Nowsourcing

The practice of outsourcing is evolving, according to Tom Abate's column in the Sunday San Francisco Chronicle.  Large corporations have long moved entire departments and functions to locations where labor costs were more affordable, especially assembly and customer service processes.  While offshoring has been controversial, wage rate differentials in emerging economies have been irresistible to multinational companies competing for customers, capital, and components on a world-wide scale.

What's changing is that smaller companies are now taking advantage of the global market for talent, by utilizing web-based labor exchanges such as eLance, oDesk, crowdSPRING, and Guru.

This is especially relevant to entrepreneurs, who typically must outsource everything except core business functions, as much to remain focused on strategic imperatives as to manage their burn rate.  And as more Americans are turning to freelance work to cope with the recession, a lot of this casual employment is remaining onshore.

Natasha Levitan, a San Jose filmmaker, is part of what work-site operators say is a new wave of U.S. freelancers who are going online to bid for contract work. Levitan, 31, has worked as a freelancer for most of the past several years, using local contacts and word of mouth to get jobs.

She joined eLance in April to help her build her client base and has gotten a few assignments through the site. She said it isn't easy to continually hustle for work, but at this point in her life, while she is single and can travel between jobs, "the positives outweigh the negatives."

According to Fabio Rosati, eLance's CEO, more than 60% of the service providers in his network are US residents.

This trend is also having an impact on large corporate IT departments, as well, as noted in a recent report in McKinsey Quarterly.  While cost considerations will continue to make contractors in BRIC countries appealing, the expansion of the contract talent pool here in the US will be an attractive alternative for some businesses already feeling competitive pressure in distant labor markets.

A shake-up in the vendor landscape will likely follow the huge capacity increases of recent years, the current downward pressure on aggregate demand, and massive uncertainty in currency markets. Adding to the pressures are the strategic, government-sponsored initiatives launched by China and other nations to grab market share. Major mergers are more likely than not. New entrants will grow rapidly and some players could experience significant reverses. Successful CIOs will manage their vendor relationships as a portfolio so they will be well positioned as new winners evolve.

It's encouraging that American ingenuity and resourcefulness offer a competitive advantage in the evolving market for technology professionals, and for the promising startups who employ them.