Modern outsourcing first came about in the late 1980s, promising specialization, labor arbitrage, risk sharing, and scale efficiencies. In the start of the 1990s, globalization made its way to becoming the second step in outsourcing with the onset of offshoring. Nowadays, with the rise the digital age and social networking, many business leaders believe that the emergence of crowdsourcing is the next phase of traditional outsourcing.

Both outsourcing and crowdsourcing rely on an external community for ideas, resources, and work and are used by businesses to get projects done in a timely manner. Outsourcing is based on a direct work flow model. Work is transferred off-site, including overseas or domestically, to an identified group of workers. Whereas, crowdsourcing refers to obtaining information, content or input into a particular task or project by enlisting the services of a number of either paid or unpaid typically through the Internet by virtual service providers. The model is already being used by companies for idea generation, product testing and branding, and graphic and website design.

How Does Crowdsourcing Work?

Outsourced work is usually hourly, uses fixed employment, and is limited to a location. On the other hand, crowdsourced work is flexible, global, and based on output. Crowdsourcing allows businesses to calculate budding market interest, build attention, and accumulate data before launching an actual product. Some companies use crowdsourcing to guide their product roadmap. This activity attracts attention to the product and allows the company to work together with their customers helping their brand.

Over the last few years, more and more companies have entered the crowdsourcing trend, especially for their marketing initiatives. For example, in 2012, Levi’s ran a crowdsourcing campaign for its marketing activities using Instagram. In a large scale crowdsourcing experience, Expedia launched a new crowdsourced deals feature on its US site in 2012, which automatically identifies the best deals found by other travelers for hotels rooms and flights. Additionally, in 2013, Nissan announced a new campaign using its social channels to promote its new policies.

How can business leaders manage risk when incorporating crowdsourcing into their portfolio of business-grade sourcing options?

• Ensure Quality Work – In order to ensure quality work in the crowdsourcing industry, it is important to find a high-reputation partner who can manage individuals and their quality of work. When opting for a crowdsourcing partner, business leaders must ensure they have a strong alliance with their crowd members and an effective process to assess quality of services.
• Turbulence Risk – One of the biggest risks companies face when using crowdsourcing is ‘turbulence risk.’ Turbulence risk is often perceived as the risk of engaging in an unfamiliar environment where risk-taking is not encouraged.
• Intellectual Property Right Infringement – When using crowdsourcing, individuals from outside the company will have access to software source code, web content, and other intellectual property, which is often a concern for organizations. With new technologies and ways of doing business, it is important for organizations to be clear about how to best protect themselves. The data used should be obfuscated and only the information necessary for the crowd members to complete their portion of the work should be provided. However, the most important thing is to have a plan of action to monitor improper use and act accordingly.

Although there are definite risks associated with crowdsourcing, it can immensely develop the quality, scalability, and originality of an organization’s work. While crowdsourcing is often referred to as outsourcing restructured for the 21st century, businesses that choose to crowdsource rather than outsource have a greater likelihood of encountering less reliability and seldom have a single party that they can hold responsible if anything goes wrong. Furthermore, there are relatively too many other variable factors that need to be considered when crowdsourcing, resulting in outsourcing being the safer option between the two.

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