Weigh in on the Pros and Cons of Outsourcing Small Jobs

This is a guest post by BusinessWeek contributor Vivek Wadhwa.

Outsourcing has become such a toxic issue in the U.S. that even the President has rallied against it. The assumption is that outsourcing means firing full-time workers and shipping their jobs to a less developed country where wages are lower and labor laws are more lax. With the economic slump, some were hopeful that the outsourcing industry would simply go bust on its own. And last year, Forbes.com and the Wall Street Journal published articles which predicted the death of Indian outsourcing, because of its high growth rates.

I had challenged all these predictions and wrote that I expected the R&D outsourcing market to gain its second wind once the economy recovered. The final results aren’t in yet, but it is beginning to look like I was right. However, there is another trend happening which I didn’t predict—the emergence of a new lower end “smallsourcing” market where India isn’t the dominant player. I learned about this in meetings with a Menlo Park, California company called oDesk which provides a marketplace for small scale outsourcing. (I wrote about it in this column, “Outsourcing Benefits U.S. Workers, Too,” posted today.)

I was a little surprised when oDesk product manager Amit Bakshi wrote to me to tell about his new employer which was thriving in the middle of the recession. Skeptical, I met his company’s CEO, Gary Swart, and reviewed detailed data on their growth rates and markets. I was completely blown away when I learned that the fastest growing destination for small-scale outsourcing was actually the U.S. And that in their feedback system by which companies rate the work that was done for them, American workers received amongst the highest feedback scores. They even trumped the Indians!

I know that many will argue that this is causing salaries to drop and forcing American workers to accept paltry wages. But $17.50 per hour isn’t really a bad wage for a mother who does some data-entry work from her home in Greenville, North Carolina. And a computer programmer in Casper, Wyoming may be happy to be earning $40 per hour writing Java code, even though his counterpart in Silicon Valley may demand more.

Small business owners who can’t afford expensive design firms to build their Web sites or the full-time technicians to maintain their computer infrastructure can now simply outsource these activities for a fraction of what it would otherwise cost. They can locate specialized talent on an as-needed basis: they can hire a writer to manage their corporate blog, bring in a team of developers to build a new Web site or update an existing one, or even rely on remote workers to handle their customer service needs.

Gary Swart gave me examples of workers who had benefited from this kind of work. And he argued that his company has helped many American businesses become more competitive.

But is this the reality or an utopian view of the world? I would be very interested in learning about your experiences. If you are a small business owner who has had some positive or negative experiences with recruiting and managing remote workers, please post your thoughts. And if you are a computer programmer in Casper or anyone else who has been doing some of the outsourced work, I’d like to hear from you, too.

Vivek Wadhwa is a Senior Research Associate at the Labor and Worklife Program at Harvard Law School and Executive in Residence at Pratt School of Engineering at Duke University. Before joining academia in 2005, he was an entrepreneur who founded two technology companies.

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