PC changes rules of outsourcing and how!
IT giants like IBM, Infosys, Wipro and WNS -- providing offshore services from India to clients in the developed part of the world -- have got a new rival on the fast expanding BPO landscape.
More importantly, the new challenger is not some thousand-employees strong Business Process Outsourcing firm, but individuals who could be sitting anywhere alone before their personal computer, but have before them an addressable market worth over $20 billion in the US alone.
While outsourcing of services by medium and large-size companies from the US and Europe to low-cost countries like India has been going on for a decade now, the new trend in this space to watch out for is Person-to-Person Offshoring (PPO), says global research and analytics firm Evalueserve.
PPO consists of services that can be offshored to individual professionals by entrepreneurs seeking to bootstrap their business and can be utilised by anyone with the technology advances and growth of internet in today's world.
All a professional requires to render these services is a PC and a reliable internet connection.
While each PPO contract is often of low value usually between $100 and $5,000 (Rs 4,000 to Rs 20,000) but due to the large number of end consumers involved, the total addressable market in the US alone has exceeded $20 billion, Evalueserve Chairman Alok Aggarwal said.
To make the things easier, there are already close to 100 websites such as Guru.Com, Elance.Com, RentACoder.Com and GetAFreelancer.Com acting as trading platforms for such services and over ten lakh professionals -- a majority of who are from India -- are already registered on these sites as PPO providers.
Guru follows a "closed auction" bidding and also provides a "SafePay Escrow" account that protects the interests of both the client and the vendor during the execution of the project.
California-based Elance.Com has approximately 80,000 registered vendors and free-lance professionals, of which about 50 per cent are from low-wage countries.
RentACoder.Com, a Florida based marketplace, has over 175,000 registered freelancers and is focussed on IT sector.
Another such marketplace, GetAFreelancer.Com has mostly IT programmers from low-wage countries as its registered freelancers.
Here, the buyers decide between closed or open bidding, while it also provides a payment escrow service.
One of the fastest growing segment in the PPO market is editorial and writing services, which include writing for books, copy writing, editing, proof-reading, news articles, newsletters, press releases, translation and web content.
These tasks do not require expensive infrastructure and people can work from their homes with a broadband connection and earn between $10 and $25 for an hour's work.
Among other popular PPO services being offered currently, jobs like online tutoring fetch 8-40 dollar a hour.
There are also jobs like accounting, book keeping, cost analysis, financial planning and tax preparation services for individuals, small businesses and home businesses.
Typical prices for these management, finance and tax related services vary between 12-30 dollars per hour.
Interestingly, global giants like KPMG, Ernst & Young, PriceWaterhouseCoopers (PwC) and Deloitte are also outsourcing accounting and tax related work to India, although their end-clients are mostly large and medium size organizations.
Jobs like writing business plans, direct marketing, market research and surveys, telemarketing, and public relations are also available for 10-25 dollars an hour.
The services being outsourced include online tutoring, website development, graphic design, database and software development, writing, editing and translation, accounting and tax preparation services, home and landscape design, marketing and sales support and creating legal drafts.
According to Evalueserve, the sector generated annual revenues of over $250 million in the fiscal year ended March 31, which will grow to over $2 billion by 2015, representing a cumulative annual growth of 26 per cent.
The payments, which could be based on a per hour or a fixed final cost basis, are generally made through wire transfers, cheques or credit cards.
The industry is currently operating through two business models -- first being direct model where a client signs a contract directly with the vendor from a low-cost location.
Under the more prevalent Online Marketplace model, the PPO vendors and clients enroll at an online marketplace -- which could be free or may involve a subscription fee or percentage of contract value or revenue after winning a project.
After evaluating bids from various vendors, the client awards the work to selected vendor or freelancer.
In this model, the online marketplace typically earns 5-15 per cent of the contract price in return for an assurance of a minimum service level from the vendor, thereby reducing the risk for the client, Aggarwal said.
According to Evalueserve, there are more than 90 online marketplaces on the World Wide Web and cumulatively they have over 500,000 vendors and freelance professionals providing these services from low-wage countries.
Pennsylvania-based Guru.Com, believed to be the largest among such marketplaces, has more than 6,25,000 registered vendors, more than 60 per cent of whom are from low-wage countries.