Nov 042010

Crowdsourcing is the idea that the wisdom of crowds can solve complex and expensive problems, with the rise of the Internet it’s become possible for groups to coalesce around a problem and resolve it.

Some good examples of crowdsourcing are The Guardian’s investigation into British MPs expense claims where dozens of the newspapers readers examined the mass of paperwork for irregularities, a task beyond the resources of the paper itself, and Wikipedia where thousands of volunteers work to compile an online encyclopaedia.

The Future of Crowdsourcing Summit recently looked at the issues and opportunities this offers for businesses. IT industry journal Computer Reseller News has an excellent summary of the day, although the emphasis on massive cost savings is probably misguided.

What sticks out in CRN’s account is many businesses are confusing crowdsourcing with outsourcing — online bidding sites such as and competition sites like 99Designs are not crowdsourcers, they are outsourcing services.

Sites like Freelancer and 99 Designs are making outsourcing, which was until recently the province of large corporations, accessible to small and start up businesses. They’re revolutionising business by reducing entry barriers to entry for new enterprises and industries by allowing entrepreneurs to access skilled workers with little more than a credit card and Internet connection.

That emphasis on cost needs to be treated carefully as well. As I’ve argued about cloud computing, it’s risky to overstate savings in a new industry as there’s a risk of commoditising the market prematurely.

Larger outsourcers found in the previous decade that assuming labour rates at 10% of home market wages equate to 90% cost savings is usually flawed as there’s a number of hidden costs that come to surface when you take services off shore. Almost certainly the users of bidding sites will have the same experience.

Probably the biggest barrier to smaller businesses adopting outsourcing or crowdsourcing is that both processes require project management skills which are often undervalued in business.

We need to acknowledge the changes outsourcing and bidding services mean to our industries and society, but we shouldn’t confuse the concepts. Both are too valuable to business to be misunderstood and devalued.

  5 Responses to “Misunderstanding crowdsourcing”

  1. Some good points here, Paul, but I’d contend that 99designs is crowdsourcing. You post a design project. A swarm of people do work and submit designs — on average 105 per project currently, it says. You pick the one you want and pay for only that one. 104 people do work for no reward. I guess it depends how you define crowdsourcing.

  2. Thanks for the comment, Stil. 99Designs crowdsourcing aspect is a point that’s occurred to me, but that bothers me as I think it’s unethical to use the ideas of people you haven’t rewarded in a competition.

    Of course this raises the other point about crowdsourcing that much of the commercial services which have crowdsourcing as a key part of their business model end up relying on digital sharecroppers, which isn’t sustainable for the business or the contributors.

    As you say, we could spend ages debating the definition of crowdsourcing.

  3. Paul:

    An interesting post but outsourcing and crowdsourcing are very different models with very different issues. Outsourcing (or off-shoring, per your example) has many issues at play: labor arbitrage, governance, CAPEX treatment, refresh policies, treatment of affected employees. Crowdsourcing (from a buyers perspective) is much more limited to the narrower issues associated with providing a clear brief or specification and good feedback.

    Carl Esposti


  4. […] While there’s still some confusion on the difference between outsourcing, crowdsourcing and running dodgy pitch competitions – which raise even more interesting questions about plagiarism, IP protection and business ethics […]

  5. […] crowdsourcing, the technique of getting those Internet mobs onto solving your business problems. While there’s still some confusion on the difference between outsourcing, crowdsourcing and ru… – which raise even more interesting questions about plagiarism, IP protection and business ethics […]

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