Outsourcing, The Necessary Cog in the Modern Workforce

Ask yourself, “what is my scarcest resource?” Money? Good guess, but no. Time? Another popular response and yet again, no. The correct answer is focus. If you examine some of the greatest business minds of the modern era, the most common trait discovered is their ability to focus on what will ultimately grow their business the most. For Steve Jobs, a borderline manic focus on the simplistic design and intuitive functionality of Apple’s products propelled his company from the Jobs’ family garage to being one of the most profitable companies in the world. Even President Barack Obama has remarked on the importance of focus in a recent Vanity Fair article, “[research] shows the simple act of making decisions degrades one’s ability to make further decisions...you need to focus your decision-making energy. You need to routinize yourself. You can’t be going through the day distracted by trivia.” Your ability to silence the “noise”, deny that which distracts you from focusing on what is most important, will define your success in business.

Today in business, specialization reigns supreme. The renaissance man, woman or company are rapidly becoming extinct. Rather than spreading your company’s product offerings in several different markets, it’s more important than ever to be the absolute best at one sole discipline. With this shift in focus, company infrastructures are transforming to meet the demands for specialized workforce solutions. Long gone are the days of 1989 where outsourcing core business competencies to offshore companies was considered a radical new concept. Thomas Friedman, columnist for , explains the transition:

For many C.E.O.’s, outsourcing is over. In today’s seamlessly connected world, there is no “out” and no “in” anymore. There is only the “good”, “better” and “best” places to get work done, and if they don’t tap into the best, most cost-efficient venue wherever that is, their competition will.

The modern workforce has evolved into a collective of four distinct classifications: in-office, outsourced, known crowdsourced, and unknown crowdsourced. Outsourced, known crowdsourced and unknown crowdsourced are considered to fall under the umbrella of “e-Work”. Because e-Work is considered to be in it’s infancy, many experts use the history of e-commerce as an indicator of where e-Work is going. Despite increasing popularity, e-Commerce retail sales only represented 4.4% of total retail sales in 2010. Yet, online transactions are estimated to have increased by upwards of 24% in each of the last three years. Similarly, e-Work continues to grow exponentially and despite the fact that it represents a small percentage of the total workforce, the e-Workforce is expected to eventually surpass the traditional in-office workforce. Despite being clustered into the same general categorization of e-Work, outsourcing and (known or unknown) have some similarities, but are ultimately quite different from one another. Each workforce classification is defined by the four main attributes of cost, accuracy, reliability and scalability. Upon further examination, it becomes evident that outsourcing is no longer a “nice” option for companies. Outsourcing is a “must-have” solution as companies require increasingly complicated cost-effective workforce solutions while avoiding any sacrifice in accuracy, reliability or scalability. The infrastructure of a modern company’s workforce has become a collective of different workforce classifications and outsourcing is the necessary support cog that makes everything run.

-- Four classifications of the modern workforce:

In-Office Work: In house employees and temps.

Outsourcing: An off-site team working together in the same physical location.

Known Crowd: Workers from around the globe collaborating via the web and generally working individually from home.

Unknown Crowd: Anonymous workers from around the globe completing small, repetitive tasks.

In-Office, Outsourcing

In-Office Work is the easiest way for a company to test the outsourcing waters. It's simple: use a temp agency, hire an army of freelancers, or bring in a part-time sales person. There isn't much in the way of commitment, the workers are reliable, and communication is strong. The outsourced employees are under your roof, after all.

The problem, of course, is the inability to scale such a solution. It's not an efficient use of a manager's time to constantly evaluate and hire freelancers. Domestic wages, payroll taxes and overhead make the situation expensive, which explains why many temp agencies are "temp to hire." It's simply cheaper and easier to bring the army of freelancers in-house than to "in-office outsource" them.

Outsourcing, then, is a typical next step on the outsourcing path. In this model, companies send specific functions to be completed by an off-site team, often overseas. This is the most-utilized style of outsourcing because it's the most efficient. It scales, it's flexible, it's relatively cheap. There are a few drawbacks--communication issues will arise. And we're talking about the age-old example of the customer service call center, which has not maintained a sterling reputation with the customers it serves. That's why this category has evolved to include complex, custom outsourcing services provided by companies like TaskUs and First Call Resolution. Solutions range from revenue generation with outsourced business development, sales, lead-gen and market research, to customer service to content creation.

TaskUs built a team of "DealPros" for Savings.com, helping the company to populate its database of hand-picked shopping discounts. The company built a team of customer service veterans to scale the company practically overnight after Dollar Shave Club's viral debut led to an unanticipated onslaught of orders. Taskus built a verification process to help RecordSetter.com smoothly verify new entries to its database of world records. in these examples, the companies did not stop at outsourcing standard chores like payroll processing or call centers. Savings.com, a content site, outsourced its content. RecordSetter.com, a verification site, outsourced its verification. These companies outsourced the guts of their businesses.

Known or Unknown Crowdsourced

One important thing to note about crowdsourcing: Crowdsourcing and outsourcing would first appear to be competitive, but in fact they are largely complementary services.

Crowdsourcing was once the scourge of the design community. But it's managed to outlive the early ire and evolve into a legit method of doing business. Simple crowdsourcing of logos and branding on sites like DesignCrowd, CrowdSpring, and 99designs is popular with businesses of all sizes. 99designs has paid freelance designers more than $28 million in compensation fees since it began almost five years ago. Then there are the fully functional crowdsourced ad agencies like Boulder-based Victors & Spoils, which sold to Paris-based agency holding company Havas in April. Beyond that, video platforms like Poptent and Tongal have garnered increasing attention and investment from venture capital firms.

Aside from creative work, the Known Crowd layer of work includes everything from app development to nuts-and-bolts search engine optimization tasks. Companies like oDesk and smaller competitors Elance, Freelancer, and Guru specialize in crowdsourcing tasks from an anonymous pool of workers. They are less expensive than more integrated forms of outsourcing, but can be unreliable for the amount of training often required to on-board freelancers found online. For example, employs content moderators via oDesk. To recruit, screen and assemble their team of 50 content moderators, Facebook implemented background checks, aptitude tests and an extensive 17 page operation manual. Their goal is to monitor, police and cleanse Facebook’s network which receives on average 684,478 new pieces of content per minute. Unfortunately, Facebook has experienced negatives associated with crowdsourcing as their oDesk employees have disclosed private content screening information as well as taken to the web to protest Facebook’s wages of roughly $1 per hour. Despite their oDesk team’s operational efficiency and low costs, some would argue the costs from negative public relations as well as expensive training processes outweigh the savings. As well known brands like Facebook turn to platforms like oDesk, armies of freelancers continue to grow in numbers. In fact, experts estimate virtual work on these sites could reach $1 billion in payments this year, most of which go to workers in emerging countries. As high speed internet reaches these countries, this type of online outsourcing will only continue to grow. The platforms still face the challenge of verifying workers and creating ways to evaluate reputation.

That leaves the final, and most automated layer of work: Unknown Crowd Outsourcing. Led by Amazon's Mechanical Turk and improved by others including Crowdflower, this layer breaks down large scale jobs that require human intelligence into tiny nano-tasks, completed by a network of strangers around the world. It can be as simple as verifying that millions of images are "safe for work" for fractions of pennies each. For example, AOL inc. uses unknown crowdsourced data categorizers to take inventory of their video library. Within AOL’s extensive collection of articles, there are millions of videos sourced from AOL or third parties. Instructions required for this type of task are incredibly simple: scan article, make note of any video content located within article and identify source of content (i.e. AOL, Hulu, YouTube, , etc). Through Amazon Mechanical Turk’s platform, AOL is able to employ hundreds of workers to provide a cost effective method for collecting data and updating video inventory metrics. Unknown crowdsourcing solutions are ideal for massive corporations that require simples tasks which need to be repeated thousands or even millions of times. It scales like no other and it's cheap. Unknown crowdsourced employees are never specialized, will often work for “virtual currency” to be used in online games like Farmville. Clients of companies like Amazon’s Mechanical Turk or Crowdflower must build in fail-safes and multiple layers of work quality verification measures to ensure the work is accurate and credible.

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With each new classification of work, the style of outsourcing core and non-core competencies becomes cheaper and easier to scale. But there are tradeoffs. As outsourcing becomes cheaper, bigger and faster, it loses reliability and accuracy. Outsourcing with a Known Crowd or Unknown Crowd is cheap and highly scalable. It also produces unreliable results with difficult-to-predict accuracy. These layers require close monitoring of the work, with managerial controls and training.

The two more lightweight categories of outsourcing--In-Office and Classic--are known to produce consistently solid results. But are expensive and don’t scale well.

Most often, businesses suss out their own middle way. There is a sweet spot for any company, situated in overlapping Venn Diagrams of cost, efficiency, size and accuracy. A hybrid approach blending automation and trusted services is the way work will get done in the future. Innovation in business is no longer synonymous with technology. The barriers to entry have been lowered significantly as the latest and greatest technology is more readily available and affordable than ever. Thus, the human input is in greater need than ever as innovation in business has shifted from technological to innovative business models. Internal workforces have been greatly reduced as tech companies compete for the smartest and brightest talent in tech hubs like the Silicon Valley. Creating the greatest product or service depends heavily on your internal team’s ability to focus on their strengths. Engineers should be focusing on building products. Developers should be coding. Sales teams should be selling. Tasks like building and verifying a sales database are required are required, yet a complete waste of time and focus for your internal team. Hence, outsourcing solutions are necessary complete those tasks and achieve operational efficiency. In-Office workforces will continue to shrink, crowdsourcing will be limited by simplicity requirements and outsourcing will become the most important part of the modern workforce as excellence has become cultural, not just “something to shoot for”.