Saturday, May 08, 2010

Crowdsourcing and Outsourcing: The Two Most Legitimate Approaches to Making Money Online

Delineating between the two could spell a huge difference in terms of the quality of the service provided. Taken into context, crowdsourcing is "the act of outsourcing tasks, traditionally performed by an employee or contractor to a large group of people or community (a crowd), through an open call." (Wikipedia: Crowdsourcing)

Discovery News has an interesting podcast on crowdsourcing.

Outsourcing on the other hand, "often refers to the process of contracting to a third-party... transnational corporations have increased subcontracting across national boundaries."  (Wikipedia: Outsourcing)

Major differences between crowdsourcing and outsourcing is the inclusion of the word 'contract'. Having a contract entails several attributes:
  • Both of the contracting parties are legally held accountable to fulfill their obligations.
  • In crowdsourcing, it would be more difficult, if not impossible to secure a contract because that would entail engaging in an agreement with multiple parties who are often anonymous.Needless to say, you cannot engage in an agreement with John Doe.
  • Outsourcing ensures a more focused service because the engaging party is committed to seeing the task reach its end. Whereas crowdsourcing could only be mustered when the collective is sufficiently motivated. Anytime that the crowd loses its motivation, the project slows down it doesn't become stagnant.
  • The involvement of a contract sets parameters and limitations to what either of the contracting parties could do. It usually sets a time frame, objectives, limitations, accountability, professionalism, court jurisdiction and arbitration in case of dispute, quality control, service satisfaction and an overall agenda which is most often economic in nature. 
Both crowdsourcing and outsourcing have their inherent flaws and advantages. Different tasks require different approaches. For example, outsourcing is more desired when the service that needs to be performed requires round the clock performance. Here, the outsourcing company or the BPO, is mandated to maintain a presence that enables customers of a particular company to reach them no matter what time of the day. Call centers are efficient in doing this because of their staffing requirements.

Entrusting sensitive information such as personal and financial data is better kept in the physical confines of a corporation with a building, where the person to whom the data is entrusted can be held legally accountable for whatever happens to it. One could only imagine crowdsourcing banking information to an anonymous group.

Crowdsourcing on the other hand could be utilized for less sensitive tasks like referrals, sales, promotions and technical projects. The best example for this is the Open Source Movement. Here, the role of the core group is relegated to quality control and management. The details of the technical project is then left in the hands of the "crowd".

In some instances this is effective, such as in the Debian/Linux Operating System,  Mozilla Firefox Browser, VLC Media Player, and countless other Open Source Projects.

However, crowdsourcing isn't a walk in the park. Internal political strife usually occur which could either lead to factionalism and has the overall effect of slowing down the development of the project, if not total cessation of it.  

Perhaps, the best application for crowdsourcing is in sales. In a way, affilliate marketing belongs to this sphere in the evolution of a product or a service by engaging Internet citizens to add value to their Internet endeavors through sales and marketing.

It is a mutually beneficial engagement where the affiliate marketer, who sells a product or a service in behalf of the producer derives a commission in the event of producing sales leads up to the point of conversion. The producer benefits from the "free" or "crowd" marketing by minimizing costs on manpower and advertising.

Freelancing is an advantageous phenomenon in that it could embed itself in either of the two processes. It belongs to outsourcing if and only if there is a legally binding contract between the two contracting entities. It belongs to crowdsourcing if the producer engages in multiple anonymous entities without the benefit of a contract.

These by far are the most effective and legitimate means to make money online.