The Global Local

June 26th, 2011 Fast Thinking, Features

More than just call centres, it’s now professional services matched to rock bottom prices offered online. Drew Turney investigates.

Among the revolutions the internet has wrought on work in the 21st century is that of freelancing, which has expanded exponentially. Services like Guru.com and Freelancer.com add global crowdsourcing into a very potent mix. Using the bidding model now entrenched in the eBay age, they become virtual messageboards for anyone, anywhere to throw their hat into the ring.

If you’re looking for projects you might be competing with others from all four corners of the Earth in everything from logo design to script editing, Flash programming to transcription. When you’re up against the newly-educated and newly-equipped middle classes of the third world it can be thankless competing against people willing to work for a tenth (or less) of your usual rate. But if you’re on the other side of the fence it can mean a world of opportunity to drive costs down to previously unimaginable levels.

Many professionals can find themselves on both sides of the equation, facing the double-edged sword of a brave new world of competition. Good thing? Bad thing? Somewhere in between? We asked Freelancer.com CEO Matt Barrie to explain the rapidly expanding universe of virtual freelancing.

Most online outsourcing services aren’t so up front about it, but the industry seems to be about connecting western payers with workers from emerging economies.

Absolutely, we connect western businesses with freelancers who are mostly from the developing world. We’re in the 250 top websites worldwide but in Bangladesh, for example, we’re in the top 20 and get more traffic than Microsoft, Apple, Linkedin, Amazon and Bing.

So if a web designer offered to design your website for $5,000 in Australia you’d probably get it done for about $500 through us. Jobs start at around $30 and average under $200.

How do you respond to critics that the whole field represents a race to the bottom as western professional are priced out of the market?

Technological progress transforms industries, disrupting jobs but creating many more. 15 years ago there were no web designers in Australia, and 10 years ago there were no SEO specialists. Now every small business needs a website and every website needs traffic. Yes, some industries will go offshore but that allows productivity in the Western world to increase. Look at US manufacturing over the last few decades. Output is always on the up but jobs have been shed because technology got better and the jobs lost were the low value, unproductive ones like those on assembly lines. It’s a win-win for everyone.

You’d probably be surprised that 70 percent of the world’s population isn’t on the Internet yet – the United Nations announced in late January the two billionth user had connected. What’s more, the average wage for those other five billion people is $10 a day or less. The first thing they’re looking to do is raise their economic circumstances.

We provide serendipity to both the western world and the developing world. Small businesses in the west get the digital workforce they need to transform, helping with their competitiveness by cutting their costs. In Australia we have over a million small businesses and 80 percent of them have no employees. How are they supposed to get anything done? Services like ours are able to deliver services for about a tenth of the cost, any time of day, on demand.

You can literally have the spark of an idea and get it implemented at 4am for a few hundred dollars or so. Frankly — with [Australia’s] 5 percent unemployment — Freelancer.com provides the much-needed workforce that will help us into the digital economy.

At the same time we deliver technical jobs to the developing world that desperately need them, at great rates of pay. If you’re a SEO specialist in Bangladesh life might be pretty grim on $2 a day. But through Freelancer.com you have the power to earn a month’s wage in a few hours.

I’d expect to pay at least $15-20,000 for a brand new car simply because that’s what it costs to design, manufacture and market one. Under the model where tasks are outsourced to the lowest bidder and using your example above, I might expect to be able to buy a brand new car for $1,500. It might be a great thing for consumers, but not for car companies who still have to pay the same for raw materials and staff.

The world changes all the time, and change is accelerating. You can’t go door-to-door selling ice in the age of refrigerators. If you want to be in the pillow business you’d own the company, do the distribution, marketing and sales, not be the guy stitching them together. Those days are over. How exactly is it a bad thing if you can buy a car for $1,500? The computer you’re typing on, the mobile you’re using, the appliances in your house — westerners all have this great lifestyle because it’s cheap to manufacture goods offshore. We wouldn’t have today’s standard of living otherwise.

The flipside is, it’s never been easier to start a business. For literally a few hundred or a few thousand dollars you can start a company to build a product or start selling a service. A good example is the social news site Digg.com. Not so long ago it rejected an $80 million takeover offer from Yahoo and it was built for $60 because the website was outsourced to freelancers. The possibilities are limitless – most people want to start a business but only a small fraction are actually doing it. There’s never been a better time.

To extend the car metaphor above, are services like yours just a way of setting new standard market pries for goods and services? Or should we simply abandon the notion of a standard market price altogether?

Pricing in a market economy is set by supply and demand and there’s a heck of a lot of supply coming online. The other 5 billion people are just like us only they’re poor, hungry, driven, self-skilling and motivated.

What do you think about the outsourcing of professional rather than support or ‘menial’ work to the third world? Companies like the Indian content ‘farm’ Demand Media are producing editorial content for both online and offline at a fraction of the cost of traditional journalists.

Demand Media is a great example of the power of freelancers. Their business model uses 13,000 freelancers to write a mountain of content on just about any topic you can think of. They just listed, soaring 33 per cent on the first day to a $1.5 billion market cap. This is the sort of business you can now build out of thin air thanks to online marketplaces.

Are buyers surprised at the specialisation or creativity of the work they can outsource to the developing world rather than just data entry or HTML?

Every job today is being digitised. If you design a house, you do it in a software package. If you do financial research, it’s an excel spreadsheet. Copywriting and it’s a text file. Design a part or product and it’s a CAD file that gets loaded into a machine. The rest of the world is just like us, they just haven’t had the opportunities we’ve had. But with all human knowledge now online they’re training up and I’m constantly surprised by the sorts of jobs we see go through, from hydrogen engine research to the design of drive train assembly for an electric car company…

The western world has mostly abandoned manufacturing in favour of services and — in Australia’s case — primary resources. Because of increasingly educated and skilled populations in the third world we’re now being given a run for our money in services too. What market sectors will there be left for the US, Europe and Australasia to lead?

Just look at the manufacturing sector in the US. According to the US Bureau of Labor Statistics US manufacturing employment shrank by two million jobs from 1988 to 2008, but net employment increased by 43 million jobs in other areas. Over the same period, manufacturing output has increased, meaning factories are more productive than before.

Disruption creates opportunity. Think about how your business would change if you had virtually unlimited labour for next to no cost. The west is great at coming up with ideas and innovating. You can now turn your idea into reality on a shoestring budget.

So what would you say to the people in Western countries who’ve traditionally made a living even in the menial or non-specialised work like data entry whose living is now threatened?

We’re not causing this, the Internet is. Do you really think you deserve a secure 20-year career in data entry? I’d suggest you go back to school!

The populist fear about loss of jobs sometimes gets loud enough to catch the attention of the government. Any worries about protectionist measures that might restrict you?

Protectionist worries in employment won’t be an issue in a hurry when we have 5 percent unemployment and we’re facing another skills crisis, they’d only be lowering Australia’s competitiveness. The alternative is dramatically boosting immigration, which is its own hot potato.

Just as the introduction of the Internet disrupted many industries, causing many big companies to collapse and jobs to be lost, it also transformed the world into a new age of communication, innovation and prosperity of billion dollar companies employing thousands in entirely new industries. The other 70 percent of the world’s population coming online is going to do the same thing through online outsourcing.


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