider using a third-party intermediary to provide governance, quality assurance and contractor management infrastructure. These intermediaries typically charge 15-30% of labor cost, while similar intermediaries in traditional BPO relationships charge 5-15% of labor cost. However, due to substantially higher labor costs of traditional BPO, Everest Group says crowdsourcing with an intermediary still costs far less than traditional BPO with an intermediary.
Crowdsourcing Risks Exist
Despite its potential advantages, the crowdsourcing model does carry inherent risks. These include lower accountability, sharing intellectual property with anonymous, remote workers, and a lower likelihood that skilled and experienced workers will engage with the crowdsourcing model. To mitigate these risks, Everest Group advises using managed service providers who can offer “private crowds” which have undergone due diligence, non-disclosure agreements, etc.
The Future Lies with Vendors
Building on its recommendation for companies to use managed service providers when engaging in crowdsourcing, Everest Group concludes that future success of crowdsourcing lies in the hands of vendors. If vendors take steps to fully understand the scope of crowdsourcing projects, staff private crowds properly, ensure timely delivery and ease of use, and otherwise increase and improve the structure of crowdsourcing, Everest Group predicts crowdsourcing will grow in popularity as a means of outsourcing. However, these developments are not guaranteed.
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