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More everyday Kiwis outsourcing work to India, and elsewhere, via the web

Freelancer.com is an online service that lets you farm out a project, such as some Photoshop work or website for your small business, to a low cost worker overseas.

When I last checked in with the Sydney-based company, back in 2010, it had just set up a local currency website, www.freelancer.co.nz.

Since then, it seems to have grown steadily, New Zealanders have now commissioned more than $1 million of work, CEO Matt Barrie told NBR. Around 4000 Kiwi employers have posted projects.

Barrie talks about it as “the people cloud”. Instead of hiring extra staff for a project, you tap people via the web, as needed.

Outsourcing has long been popular with big companies. Barrie says Freelancer makes the concept accessible to sole traders and small businesses, too. 

Of course, there are many locals who will happily handle the kind of web design, graphic design, coding and search engine optimisation tasks that feature heavily on Freelancer.

But Freelancer lets people worldwide bid for a project – and many, especially those from India and the Philipinnes, will do it a lot cheaper than their Kiwi competitors (31% of all jobs commissioned through Freelancer.co.nz have gone to bidders based in India, followed by the US on 9% and Pakistan 8.5%).

You top up your Freelancer account with a credit card or Paypal, then make payments milestone payments as a successful bidder completes each phase of a project in the time-honoured half now, half later fashion.

Employers pay $4 per job posted or 3% of the value of the job, whichever is greater.

If everything does go bellyup, Freelancer offers a dispute resolution service.

Destroying local jobs?
I asked Barrie if he feels guilty about putting locals out of work.

Not at all, he said.

He’s helping sole-traders and small businesses in the Western world cut and become more competitive by offering them a cheaper way to execute projects (and Barrie doesn’t just spout about this in interviews; he’s also spent more than a decade as an external lecturer at the University of Sydney; most recently in technology venture creation).

His message: outsourcing and offshoring isn’t just for big corporates, anyone can do it through a site like Freelancer.com. For example, it helps give a leg-up to the high-tech start-ups he meets and mentors through his course work – freeing up money and time to focus on strategy and other headline tasks.

Branching out, growing fast
Freelancer has always focussed on web and other IT-related projects (web design still accounts for about 50% of its projects) but it is now diversifying into other areas. Barrie says any task that can be done online is on the table – including those in high-end areas like astrophysics and biotech, as well as more mainstream areas like data-entry, accounting and sales and marketing tasks.

The diversification is helpign to fuel growth (although some expansion has also been through Freelancer taking over struggling competitors).

Freelancer.com is growing fast, from a small base, in NZ, with usage tripling since 2009.

Worldwide, around 4 million are using the service.

When I last spoke to Barrie, two years ago, his company had around 20 staff. Today it has 135 (about 50 in Sydney and most of the balance in Manila. It also has a satellite office in London and will shortly open one in the US).

Revenue has doubled then doubled again to around $US50 million. Barrie won’t give any specifics on the privately-held company, but says it is single-digit profitable.

It’s harder to say if the category as a whole is growing. Freelancer.com has grown so fast, in part, by buying a dozen rivals in the US, Europe and Asia – some of whom (like Lime Exchange, in liquidation) have been struggling and were presumably picked up by Barrie for a song.

Which bidders can you trust?
My own experience of Freelancer.com has been mixed. I posted two projects in 2010: one to transcribe an interview, a second to drive traffic to a news story on NBR.

Dazzled by Barrie’s descriptions, I was expecting compliant, highly motivated offshore workers.

But the Indian whose bid I accept for the traffic generation project required a lot of bugging to meet his target number of page impressions.

And the Filipino woman I hired for transcription staged a temporary strike until I sent a milestone payment – and then did a so-so job because she struggled with my Kiwi accent.

A related issue was that dozens bid for my projects, but they all had five-star reputations. It seemed likely some were gaming the system, using sock puppet accounts and/or small jobs to harvest good ratings from their friends (or themselves).

Barrie, acknowledges this was a problem, but says it has been fixed by an upgrade to the reputation management system.

Better reputation management, community ratings
A key element of the new community reputation is that you’re now weighted toward the volume of money you’ve been paid rather than the number of jobs you’ve done – making it harder to game the system. Bidders are also now rated for attributes like professionalism, communications and how many times they’ve been re-hired.

Another tweak: a person who posts a project sees a bidder’s reputation score as it relates to a particular project. For example, your experience in web design work will count for nothing if you bid on a genealogy project.

Arbitrage
The site has also seen another phenomenon recently: the rise of arbitrage (now the subject of a Harvard University PhD student’s Freelancer study).

Barrie gave this example: a company in India might win your web development project with a $5000 bid, but subcontract it out for, say, $2000 to another company (what Barrie calls the true cost).

The Freelancer CEO sees this as win-win. The prime contractor manages the project, and makes sure you’re happy with the work, which is still cheap by Western standards – and it makes a big whack of profit.

I’m more thinking: $3000! $3000!

Three locals like it
Bambini, which provides breakfast and lunches for underprivileged school children, is one of the small NZ outfits that has posted jobs to Freelancer.co.nz.

CEO Rod James used Freelancer.com to get help with a moving typography project for the charity’s website.

"As a not-for-profit, we didn’t have a lot of money coming in,” said James.

“So I put the project online and pretty soon about 40 people had looked at it.

“I wasn’t simply chasing the lowest price, I wanted someone who would understand what I was doing and would care about it. The successful bid ended up being a freelancer from England, Mark Winteredit. Mark was so professional and maintained great communication all the way through - he really worked hard on the project and produced a fantastic result. Freelancer was easy to use and helped get our charity off to the best possible start."

For charity ...
Lucette Dillon, who runs the Quan Am Foundation, a charity to raise awareness of orphaned children in Vietnam, posted projects on Freelancer for website development and a logo.

"Signing onto the site the next day I was pleasantly surprised to have a number of bids and private messages from people/companies willing to work pro-bono on this assignment. From there on I viewed profiles and chose RedAtom studios who are based in the US for my project. The whole process was so simple, I thought it would take months to find someone to help me but RedAtom had a draft site for me to view within the week," Dillon said. (The site has yet to go live as Dillon is traveling overseas.)

... and the the folding stuff
One of the most enthusiastic advocates is Ryan Sanders, founder of Haka Tours.

Sanders has posted search engine optimisation, affiliate marketing, and web design jobs to Freelancer.co.nz.

“Haka Tours is one of a number of tourism brands I own through which go direct to the consumer online," Mr Sanders told NBR.

No qualms about hiring offshore
Like Barrie, Sanders has no qualms about funneling work overseas. Rather, he sees it as a secret of his success.

"Freelancer has enabled us to run multiple online marketing projects simultaneously for a fraction of what it would cost us if we hired locally," he said.

“In late 2010, I was awarded NZ Young Entrepreneur of the Year at the National Tourism Awards by John Key for business innovation. At the heart of my business strategy, was a comprehensive outsourcing model which allowed me to double industry average net profit margins whilst not having the burden of hiring staff during a difficult economic period.

“We are operating in a global labour market. That is a fact. As always, businesses can choose to adapt or fall by the way side. As a business owner, your first question when faced with a job vacancy should be “Can this role be performed remotely?”

It seems to be working. Haka Tours was recently named the top tourism company from more than tourism businesses in New Zealand  for 2012 by an independent travel review website Rankers, beating out the likes of AJ Hacket Bungy and Shotover Jet.

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Comments and questions
26

I am about to outsource a job worth $35,000 if built in NZ, but in India, it'll cost about $10,000. If we didn't outsource we wouldn't be able to innovate. Outsourcing is the future.

On one hand, it's useful to have a contractor on hand for back-and-fourth discussion and quick feedback and changes. And an NZ contractor is more likely to understand your business, and throw in their own ideas.

On the other, outsourcing to someone offshore forces you to focus your thinking and deliver a tight brief. And of course it can be very cheap (assuming no wrangles over anything that needs to get re-done).

So ...

I agree, I have seen many people post bad feedback on freelancers because they asked for a Mercedes but asked for a bicycle. Most people who have not developed lack the understanding of scope creep. We will be locking this spec down well (I hope)

Totally fair call, but outsourcing has wider consequences for society as a whole (look at the woeful state of the US), after all saving a few bucks is pointless when no one can afford what you're producing because they're unemployed due to outsourcing.

For the outsourcer, there is also issues when things inevitably go wrong - just look at the woeful state of some of the telcos call centres where fluent and clearly spoken English is optional....

outsourcing is fine for those with a short sighted view of the world (e.g. most corporates wanting to hit their annual targets), but the cons ultimately outweigh the pros.

This debate is pretty pointless anyhow, as its happening regardless of what we say here

Exactly. If you don't change the service you provide as an employee, someone overseas will eat your lunch. This is completely normal.

Good luck - we make a good living fixing "outsourced" software projects. A client we are now working with in the UK is looking at scraping his entire site and starting again from the beginning because of all the security holes his outsourced site has.

As they're in the UK and I assume you're in NZ, doesn't that mean they're outsourcing to you now?

What tends to happen and what is apparent from posts below is software projects are complex and short term "savings" can be costly delays, time to market etc.

What can "look" good can be filled with holes such as security, usability, scalability and flexibility and so on.

Poorly made software costs you in the long term, especially if the freelancer is long gone, no one likes fixing poor code.

Partnering with a company with a proven record is the best bet for optimum results in my opinion.

Buy kiwi and save.

Can't innovate a job at home though, eh?

I've used these folks (designcrowd.com) for a couple of small design projects. One project winner was from Egypt, the other from Russia. Fine for discrete projects, but I wouldn't use these services for heavily nuanced or iterative projects. Too hard. I expect they're making SMB designers nervous. But you'll never see big businesses looking there for suppliers.

I've used elance and freelancer.

The quality - is often average - always include a signed QA statement (from the vendor) as a requirement for your project (before payment). It helps.

I would mainly use these services for rapid prototyping - as opposed to a larger $30K build.

Also re: design - sometimes the creative lacks. If you say - I want the design to look a bit like itunes - they will come back with something that looks exactly like itunes.

Overall - you need to manage things carefully - and be patient - often the first copy/version - will make you gasp. It takes a bit of time - to get the project polished - but don't lose your temper - go about it calmly.

Agree completely. Clearly defining the success criteria is the biggest caveat to all of this including my comments in the interview.

I have no direct experience with outsourcing overseas, but as a locally producing web development company I can say it has been a godsent.

Unfortunately for many of our customers, they are not in a position to develop a tight brief or keep the project under control, so we have found that most projects in the past 4 years have been "rescues" and rework of projects that have been somewhere else (driven into a wall)

So the end result of globalisation for the working class is everyone is dragged down to the lowest common denominator... ahhh progress!

Maybe you could look at it from the angle that in tough economic times like now, it allows businesses to keep moving forward with projects and provides the opportunity for stability (or even growth) where not previously financially viable if locally staffing was employed?

While all the profits go to the top and the jobs (which are kept to the lowest possible pay) are still sent off shore. Yes progress for this country indeed.

Sorry but no one wins if a business stops trading. Only those who hold the purse strings in these tight economic times understand why outsourcing is the only viable option and thus protecting current local staff.

@13 What a load of cr*p - Have you seen the pay disparity between senior managers and workers in this country? The doers get laid off and the managerial parasites who add no real value roll in cash. Meanwhile Indias/chinas/the philippines get growth whilst the rest of us starve.

This is short sighted idiocy at its finest. Invest in NZ, invest in NZ skills and grow.

"Bambini, which provides breakfast and lunches for underprivileged school children, is one of the small NZ outfits that has posted jobs to Freelancer.co.nz."

The $1m paid to freelance over the last year could have been paid to our own low paid workforce. As this trend continues and as our manufacturing base depletes (a la F&P) expect a rapid expansion for the need for charities such as Bambini.

Good on those entrepreneurs benefitting from this, although what this business model choice means for the NZ is that qualified Kiwi professionals will slowly join the unqualified workers as under-paid blebs. The country will be run by a lucky few business owners and their friends in politics.
The economy is no longer meant to benefit the country or the population, but to "grow" on its own, regardless how or where wealth is created. This short-sighted race forward cannot end well.

wake up and smell the coffee people! take a deeper look at the longer term impacts of this - Those idiots in the US who led the outsourcing charge have their own citizens begging for spare change in the street. For those on here smugly saying outsourcing is good for business better hope they're not amongst those future kiwis who are destitute and begging for a living as the west trades places with the 3rd world

I think the negative comments here are from people who don't own or run their own business and have the luxury of not having to worry about staying in the black.... This type of attitude from people who risk nothing and think a certian standard of living is their right, is a bit painful.

As a business owner I have no choice but to outsource some roles to overseas. Our competitors are doing it and to survive we must do the same. I would rather not and some jobs such as design I wouldn't go outside Nz but image processing for our web site is perfect for It. It's not so much the cost savings but the speed of which we can get out product online, it's just so much quicker.
With regards to comment about business owners doing well at the expense of their employees. some of my staff earn more than me. And we are outsourcing because we are not currently profitable.

I agree why is there not tighter legislation around in sourcing and protecting nz skills and jobs? For a start we should have a roll of shame naming companies that outsource whilst locals are unemployed. If all companies were forced to use insourced labour we would have a level playing feild. Those companies that decided not to operate in the nz market, I say who cares

I wonder how many people are aware there can be N.Z. GST obligations for large out-sourced projects?!
http://www.ird.govt.nz/gst/additional-calcs/calc-spec-supplies/calc-special/special-supplies-f-i.html#imported