Outsourcing companies have traditionally been focusing on large contracts (i.e. multi-years, multi-million dollars). Thanks to the emergence of new destinations in the offshoring industry, like China, outsourcing vendors have started to discover the virtues of the SMB market, which is good.

But it still leaves one major segment to be addressed yet: the long tail, one of the largest ones, but certainly a tough one for vendors to address successfully.

Mary Trigiani sent me a link to an article called “Ooohs! & Aaahs?!! of Outsourcing” and posted by Ilya Lichtenstein on www.foundread.com.

In a nutshell, the post relates the experience of an individual who picked a freelancer on Internet to develop a very small application (40 hours of development).

I recommend reading the post [Ooohs! & Aaahs?!! of Outsourcing]..

Individuals as described in the abovementioned post, together with a myriad of small projects within organizations of all size, are just below the radar screen, and therefore invisible to larger providers.

Some companies (eLance, Guru, etc.) have been targeting this segment, relatively poorly in my opinion, since selecting a good provider looks like playing lottery; the same goes for freelancers, who are often faced with people with no significant experience of subcontracting. At a glance, these first-generation companies provide a list of freelancers and projects, a secure payment system (not guaranteed) and a rating system.

A second generation of solutions led by oDesk provides additional tools to secure the relation between suppliers and clients (basic matching system, secure work environment, guaranteed payment, etc.).

I am still unsure about this format. People with projects are snowed under with potential providers from all sizes; providers have a similar problem, as there is still very little information available about their potential client.

In a way, these sites have problems similar than dating sites’, which is to match efficiently and rapidly requests with a few best offers. A major difference with dating sites is that users are certainly not to devote the same amount of time and energy finding an outsourcing match, as they would do finding a personal companion. I have been using some of these sites for a while but I finally gave up, since I found the results were not worth the effort. That said, I do not want to generalize since there are many positive experiences too.

Outsourcing vendors could offer a very valid alternative to these sites. In fact, customers would benefit from the various commitments a larger company can make (replacing / adding resources, methodology, warranty, etc.). Moreover, the relatively low cost involved in promoting this activity would result in a lower overhead, and therefore a better price/quality ratio.

Emerging leaders would be perfect candidates to make the required changes in their organization to tackle this activity successfully, which yields me naturally to look at China. I am watching carefully a few cases to see how they will develop. Stay tuned.

Posted by Remi on Wednesday, June 13th, 2007 at 11:09 AM.