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World Bank sees huge opportunities in online outsourcing

By Adeyemi Adepetun
10 June 2015   |   1:02 am
THE World Bank has projected that huge opportunities in online outsourcing (OO) await countries that maximize the full potential the Internet platform can offer.
World Bank Group

THE International Finance Corporation (IFC), a member of the World Bank Group. Photo: techcabal

THE World Bank has projected that huge opportunities in online outsourcing (OO) await countries that maximize the full potential the Internet platform can offer.

World Bank said OO has become a promising alternative to traditional employment in today’s digital
era, adding that it has transformed where, when, and how work is performed.

According to it, for employers, OO provides broader access to specialized skills, more flexible and faster hiring processes, and 24‐hour productivity.

The bank in a new study titled: “The Global Opportunity in Online Outsoucing”, produced by it inconjuction with Dalberg Global Development Advisors, noted that OO is a global industry with workers drawn from across the world.

The 74-Page document focused on OO’s potential as a new and innovative channel for socioeconomic development for developing country governments and practitioners, particularly in terms of youth employment, services exports, and participation in the digital economy.

The study defines OO as the contracting of third‐party workers and providers (often overseas) to supply services or perform tasks via Internet‐based marketplaces or platforms. These technology‐mediated channels allow clients to outsource their paid work to a large, distributed, global labor pool of remote workers, to enable performance, coordination, quality control, delivery, and payment of such services online.

Targeted opportunities
With focus on two areas including microwork and online freelancing, the study said OO has created new opportunities to access and compete in global job markets, from anywhere at any time, as long as there are computers and Internet access.

Although, there are about 85 million Nigerians on the Internet and the largest on the continent, the study, which said that the distribution of workers is similar for both microwork and online freelancing, noted that Africa still has a small representation, but that South Africa and Kenya are the leading countries on the continent.

According to it, almost two‐thirds of workers currently come from the United States (which has the most workers), India, and the Philippines. In Europe, Serbia and Romania contribute high numbers of OO workers relative to their total populations.

It defines Microwork as the process where projects and tasks are broken down into microtasks that can be completed in seconds or minutes. Microworkers require basic numeracy and literacy skills, for example, for image tagging, text transcription, and data entry. Workers are typically paid small amounts of money for each completed task, and barriers to entry are lower than in online freelancing, making it particularly attractive to unemployed and underemployed individuals with no specialized skills.

Online freelancing on the other hand is where clients contract professional services to distributed third‐party workers. Online freelancing often requires a higher level of expertise than microwork, with workers typically possessing technical or professional skills. Online freelancing tasks tend to be larger projects that are performed over longer durations of time—hours, days, or months. Examples include graphic design, web development, and technical report writing.

Estimating the market and its growth
The study noted that estimating the current market size and projecting is challenging because of the limited availability of public data, the nascent state of the industry, and the high uncertainty regarding how the industry will evolve.

Nevertheless, the study estimates that gross service revenue within the OO industry was about
$2 billion in 2013, with 48 million registered OO workers, 10 per cent of whom are considered to be
active. The microwork market is dominated by two firms, both of which follow open services platform
business models: Amazon Mechanical Turk and CrowdFlower. Industry experts suggest that these firms
currently have combined yearly global gross services revenue of about $120 million; together they form
about 80 per cent of the microwork market.

The online freelancing market, which grossed about $1.9 billion in 2013, is over 10 times larger than the microwork market. Industry experts suggest that the top three firms (Upwork, Freelancer, and Zhubajie/Witmart) form about half of the entire OO market.

The market size for online freelancing is projected to grow to $4.4 billion in 2016, while the market for
microwork is estimated to reach $0.4 billion. Thus the total OO industry is projected to be $4.8 billion in
2016. Medium‐term models estimate that, in 2020, the OO industry will generate gross services revenue
in the range of $15 billion to $25 billion.

How governments can improve competitiveness
As seen in industries related to OO, such as ITO/BPO/KPO, the study noted that governments can play a
significant role in maximizing their own country’s competitiveness in global employment markets by
putting in place policies to maximize the social and economic benefits of OO.

For instance, it observed that the growth of the Indian BPO and software industries is, in part, attributed to government policies that established software parks with financial concessions and reliable infrastructure, large‐scale investments in university research and development, and accreditation schemes to ensure the supply of trained workers.