Friday, June 15, 2007

Outsourcing the eBay way

Source: Computerworld

SMBs are increasingly turning to eBay-like IT services brokers

Increasingly, small and midsize businesses are turning to eBay-like IT services brokers to hire technical talent for projects -- both within the U.S. and offshore.

Such users are seeking the same advantages that large companies hope to get through IT services deals: flexible workforces, lower-cost labor and access to the right skill sets for particular projects.

Using an online job marketplace was the direction that Giancarlo Fiorarancio took Betsey Johnson, a New York-based chain of women's designer clothing stores with nearly 50 outlets, after he was hired as its IT director about nine months ago.

The kinds of services offered by vendors such as OnForce "have a disruptive potential" for U.S.-based temporary employment agencies and IT services providers that charge higher labor fees, said Gard Little, an analyst at market research firm IDC.

But the job marketplaces may have their largest impact because of their ability to connect IT managers with offshore help. While Congress debates whether it should raise the annual cap on H-1B visas, global job-matching services such as one offered by oDesk are showing that companies of any size can hire offshore IT talent to work on projects.

The shift of technology work to offshore locations, free of any H-1B constraints, is an economic reality that the Committee on Science and Technology in the U.S. House of Representatives began examining this week.

Many of the firms offering to do work via oDesk are small software development outfits that are spread among about 60 countries, Swart said. The largest concentrations are in India and eastern Europe, which both account for about 30% of the total. But oDesk said it also lists many services providers that are based in North America.

Pay rates vary by skill as well as geographic location, the type of project involved and recommendations from earlier customers. For instance, on a worldwide basis, AJAX developers currently are being paid hourly rates of between US$15 and US$83, according to oDesk.

Development work and the number of hours spent on it can be monitored and evaluated on an ongoing basis through a central project management repository and the use of tools for tracking technical issues and different versions of software programs. In addition, oDesk provides screenshots of a programmer's work so IT managers can do spot checks of code.

As with eBay's online auction site, recommendations from customers give service providers on both the oDesk and OnForce sites evidence of a successful track record, which can help them earn higher fees. As a result, developers have to deliver more than good technical services, said Shane Bell, whose Midland, Texas-based company, ITechWest Solutions, runs on orders he gets via OnForce.

"Ninety percent of it is relationship, and that willingness to go the extra mile," said Bell, who had a full-time job at a telecommunications company when he started doing some extra work through OnForce about two years ago. Now ITechWest is a full-time occupation for him. The firm employs five other people as well, and Bell projects that it will gross about US$1 million in revenue next year.

A dependable technician with good people skills can earn between US$35,000 and US$50,000 per year through sites like OnForce and oDesk, said Crisantos Hajibrahim, who started doing IT work after being discharged from the Marines several years ago.

TopCoder uses another approach to connect employers to overseas tech workers. Users of TopCoder's Web site submit development projects that are used as the basis of coding competitions between developers. The top developers are paid by the customers, while TopCoder officials assess the work of other programmers and give them feedback on it.

Tiffani Bova, an analyst at Gartner, said demand for services such as OnForce, oDesk and TopCoder is increasing -- especially as smaller companies become more reliant on technology. "It absolutely fills a need for a specific type of customer," Bova said. "And with the number of small businesses in North America under 100 employees, I expect it to continue to gain momentum."