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Person-to-person offshoring services for small businesses and homes

Written by  Alok Aggarwal
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Alok AggarwalIssue:Asia-Pacific III 2007
Article no.:2
Topic:Person-to-person offshoring services for small businesses and homes
Author:Alok Aggarwal
Title:Chairman
Organisation:Evalueserve
PDF size:224KB

About author

Alok Aggarwal is the Founder and Chairman of Evalueserve. Prior to starting Evalueserve, Dr Aggarwal was the Director of Emerging Business Opportunities for IBM Research Division Worldwide, responsible for converting business innovations into businesses. Dr Aggarwal ‘founded’ the IBM India Research Laboratory within the Indian Institute of Technology, IIT, Delhi. Dr Aggarwal served as a member of the Executive Committee on Information Technology of the Confederation of the Indian Industry, CII, and also of the Telecom Committee of the Federation of Indian Chamber of Commerce and Industry, FICCI. He is currently a Chartered Member of The Indus Entrepreneur, TiE, organization. Dr Aggarwal has also served as a Chairperson of the IEEE Computer Society’s Technical Committee on Mathematical Foundations of Computing and on the editorial boards of SIAM Journal of Computing, Algorithmica, and Journal of Symbolic Computation. Dr Aggarwal has published 55 research papers in renowned journals and has filed ten patent applications. He has taught at the Massachusetts Institute of Technology, MIT, and has chaired a number of conferences, including Symposium on Theory of Computing, Foundations of Computer Science, and Symposium on Computational Geometry. Dr Aggarwal received his B. Tech. in Electrical Engineering from IIT Delhi and his PhD from Johns Hopkins University in Electrical Engineering and Computer Science.

 

Article abstract

Person-to-person offshoring, or PPO, lets small businesses, home offices and individuals contract one-time or continuing services from a growing number of service providers in low-wage countries. Some services are contracted directly from the vendor over the Internet, others use online marketplaces where vendors compete offering their services. Service providers pay monthly fees plus a percentage of the earnings contracted through the marketplace. Tutoring, financial design, editorial, writing, software development, website creation, marketing and sales support are important PPO services.

 

Full Article

There is a new offshoring trend to watch, called person-to-person offshoring, PPO. Offshoring is now beginning to go mainstream and is touching both the upper class and working class alike. This is reminiscent of 1991-92 when manufacturing in China and other low-wage countries began to impact the lives of the rich and the not so rich in developed countries. PPO consists of those services that can be offshored by entrepreneurs who are trying to bootstrap their new organization as efficiently as possible. With technology advances and the growth of the Internet, small offices, home businesses and even individuals can utilize PPO services. PPO offerings include online tutoring, website development, graphic design, database and software development, writing and translation services, accounting and tax preparation services, architectural, home and landscape design services, marketing and sales support services, the drafting of legal documents and other administrative services. Individual contracts are often of low value - usually between US$100 and US$5,000. Since the number of end-consumers and small businesses is enormous, the total addressable market in the United States alone easily exceeds US$20 billion. Indeed, our research and analysis shows that between April 2006 and March 2007, the revenue from this sector was more than US $250 million and is likely to grow to over US $2 billion by 2015, representing a cumulative annual growth rate of approximately 26 per cent. Furthermore, because PPO consumers have diverse requirements, the breadth of offshoring services is likely to be fairly large. Many offshoring trends are in the beginning of their life cycles and others only have a few early adopters so it is not clear that all of these services will, in fact, enjoy mass adoption in the long run. Nevertheless, the value proposition of receiving such services at a significantly lower cost and ‘just-in-time’ is clearly irresistible, so the sector promises to grow rapidly. Business models for person-to-person offshoring PPO service offerings, generally speaking, employ two business models: Direct interaction model - In the first model, a person signs a contract directly with a vendor in a low-wage country. The vendor has employees (e.g., tutors and administrators) working on a full-time or a part-time basis, or as sub-contractors. These are low-cost contracts - the client usually cannot travel to the offshore location or perform a costly due-diligence process, and therefore is exposed to some risk. Although payments can be made through checks or wire transfers, since the cost of individual projects is fairly low clients usually pay the vendors with credit cards and this helps to offset some of this risk. Online marketplace model - In the second model, the vendors providing PPO services enrol in an online marketplace. They pay a monthly subscription fee plus a fixed percentage of the revenue for services contracted through the marketplace. When clients post their requirements for a project or service on the online marketplace, the system communicates these opportunities to selected vendors and freelancers that provide the needed services and on request send their proposals to the client. The client awards the work to the appropriate vendor depending on the per hour or fixed-cost price, delivery time and a quality score posted by other clients who have been served by this vendor. In this model, the online marketplace typically earns between five per cent and 15 per cent of the contract price in return for assuring a minimum service level from the vendor, thereby reducing the client’s risk. Clearly, if the project calls for ongoing services such as continuous administrative service support, then the client and the vendor are likely to be ‘tied’ to the marketplace for the duration of the services. This model, therefore, only works well for ad-hoc or on-demand projects that are limited in scope and size. Our research estimates that there are currently more than 90 online marketplaces on the World Wide Web, which together serve more than 500,000 vendors and freelance professionals from low-wage countries that provide these services. Four of the larger marketplaces include Guru.com, elance.com, rentacoder.com and getafreelancer.com. PPO types Although there are several dozen PPO services, ten merit special attention: 1. Online tutoring services - India-based companies such as Transtutors, Career Launcher, Educomp Datamatics, and Tutor Vista, provide online tutoring for school and college level studies and prepare students for the GMAT, GRE and SAT university entrance examinations. In addition, they also offer one-on-one ‘live’ homework assistance over the Web, provide essay-writing guidance and help with educational content. 2. Accounting, finance and tax preparation services - These services include accounting and bookkeeping, budgeting and forecasting, cost analysis and reduction, financial planning and reporting, and tax preparation services for individuals, small businesses and home businesses. Most of these services are primarily provided through online marketplaces, although some firms in India (e.g., Xpitax, SurePrep, Outsource2India, CCH, IFR, Datamatics, OPI and kpoexperts.com) provide individuals with such services as US tax-form (e.g., 1040, 1065, 1120) preparation. 3. Home design and related services - This includes computer-aided design, architectural drafting, interior home design, landscape design and drafting, and preliminary drawings for electrical, plumbing, heating, ventilating and air-conditioning systems. A few companies from India currently provide these services, including Satellier, BluentCAD, ASE Designsoft, Exceed International, and DimensionICAD. 4. Editorial and writing services - These services include: academic writing; children’s writing; copy writing; creative writing; editing and proof-reading; grant writing; summarization of news articles; creating newsletters and press releases; writing proposals; drafting resumes; drafting speeches; technical writing; translation; creating Web content; and writing white papers and articles. Some companies providing these services from India include Creative Lipi, VMG-BPO, Webspiders India, Vogue Advertising, and Netscribes. 5. Graphics design services - These services include: the design and layout of annual reports; banner ads; billboards and signs; brochures; business cards; letterheads; catalogues; collateral; datasheets and press kits; corporate identity packages; logos; package design; page and book layout; and photo retouching. From India alone, there are more than 50 vendors and 200 freelancers providing these services, some of which include SmartData Enterprises, Virtuosoonline, Inforlinx Solutions, and Webgrity. 6. Transcription and other administrative support services - These services include: data entry; fact checking; development of mailing lists; personal assistant and secretarial work (e.g. scheduling appointments and maintaining calendars); presentation formatting; word processing; and, of course, transcription. Indeed, there are more than 300 vendors from India alone who have substantial numbers of full-time and part-time staffs, and sub-contractors providing legal and medical transcription. 7. Software coding and other IT services - These services include software application development; database development; coding and maintenance in Linux, Java or C+ environments; networking-related services; animation; writing scripts and utilities; IT security; system administration; and technical support. There are more than 5,000 vendors and more than 300,000 freelancers in low-wage countries like India, Russia, China, Ukraine, Pakistan, Bangladesh, Belarus and the Philippines who provide these services and charge between US$12 and US$30 per hour. 8. Website creation and maintenance services - These services include website design; e-commerce site design; flash animation; HTML email design; Internet marketing; online forms and database integration; search engine optimization; usability and interface design; Web hosting; and web programming. Just like the software coding area, there are more than 5,000 vendors and more than 300,000 freelancers in low-wage countries like India, Russia, China, Ukraine, Belarus and the Philippines who provide these services. 9. Marketing and sales support services - These services include writing business plans; email and direct marketing; lead generation; conducting market research and surveys; telemarketing, and help with public relations. Currently, there are more than 100 vendors and more than 300 freelancers providing these services from India. These freelancers can work from their home offices as long as they have a broadband connection. 10. Ancillary and concierge services - A few companies such as Future Net are experimenting with providing ancillary and concierge services from low-wage countries. In their model, the end-client registers on their website and agrees on a price. Future Net then provides the following kinds of services: entry, storage, daily upgrades and warehousing of personal data; debugging, restructuring and archiving of software; day-to-day accounting and bookkeeping, auditing and editing of personal accounts; transcription for deeds and documentation, financial deeds, legal documents and property deals for customers or for their family members, children and friends. Other services would include payments made to utility service agencies, educational or other institutions; and purchase of simple items such as movie tickets, personal computers, and electronics equipment. It is still too early, though, to say whether clients will embrace these concierge services over the long term.

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