Offshoring No Longer Just for Big Companies

Ann All

Much of the anger over offshoring is aimed at big multinational companies like IBM, which have been shifting a growing number of jobs overseas, and their clients, many of which are also large global companies. But a Contra Costa Times article spotlights an interesting trend: startups that hire contract workers in low-cost countries through online job sites like oDesk and Elance.


Article author Scott Duke Harris offers several Silicon Valley examples, including data storage service Box.net, which outsourced software development work to folks in Siberia, and RockYou, a development company that creates applications for Facebook and MySpace that supplemented its local production capabilities with Romanian and Japanese workers.


Harris notes some startups are called "micro-multinationals" due to their prowess in hiring global employees.


As I noted in a recent blog post, hiring temporary contractors like those who plug their services on oDesk and Elance is an appealing option for companies, not just startups, in a rocky economy. As I mentioned then, contractors employed through oDesk worked more than 1 million hours in August, an all-time high for the 7-year-old site. Just a year ago, workers on oDesk logged less than half of that, about 400,000 hours per month. Online hiring is up 129 percent since last year, pretty impressive considering the flat employment growth in the larger economy. The number of temporary IT jobs appears to be growing.


oDesk itself uses a global model. As Harris writes, the company was founded by partners in California and Greece. It has 38 full-time employees in California and the equivalent of 106 other full-time jobs elsewhere around the world. An example of an oDesk team: A stay-at-home mother in Tennessee manages a customer-support staff primarily based in the Philippines.


According to oDesk CEO Gary Swart, Silicon Valley companies that use oDesk can typically hire six workers overseas for the cost of a single California-based employee.

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Add Comment      Leave a comment on this blog post
Oct 15, 2010 7:49 PM R. Lawson R. Lawson  says:

The oDesk model is not the future of American IT workers.  Perhaps the future of "third world" IT service providers, but not us. 

Here is the email I sent to the original writer explaining why:

Interesting that you used oDesk in your article.  Simply visit their website and I think that is a clue as to why there is a 'shortage': http://www.odesk.com/community/oconomy/rate_statistics.  The average rates in the oDesk market space are simply not sustainable for American workers.  If companies are looking to hire at rates anywhere near what you find on oDesk (average project is less than $15/hr) they won't have any luck.

You are talking to companies who make a living commoditizing workers and are more concerned about rates than about experience and the quality of work they will find.  I suggest you speak with a good consulting firm in your area and people that consider a $120/hr bill rate low.  Most high end consultants don't do business with these companies because it isn't profitable.  You may find a few Americans who give oDesk a try, but most figure out very quickly that their game is a race to the bottom. 

The most prominent project factor on the oDesk site is bill rate.  People who understand very little about software development become fixated on the one rate that has little impact on the total cost of your project or the success of it.  Other factors, such as automation, experience, and process maturity have a great impact on projects but you find very few metrics on oDesk related to that.

Oct 25, 2010 10:32 AM Jim Chiang Jim Chiang  says:

What if a company cannot exist without using an offshore team?  For example, given budgetary constraints, you can't afford a firm here.  I would suggest to use the right offshore firm to get the prototype up and running fast before hiring local employees.



Blog at: http://blog.neocontext.com


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