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10 September 2009

Pinto's Point

Small sourcing generates U.S. jobs

By Jim Pinto

During the recent U.S. recession, outsourcing has become a dirty word.

It usually means firing full-time workers and shipping their jobs to countries where wages are lower and labor laws are more lax. But, here is a good surprise: One of the fastest-growing destinations for outsourced jobs is none other than the U.S.

Several companies now connect people in need of skilled temporary work with employees who fit the bill. They provide the infrastructure, which makes it easier to monitor, manage, and pay consultants working in remote locations. This illustrates how the world has become not just a freelance economy, but also an outsourced economy.

There are three key factors that contribute to this trend.

1. The Internet makes it easier to assemble and manage remote teams of workers.
2. Increasing economic pressures in the global economy, spurred by the rise of global competitors, have forced eliminations of full-time positions. So more businesses rely on outside contractors.
3. Many small and mid-size businesses now regularly need real technology—building web sites and databases, developing customer interfaces, and installing a variety of software.

Small businesses used to be the least well-equipped and the most under-resourced. Now, they are bridging the gap by using the new global freelance market for technology skills and help in marketing, accounting, and many other areas.

The interesting point about this new brand of outsourcing—called “smallsourcing”—is the truly global nature of the workforce and the work being outsourced. Smallsourcing companies like oDesk have contractors available from dozens of countries, including China, Singapore, Russia, and Bolivia. At the same time, work is being outsourced to the U.S. from the U.K., Canada, Australia, Spain, Saudi Arabia, and the Mid East.

Here is a good surprise: While the single largest percentage of oDesk software work goes to contractors in India, the U.S. ranks No. 3. And the number of hours worked in the U.S. is growing at a much faster pace than for other countries.

The salary differentials between India and the U.S. are far smaller than one might have thought. Indian workers were paid roughly $11 an hour on average, and U.S. workers were paid roughly $17.50 an hour. But Americans receive higher evaluations for their work, and so they do not have that much of a disadvantage. Most companies are happy to pay a little more for higher-quality work, delivered on time.

Smallsourcing forces workers in high-wage countries to compete against those in low-wage countries, which means downward pressures on wages. But recessionary pressures have made $17.50-an-hour jobs attractive, especially when one considers the minimal overhead required to do the work. Most smallsourcers already have a computer and Internet connection. Plus, highly skilled workers can make much more; some with web design and system administration skills earn $60-$90 an hour. If the job is bid on at a fixed price, time savings could raise the hourly rate substantially.

In a global economy, it is not surprising that most large companies outsource. But within the last few years, more small businesses are taking advantage of inexpensive outsourced labor, right here in the U.S. And many are willing to pay more for a software developer they can talk with easily, either locally or in a time-zone just a couple of hours different.

If you are currently out of work, try “smallsourcing” your skills. You may not ever want to join a big-company workforce again.

Related links:

• Outsourcing Benefits U.S. Workers, Too:
  http://www.businessweek.com/technology/content/jul2009/tc20090731_382752.htm
• Smallsourcing - Even small businesses can benefit from tapping low-cost resources abroad:
  http://www.entrepreneur.com/growyourbusiness/portfoliocombusinessnewsandopinion/article185044.html
• Blogs about: Smallsourcing:
  http://en.wordpress.com/tag/smallsourcing/
• Weigh in on the Pros and Cons of Outsourcing Small Jobs
  http://www.businessweek.com/smallbiz/running_small_business/archives/2009/08/outsourcing.html

Behind the byline

Jim Pinto is an industry analyst and founder of Action Instruments. You can e-mail him at jim@jimpinto.com or view his writings at www.JimPinto.com. Read the Table of Contents of his book, Pinto’s Points, at www.jimpinto.com/writings/points.html.