Outsourcing Makes It a Small World After All

Friday Jun 11th 2004 by Dan Muse
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Elance Online provides small businesses the opportunity to solicit bids from nearly 14,000 businesses that offer outsourcing options in more than 100 categories including IT-related services.

To say that outsourcing jobs overseas is a hot topic would, of course, be an understatement. Regardless of how you feel about the trend, the motivation for shipping jobs to countries such as India is clear — it saves businesses money.

However, if you think outsourcing applies only to large companies, think again. It may be one of the better kept secrets in the business world, but small companies are masters at outsourcing. After all, most know what they do well and know enough to get help for the rest.


Elance Online Search Feature
Elance Online lets you search for companies by location and reputation.

The difference between large and small businesses is that the latter typically do not have the time to develop an extensive lists of outsourcing candidates for tasks such as programming, software development, Web design or database application development. And they certainly don't have access to contractors on a global basis.

To make it easier for small and mid-size businesses to find good, reliable and affordable partners around the world or around the corner, a five-year-old company called Elance Online offers a one-stop shop for securing everything from accounting to Web development. "The thought was that only big companies could do it, but we make it easy and safe for small businesses to outsource also," said Beerud Sheth, vice president, Business Development at Elance.com.

Over its five-year history, Elance Online has built a large and geographically diverse list of sellers. Sheth said that 53 percent of the nearly 14,000 companies that signed on to Elance Online to provide services are U.S.-based. The rest are located in countries such as India, Cananda and Russia.

Elance Online screens the contractors upfront, verifies credentials and provides work samples when possible, said Raul Mujica, the company's vice president. "The proof is on the site. The greatest factor is that performance is tracked on the site," he said. Not only can buyers post feedback on their experiences with service providers, but Elance Online posts how much money each company has earned through business generated on the site.

Mujica said that typically 8 to 12 companies are bidding on a project. "Buyers don't usually buy from the lowest bidder." References, past performance and turnaround time are among the factors that often outweigh price.

Sellers pay basic subscription fees that range from $5 to $30 a month, although there are additional fees based on the tier of service selected and categories (e.g., accounting, technical writing, and so on). Sellers also pay 8.75 percent of their revenue to Elance. The fact that sellers tend to be small businesses and entrepreneurs themselves results in savings for buyers. "They have lower overhead, often work from home and can monetize free and spare time," said Sheth. As a result, Sheth said, the small businesses buying services typically save 40 to 80 percent of what they would have spent if they were to contract services traditionally.


Elance Online Provider Listing
Whether you are looking for business cards or Visual Basic programmers, you have a good shot to find it at Elance Online.

You Want IT, You Got IT
If outsourcing is hot, IT outsourcing is on fire. Earlier this week, the company unveiled its Web & IT Outsourcing Center, which specializes in providing outsourcing resources for technology consulting businesses. Categories include e-commerce, Flash animation, Flash MX, HTML e-mail design, search engine optimization, usability testing, Web design, Web development, Web hosting, Web marketing and Web programming.

Elance cites Gartner research that reports outsourcing is the main source of growth for IT services and that it will account for 53 percent of the total worldwide IT services market in 2004 and will reach 56 percent by 2007.

The goal of the Elance Online service is to match small business looking for IT-related services with suppliers. "Many of our customers are technical entrepreneurs and small consulting firms who routinely outsource work to virtual teams," said Mujica. He estimates there are 400,000 small- to mid-size Web and IT services firms in the U.S. alone. Many of those businesses may have resulted from jobs being sent overseas. "They flipped the trend and made it an opportunity," said Sheth.

He added that he is also starting to see what he calls "reverse outsourcing." That is, international companies are outsourcing their IT functions to small U.S.-based businesses.

Whether you are looking to buy or sell, Sheth said, "outsourcing reduces the costs of entrepreneurs. It reduces the huge costs of starting a business. Outsourcing drives entrepreneurship."

Dan Muse is executive editor of internet.com's Small Business Channel and EarthWeb's Networking & Communications Channel.

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!
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