The Roar of the Crowd
This article originally appeared in Outsource Magazine Issue #24 Summer 2011
Over the past five years “crowdsourced” solutions have started to emerge as a popular business model for start-ups, as well as a viable alternative to more traditional outsourcing methods, particularly for smaller businesses.
But whilst “crowdsourcing” as a popular term has snowballed – easily demonstrated by a search on Google or BBC News Online – it still has a long way to go before it is embedded in the enterprise.
Lukas Biewald, CEO of crowdsourcing aggregator CrowdFlower, has said that “I think that companies like ours are really set to disrupt the whole outsourcing industry.” Is crowdsourcing a genuinely new way of doing things, with the potential to shake up the traditional outsourcing market, or is it partly a passing fad?
What is Crowdsourcing?
The term “crowdsourcing” was originally coined in 2006 in a Wired article by journalist Jeff Howe.
He defines crowdsourcing as:
“the act of taking a job traditionally performed by a designated agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call.”
Of course the combination of “large group” and “open call” means the crowdsourcing process can theoretically be applied to a number of situations, from websites like Wikipedia which rely on user-generated content through to viewers voting for the X-Factor winner. It also means there are many instances of “crowdsourcing” before the term was ever coined.
Because the term is quite ubiquitous there are inevitable debates about what constitutes a crowdsourcing business model. However there are clearly a number of distinct areas where organisations are getting value out of sourcing work to the crowd.
Ross Dawson is a Sydney-based futurist, author and crowdsourcing expert who is currently writing a book on how businesses can get value from crowds (jointly with the author of this article.) Dawson has published a ‘Crowdsourcing Landscape’ which covers the palette of different business models in this emerging area.
“The crowdsourcing landscape is very diverse, offering over a dozen distinct models for creating value with crowds. The space is rapidly maturing, with solid, well-funded businesses in every sector,” says Dawson.
One of the most important market segments are “Service Marketplaces”, effectively online exchanges where businesses post projects and freelancers – both individuals and teams – bid for the work.
Some of these websites specialise in different niches such as software programming or writing, but leading firms such as oDesk, Elance and Freelancer.com are more generalist and cover a diverse set of projects from web development through to professional services.
Besides giving access to a very large labour pool these sites also add value in a number of ways. For example oDesk provides “Team Rooms” for your virtual workforce from where you can manage some of the communications and handle the payment process. It even has software which takes random snapshots of your contractor’s desktop to check they are working during billable hours.
Some argue that these sites are actually just outsourcing for smaller businesses rather than “crowdsourcing” as once a project starts it tends to be worked on by one provider and the crowd is no longer involved. However the way businesses need to interact with the providers on these sites to get value has many similarities with other types of crowdsourcing; many of the operational dynamics and marketing messages are similar.
Another major market segment are “microtask” platforms where large-scale projects involving simple web-based work such as retrieving consumer data or categorising photos, are broken down into thousands of minute tasks and delivered to registered workers via a semi-automated platform.
The granddaddy of microtask platforms is Amazon Mechanical Turk delivering “Human Intelligence Tasks” (HITs) to an army of registered “Turkers” carrying out tasks in their spare time.
Mechanical Turk has been around since 2005 and other business models have evolved around it. Aggregators such as CrowdFlower help project manage your Mechanical Amazon Turk either through their own interface or a complete managed service.
Some of the most successful crowdsourcing businesses also take the basic microtask concept and then use it in specialist areas where some degree of experience is needed – for example SEO work or software testing.
Competitions and Crowdfunding
Competition platforms such as 99designs.com are also a part of Dawson’s Crowdsourcing Landscape. These platforms run projects as contests for registered professionals. A business may require a logo designed or need a market-related idea. They set a reward for the successful applicant or applicants. Some platforms run more of a distributed innovation model which involves the crowd also shaping, commenting and helping develop concepts and ideas.
Another key market segment are crowdfunding platforms such as kickstarter.com – where generally artistic and design-led projects such as recording a new CD or designing a new iPhone accessory are seeking funding for completion. The “investors” pay a small stake, usually in return for some exclusive and desirable output from the project. Once funding has been reached then the project can commence.
Some platforms such as crowdcube.com are also trying to establish places which provide a financial return and which are funding business rather than creative ventures.
Pros and Cons
So there is a market with some variety, but why should a firm crowdsource? The reasons to crowdsource that are often pitched to smaller businesses and start-ups are many of the same reasons why they should outsource in general. Cost is a primary factor, as well as the ability to access skills and services not available in-house.
Speed is another essential reason. Most of the exchanges are global in nature, so you can have your projects worked on 24/7 rather than normal business hours.
“Crowdsourcing isn’t always the right model. Sometimes things are better done in-house,” says Ross Dawson. “But those organisations that choose the right tasks for crowdsourcing and approach it well will build significant advantages over their competitors. Cost and efficiency are often less important than simply being able to get highly talented workers to complement the skills of your staff.”
Specifically using a crowdsourcing model is often pitched as the ability to get better results due to the input of many minds, as well as a flexible labour-on-demand model. The ability to access a workforce that is specifically global with a wide breadth of experience is also cited.
Naturally there are some criticisms of the model, for example around the quality and accuracy of the work, but a common reaction – especially for first-time users – is that the results can be surprisingly good. For example using Amazon Mechanical Turk for simple web-based work can be extremely effective.
Using these services is also not as necessarily straight-forward to use as it might seem. Often first-time users are simply driven by cost and go for the cheapest option, a high-risk strategy that is unlikely to reap the best rewards. There are best practices – usually gained through experience – which centre on building relationships with providers, effective project management and ensuring data quality. Getting these elements right can help drive value.
Crowdsourcing can also be controversial. Some professional groups, particularly graphic designers, have criticised competition platforms such as 99designs. They say they devalue the profession because it increases the amount of unpaid “on-spec” work.
There are also very legitimate concerns about the extremely low wages offered on some projects posted on these platforms and the potential rise of “digital sweatshops”. Much of this is due to natural concerns over globalisation and offshoring, but also because there is a lack of regulation in an industry which is still set to mature.
Questions over wage levels will need to be addressed in the not-too-distant future, but at some point down the line, there is already some movement with platforms like oDesk negotiating benefit packages for their US-based contractors.
Growth of Crowdsourcing Platforms
Whatever the ethical debate, it is clear that the market is growing very rapidly. Service marketplace oDesk has doubled in size every year since 2004, whilst rival Australian-owned Freelancer.com recently notched up its millionth project and has started to set-up country-specific presences, partly by acquiring a number of smaller competitors.
Meanwhile a competition platform like 99designs.com is growing revenues by around 120 per cent a year, a statistic that may have helped them attract $35m USD in funding this spring. Other crowdsourcing platforms have caused similar interest – for example software testing platform uTest received $13m USD late last year, whilst Google invested nearly $6m USD in search engine marketing platform Trada.
A parade of new start-ups with endless new twists on the crowdsourcing concept, appear here and there. Task Rabbit has “runners” who will do simple errands for you. “Wishabi” is a platform with a community of “deal hunters” who specifically search for online shopping details for Canadians.
The market is expected to keep on growing. “The growth in the use of crowdsourcing by small and mid-sized businesses is extraordinary,” says Dawson. “Even so there is enormous growth potential yet as more see the possibilities.”
Do Larger Enterprises Crowdsource?
Many of the platforms, particularly the service marketplaces, have targeted SMEs, entrepreneurs and start-ups. In fact Freelancer.com currently markets itself specifically as “Outsourcing for Small Business.” But as the market grows will larger organisations get involved and will crowdsourced-based business models provide an alternative to more traditional BPO routes?
Gary Swart, CEO at oDesk believes that as the market matures, the larger enterprise will start to engage.
“I still think we’re at the early stage of this market, and I often use an analogy of when salesforce.com started selling CRM and the cloud: in the early days they only sold to small-to-medium business, and the reason why is because large companies just weren’t ready for it. It was too much of what I call a ‘change mode’ sale. Now companies are using software as a service, they’re using platform as a service, they’re using infrastructure as a service, why not labour as a service?” says Swart.
“I don’t even think we’re at the knee of the curve of what’s to come, as larger companies ask ‘what about us?’ These large corporations need to save costs and would like to have fewer bodies and less office space and less infrastructure for these employees. They will need a way to leverage a global talent pool in order to get work done”
In fact some global corporates already have sporadically used a crowdsourced model for some functions, particularly around marketing-related activity. For example brands as diverse as the FT, Vodafone and Unilever have all tapped the thoughts of the creatives registered at Idea Bounty to shape advertising campaigns and marketing initiatives. Meanwhile Harley-Davidson have used crowd-powered ad agency Victors & Spoils for their latest campaign.
Other corporates like Dell and Starbucks have taken the crowdsourcing model in-house and produced websites for customers to suggest ideas which can be incorporated into their products, which is also good for customer relations.
For service marketplace and microtask platforms activity amongst larger firms is equally embroyonic, but there are certainly a few companies dipping their toe in the water. Like Gary Swart, Fabio Rosati, CEO at Elance, believes that the enterprise business will eventually start to come.
“Today the typical case scenario is a single individual within a large organisation who has heard about Elance. They may be a maverick, may or may not be authorised, but they come to us as it provides resources in an immediate, flexible, cost-effective way. Once they discover how useful it is they tell their colleague and we start to see 20 or so people in the company using Elance. Eventually the procurement function gets in touch and establishes an official vendor relationship.”
Gary Swart, of oDesk claims that four of the top ten web companies in the world are already using oDesk for some portion of their staffing needs on elements such as translation, content production and photo moderation.
“We have developed integrations that enable enterprise client systems to route work directly to a flexible bench of pre-screened, rated and ranked, tested and trained talent” explains Swart. “They work on-demand, directly through the interface that we’ve created with our client.”
Clearly there are several barriers for large organisations to get involved. These are numerous and include internal opposition, the background checks needed around employing people, concerns around confidentiality and the cloudy ethical debate over potentially exploitative levels of pay.
But as the crowdsourcing market begins to mature, APIs improve, and best practices develop we can expect more enterprises to get involved. Rosati believes it may be another year before the enterprise market for Elance starts to really take off whilst in other areas it really is happening. For example uTest, a platform which guarantees a pool of software testers suited to many types of applications, already lists Google, Microsoft and Intuit amongst its client base.
Overall there is enough activity and potential to grow to suggest that crowdsourcing is not a passing fad and will take its place in the outsourcing market. Initially most clients using this method are likely to be smaller businesses with larger organisations continuing to use it where it makes most sense – primarily in lower-end web-based work or in specialist niche areas such as translation.
The longer-term implications are harder to predict, but they could be far-reaching. Ross Dawson believes that crowdsourcing will be fundamental to the future of work.
“The reality of global distributed work is going to change how we work, the work we do, and the shape of organisations,” he says. “Crowdsourcing will evolve into an integral accepted part of how many businesses operate.”
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