The future of the company is in a global market? February 7, 2012

When outsourcing, and particularly offshore outsourcing, became popular business strategies only a few academics stopped to ask how this might change the very nature of the company as we know it. Now online resource marketplaces are becoming common, things are going even further.

These marketplaces are very simple. If you need something done, you post the job online. Across the world, millions of individual contractors and small companies watch these job postings and bid for the work, creating a reverse auction, based on price and their track record of delivery.

Tools like oDesk.com, Elance, and guru.com are all offering this service – usually for about 10% of the contract value as an agency fee. I have heard more and more people recently in large established companies talking about getting some copywriting or marketing or blogging done by going to these marketplaces – it appears to be replacing the old concept of local freelancers.

Cost has always been the main driver for those seeking to outsource work across the globe, but the availability of talent and the ability to scale were never far behind. What has changed is that many more international locations now have the infrastructure, the people, and the stability of democratic governments. There are many places in the world where IT and IT-enabled services can be delivered and entire continents, such as Africa, are waking up to this fact.

And these markets are not only allowing access to the lowest possible cost, but they have also allowed contractors to earn far more than they could locally because they are pitching their prices higher than the local market. Think for a moment, if a company from New York needs a website prepared and a local firm will charge them $1000, but a developer in Bangladesh might expect $100 in his local market, the contractor in Bangladesh is likely to pitch $400 for the job.

Until recently, I heard this week from a contractor who writes blogs in Bangladesh. He was moaning that people from the Philippines – who can undercut everyone – are flooding the online marketplaces.

It seems price is still important, but more importantly, these networks look ready to stay and to become an integral part of the modern company – hiring and firing and creating virtual global teams at will.

  Photo by Dave McClure licensed under Creative Commons