September 16, 2011 6 Important Ways Crowdsourcing is Different than Outsourcing

The marketing team at TopCoder spent a few days earlier this week at the Gartner Outsourcing and Vendor Management Summit. Taking place at the Peabody Hotel in Orlando, the facility was outstanding, the attendees came prepped to learn, pry and ask purposeful questions and to our delight, there was even a small café that pressed a pretty mean Panini.

As we sipped coffees in the AM, shared a few beers in the PM and swapped stories with attendees at the event seeking solutions, a very common conversation, given the title of the event, that kept coming up centered around the comparison of what a non-traditional crowdsourcing and community development model could provide as compared to a traditional outsourcing model.

Pleae Note – Since Crowdsourcing has become a rather popular term, we do use the language at times, such as this post, but we encourage everyone to read some thoughts on why we refer to TopCoder as being part of a Community.

These 6 specific comparisons helped us frame our conversations on-site at the Gartner event. If you are internally considering an Outsourced model or perhaps a Community Development platform, these 6 items will help you understand the major differences.

Per Hour Vs. Per Output

The shift from a labor-based model to an outcomes based model is really a re-envisioning of how work gets done and ultimately how you pay for that work.

Outsourcing – A team in India, the Ukraine, or even an onshoring solution here in the U.S. might be able to reduce your cost. You still pay for hours of human labor and of course the notion is that you can source labor more cheaply than hiring internally. Regardless of outcomes, such as costly delays and the quality of the delivered solutions, you still pay for an hour of human labor.

Crowdsourcing – In an outcomes based model where competition is the driver for production, you pay for the best quality output at a predefined spend. You no longer pay per hour, unsure how productive that hour actually was for your compnay. You now pay and can exactly calculate cost per quality output.

The Elimination of a Single Point of Failure

Human beings fail. Perhaps they slept poorly the night before or missed a train this morning. Whatever the reason, delays and negative impacts in productivity on an individual level drive up costs and extend time-lines on projects.

Outsourcing – You are simply augmenting your labor-force. Now a finite pool of developers handles tasks traditionally done in-house. Work is still given to individuals who are managed in a traditional way, just not in your office. As stated above, a single human will have bad days and when one individual fails, that lost productivity is felt throughout the project. If this weren’t the case, Outsourcing would cure the ails of IT – the inability to stay on budget and deliver quality outputs on time – but often, it does not.

Crowdsourcing – In TopCoder’s Competition Methodology, very rarely do we have submissions by only one person. By accessing a community, driven by competition, multiple quality solutions are provided, scored and ultimately the best in breed is selected. This elimination of any single point of failure helps to cancel out the randomness that is human life. If a qualified member has an off day, or decides to sleep-in and not compete, another qualified individual is having a great day and is raring to compete.

Access to Breadth of Talent

A community development approach can make your life easier when it comes to ensuring you have access to the talent needed, when you need it.

Outsourcing – Traditionally, you will seek solutions to specific talent and developer proficiencies (languages). When the 3rd party you are currently engaging isn’t a good fit for a new project, you have to start the process over again and source a new partner.

Crowdsourcing – A proper community grows every single day, consistently adding new skills and proficiencies as it grows. TopCoder isn’t a panacea and we can’t canvass all projects. But growing a relationship with us, where new challenges can be met without the need to yet again source the specific talent can greatly shrink time-lines.

Predictability

A key factor that hampers innovation in a company is their inability to accurately predict the cost, the quality and the time it will take to bring a solution to market. The uncertainty ties their hands and less risk is often assumed.

Outsourcing – You are still in a labor-based model and because output depends on individual humans succeeding consistently and over time, the model breaks down. Costs run high, quality can suffer and time-lines are simply not met.

Crowdsourcing – In a proper community setting, every aspect of every project is transparent. This means you understand which members of the community are registering to compete and their track record in the proficiency needed to s
ubmit a quality solution. Couple this with the fact that competitions have didactic time-lines that must be met to qualify and your ability to predict the outcome of any given project increases exponentially. With more predictability, more projects can move forward and innovation can flourish.

The Scope of Work

Development and Testing are by no means the only two aspects of a software product life-cycle.

Outsourcing – The finite pool may be good at a few specific tasks. There are obvious limitations to what your 3rd party outsourcing partner can provide.

Crowdsourcing – Speaking specifically about TopCoder, we now canvass 40 different types of competitions, contests and challenges that span from idea generation, to design, to specification & architecture, to software development, algorithmic optimization and testing of the best solutions.

The Acceleration of Innovation

Companies of all sizes desire to innovate as effectively as Apple, but the truth is very few organizations have the resources to do so.

Outsourcing – Outsourcing and Innovation don’t typically align. You are paying a talent pool for work you have pre-identified and typically it is not of the innovative variety.

Crowdsourcing – The ability to take ideas much further down the product life-cycle, faster and on less spend can allow your company to flesh out many more ideas in parallel than you would traditionally. Some will use the term Rapid-Prototyping, but however you dub it, the results are more looks and feels, more touches with working solutions that can help you zero in on the best solution, and bring it to market with more speed and confidence.

Outsourcing is staff augmentation while Crowdsourcing can be force multiplication. One allows you to get a certain percentage of your work done with possible cost savings. And one enables you to get a lot more work done in a massively parallel fashion.

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