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Crowdsourcing – the Next Wave of Outsourcing?

In the late 1980s, the first wave of modern outsourcing realised the promise of specialisation, labour arbitrage, risk sharing and scale efficiencies. From the late 1990s forward, the era of globalisation saw the forming of the second wave of outsourcing with the rise of offshoring. Now, in the era of social networking, are we seeing the third wave of outsourcing with the emergence of crowdsourcing?

Crowdsourcing is a means of tapping into the global talent pool wherein certain business requirements a company wants to fulfill are broadcast to an unknown group of virtual service providers. The model is already being used by companies for idea generation, product testing and branding, and graphic and Web site design. Its benefits include:

  • The crowdsourcer taps a talent outside its organisation for out-of-the-box thinking.
  • Problems can be explored quickly at low cost and with input from the market.
  • Payment, if any, is tied to results and recognition, hence only the motivated contribute.
  • Crowdsourcing can facilitate brand-building kinship through a sense of collaboration.

As a large client organisation, how do you fit crowdsourcing into your portfolio of business-grade sourcing options, and how do you manage risk when the virtual service provider is unknown or distant? Our top 5  tips are:

1. Create criteria for candidate projects. Determine candidate projects based on risk and reward (e.g. testing a Web site applet rather than developing an ERP application).

2. Be clear on requirements. Documenting requirements and the desired ‘end’ (e.g. expected results/service levels/quality standards) while allowing freedom on the ‘means’ will narrow the field of virtual service providers and improve the strike rate of the crowd solution. If you would not be comfortable with your idea being broadcast on Facebook, then don’t use crowdsourcing.

3. Unleash creativity. Provide incentives for competition and collaboration, and value the intellectual property.

4. Make a schedule, but allow for iteration. Seek to balance timelines versus space for creativity and collaboration, seriousness versus play.

5. Give yourself a structured decision process. For crowdsourcing, the decision process often means filtering the ”best few” solutions to take to the next stage.

We will leverage the lessons from previous waves as crowdsourcing forms the next wave of abstraction and distance from our service providers. If not a replacement for outsourcing and offshoring, crowdsourcing will certainly be part of the client toolkit for selective sourcing.

ISG can help you achieve your organization’s goals through objective advice, knowledge of your industry and experience with arrangements from simple to complex.