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CONTENTS
ExecutiveSummary.......................................................................................................................1
WhatIsOnlineOutsourcing?...............................................................................7
DefiningOnlineOutsourcing...............................................................................................................7
IdentifyingOnlineOutsourcingBusinessModels.............................................................................11
SegmentingOnlineOutsourcingTasks.............................................................................................13
UnderstandingDemandDrivers.......................................................................................................13
EstimatingandForecastingtheMarket...............................................................18
Methodology.....................................................................................................................................18
EstimatingtheCurrentPenetratedMarket......................................................................................19
ProjectingMarketGrowth................................................................................................................21
LimitationsofthisApproach.............................................................................................................26
ProfilingOnlineOutsourcingWorkers.................................................................28
Methodology.....................................................................................................................................28
MappingOnlineOutsourcingWorkers.............................................................................................29
ProfilingWorkers..............................................................................................................................30
MotivationsandLevelofEngagement.............................................................................................33
OnlineOutsourcingWorkerArchetypes...........................................................................................38
SocialandEconomicImpactonWorkers.............................................................41
Methodology.....................................................................................................................................41
EconomicImpact...............................................................................................................................41
NonfinancialImpact..........................................................................................................................43
PotentialRisks...................................................................................................................................45
ImplicationsforDevelopingCountries..............................................................................................46
AssessingCountryReadinessforOnlineOutsourcing..........................................48
HowCanGovernmentsImproveCompetitiveness?.............................................51
EnablingandPromotingOnlineOutsourcing...................................................................................51
RemovingLegislativeandRegulatoryBarriers.................................................................................59
WhatAdditionalResearchIsNeeded?................................................................61
References....................................................................................................................................65

iii

LISTOFFIGURES
Figure1.1KeyElementsofOnlineOutsourcingModels.........................................................................11
Figure1.2CommonJobCategoriesbyComplexity.................................................................................13
Figure1.3DemandDriversbyIndustrySector........................................................................................15
Figure2.1EstimatedGlobalOnlineOutsourcingPenetratedMarket,2013,$million...........................20
Figure2.2AverageOnlineOutsourcingGrowth,20112014,percent...................................................22
Figure2.3EstimatedShortTermGrowth,$billion.................................................................................23
Figure2.4EstimatedShortTermGrowthinNumberofRegisteredOOWorkers,million.....................24
Figure2.5EstimatedGrowthinOnlineOutsourcingRevenue,20132020,$billion.............................24
Figure2.6EstimatedCapacityofOnlineOutsourcingWorkers,20132020,$billion............................25
Figure3.1GlobalSupplyofOOworkers,Top25Countries.....................................................................29
Figure3.2GlobalSupplyofOOworkersperCountryPopulation,Top25Countries..............................30
Figure3.3GenderDistributioninSelectedMarketplaces.......................................................................31
Figure3.4AgeDistributioninSelectedMarketplaces.............................................................................32
Figure3.5EducationofWorkforceinSelectedMarketplaces.................................................................33
Figure3.6MotivationforParticipatinginSelectedMicroworkPlatforms,percentoftotalresponses..34
Figure3.7MotivationforParticipatinginOnlineFreelancingonElance................................................35
Figure3.8MostImportantSelfReportedMotivation,PercentofTotalResponses...............................36
Figure3.9NumberofHoursSpentonOnlineOutsourcingPerWeekonSelectedMarketplaces..........37

LISTOFTABLES
Table1.1OverviewoftheLargestOnlineFreelancingMarketplaces(2014)............................................8
Table1.2OverviewoftheLargestMicroworkMarketplaces(2014)........................................................9
Table2.1EstimatedGlobalOnlineOutsourcingIndustrySize,2013.......................................................19
Table3.1TopFiveOnlineOutsourcingCountries....................................................................................29
Table4.1SelfReportedMonthlyWagesinSelectedMarketplaces........................................................42
Table5.1FrameworkstoAssessCountriesCompetitivenessforOffshoring/NearshoringIndustries...48
Table5.2ProposedFrameworkforAssessingCountriesCompetitivenessforOnlineOutsourcing......49
Table5.3ProposedMetricsforAssessingCountriesCompetitivenessinOnlineOutsourcing..............50

iv
ACKNOWLEDGMENTS
Thisstudybuildsontheexistingknowledgeandresearchinthefieldofonlineoutsourcing,
microwork,andonlinefreelancingandaimstoprovideinputsforgovernmentanddevelopment
practitionerswhomaypotentiallyleverageglobalopportunitiesforOO.Thefindingsand
analysispresentedinthisreportwouldnothavebeenpossiblewithouttheassistanceof
individualsfrommorethan60organizationswhocontributedtheirviews,time,andadviceto
thepreparationofthisdocument.Inaddition,thestudyreliesontheinputsfrommorethan30
OOworkerswhoshareddata,insights,andperspectives.

TheauthorswouldliketoacknowledgeandthankthesponsorofthisworktheRockefeller
FoundationsDigitalJobsAfricainitiativeforitssupportandfinancing.

ThisreportwascommissionedbytheWorldBankICTUnitanddevelopedinpartnershipwith
DalbergGlobalDevelopmentAdvisors,withinputfromexternalprojectexpertsand
collaborators.ValuableguidanceandsupportwasreceivedfromvariousWorldBankstaff,
includingRandeepSudanandNaomiHalewoodfortheirstrategicadvice,IsabelleHuynh,Tim
Kelly,SiddharthaRaja,andIndhiraSantosfortheirsuggestionsandcomments,Christine
Abdelmasihforheradministrativeandlogisticalassistance,andColinBlackmanforhisediting
ofthedraftreports.

TheauthorswouldliketoextendthankstoRobinMiller,NaokoKoyama,AngelaGachui,
AdetayoBamiduro,andJoyceKabiruofDalbergGlobalDevelopmentAdvisorsfortheir
contributiontotheresearchandpreparationofthemanuscript.

Externalreviewersandexperts(andtheiraffiliationsatthetime)whoofferedadviceincludeJill
Isenstadt,HeadofCoachingatJoyable;JenCantwell,formerSamasourceEastAfricaManaging
Director;CarlEspoti,FounderandCEOofMassolutionandPublisherofCrowdsourcing.org;
MarkSears,CEOofCloudFactory;andBrianReavey,SeniorManagerofCommunity
DevelopmentatCrowdflower.

v
ABBREVIATIONS

AMT AmazonMechanicalTurk
ATM automatedtellermachine
BPO businessprocessoutsourcing
CAGR compoundannualgrowthrate
FDI foreigndirectinvestment
KPO knowledgeprocessoutsourcing
ICT informationandcommunicationtechnology
ITBPM ITandbusinessprocessmanagement
ITO informationtechnologyoutsourcing
NASSCOM NationalAssociationofSoftwareandServicesCompanies(India)
NGO nongovernmentalorganization
SACCO SavingsandCreditCoOperative
SME smallandmediumenterprise
UHRS UniversalHumanRelevanceSystem

AlldollaramountsareU.S.dollarsunlessotherwiseindicated.

vi
EXECUTIVESUMMARY
Onlineoutsourcing(OO)hasbecomeapromisingalternativetotraditionalemploymentintodaysdigital
era.Ithastransformedwhere,when,andhowworkisperformed.Foremployers,OOprovidesbroader
accesstospecializedskills,moreflexibleandfasterhiringprocesses,and24hourproductivity.For
workers,thisformofoutsourcinghascreatednewopportunitiestoaccessandcompeteinglobaljob
markets,fromanywhereatanytime,aslongastheyhavecomputerandInternetaccess.Thisstudy
focusesonOOspotentialasanewandinnovativechannelforsocioeconomicdevelopmentfor
developingcountrygovernmentsanddevelopmentpractitioners,particularlyintermsofyouth
employment,servicesexports,andparticipationinthedigitaleconomy.

DEFININGONLINEOUTSOURCING
Onlineoutsourcingreferstothecontractingofthirdpartyworkersandproviders(oftenoverseas)to
supplyservicesorperformtasksviaInternetbasedmarketplacesorplatforms.Thesetechnology
mediatedchannelsallowclientstooutsourcetheirpaidworktoalarge,distributed,globallaborpoolof
remoteworkers,toenableperformance,coordination,qualitycontrol,delivery,andpaymentofsuch
servicesonline.

Onlineoutsourcingishighlyrelevanttoimpactsourcing,asitcouldsignificantlybenefitdisadvantaged
individualsinlowemploymentareas.Thisdefinitionalsoencompassestwomajorsegments:

Microwork,whereprojectsandtasksarebrokendownintomicrotasksthatcanbecompletedin
secondsorminutes.Microworkersrequirebasicnumeracyandliteracyskills,forexample,for
imagetagging,texttranscription,anddataentry.Workersaretypicallypaidsmallamountsof
moneyforeachcompletedtask,andbarrierstoentryarelowerthaninonlinefreelancing,
makingitparticularlyattractivetounemployedandunderemployedindividualswithno
specializedskills.

Onlinefreelancing,whereclientscontractprofessionalservicestodistributedthirdparty
workers.Onlinefreelancingoftenrequiresahigherlevelofexpertisethanmicrowork,with
workerstypicallypossessingtechnicalorprofessionalskills.Onlinefreelancingtaskstendtobe
largerprojectsthatareperformedoverlongerdurationsoftimehours,days,ormonths.
Examplesincludegraphicdesign,webdevelopment,andtechnicalreportwriting.

Microworkandonlinefreelancingoftenoverlap,themajordifferencebetweenthemoftenbeingthe
sizeandcomplexityofthetasks,aswellasthecompensationoffered.SomeofthemostpopularOO
platformsincludeFreelancer,Upwork,Crowdflower,AmazonMechanicalTurk(AMT),Samasource,and
CloudFactory.

ThetwoprimaryarchetypesamongOOfirmsare"openservicesplatforms"and"managedservices
platforms.Intheformer,intermediaryfirmsofferanonlinemarketplacewhereworkersandemployers
canconnectandnegotiatedirectly.Employerspayaservicefeetopostjobsonthemarketplaceand
workerscanbeselectedbasedonthepricetheywillchargeorontheirreputation.Ontheotherhand,
undermanagedservicesplatforms,therelationshipwithbothemployersandworkersaremanaged
directly.Managedservicesplatformstakecareoffindingandhiringindividualworkers,exercisea
degreeofownershipofthework,andperformqualitycontrolforclients.Theboundarybetweenopen

1
andmanagedservicesplatformsisblurredbut,currently,themajorplayersinOOareopenservices
platforms.

BecauseofthedynamicandrapidlyevolvingnatureoftheOOsectorandthetypeoftaskspostedon
thesemarketplaces,thestudysegmentedthecomplexityofthetasksbasedontheskillsandeducation
ortrainingrequiredasaproxytodeterminetaskcomplexity.Lowcomplexitytasksreferprimarilyto
microwork,wherenospecializedskillsortrainingarerequired;mediumcomplexitytasksrequirebasic
literacy,numeracy,andsomelevelofsoftskills,oftenincludingbothmicroworkandonlinefreelancing
tasks;highcomplexitytasksareprimarilyassociatedwithonlinefreelancingthatrequiresspecialized
technicalknowledge,andthatofteninvolvesvocationaltrainingorauniversitydegree.

THEDRIVERSFORONLINEOUTSOURCING
Onlineoutsourcingfirmsreportthattheprivatesectoriscurrentlydrivingmostofthedemand,but
publicsectordemandforOOisapotentialsourceoffuturegrowth.Demandforonlinefreelancingis
usuallydrivenbysmallenterprises,whilethedemandformicroworkisdrivenbymediumandlarge
enterprises,withthemajorityofclientsforbothsegmentsintheprivatesectorinthedevelopedworld.
OfthebusinessesusingElance(tobemergedeventuallyintoUpwork)in2011,85percenthadfewer
than10employees,and75percentofallemployerdemandcamefromfourcountries:Australia,
Canada,theUnitedKingdom,andtheUnitedStates.Somelargemultinationaltechnologycompanies
arealsosettingupinhousemicroworkmarketplaces

JustunderhalfofthedemandforOOiscurrentlydrivenbythetechnologyindustry.Theremainderof
thedemandisbroadlyspread:20percentisdrivenbymediaandentertainment,13percentby
manufacturing,withfinancialservices,retaildistribution,travelandhospitality,andhealthcare
accountingfortheremainder.Althoughsoftwareandwebdevelopmentstillaccountforalarge
percentageofdemandforOOservices,overtimedemandisbecomingmorediversifiedoveragreater
numberofskillsratherthanbeingconcentratedwithinonlyafew.

ClientdemandforOOservicesmaybelimitedbyaperceptionthatskilledworkersarehardtofind,and
itispossiblethatmisperceptionofpoorqualityislimitingdemandfromfirmsthatarenotcurrently
usingOOmarketplaces.BigdatarepresentsauniqueopportunityforOO.Expertinterviewsforthis
studyconfirmthatanincreasingnumberofgovernmentsarejoiningtheopendatamovement.Along
withthegrowingneedsofbusinessesfordatagathering,cleaning,mining,andpackaging,theuseof
opendatabygovernmentswillfuelthegrowthindemandforOOservices.

ThemajorityofglobalprivatesectordemandforOOservicesappearstocomefromAustralia,Canada,
theUnitedKingdom,andtheUnitedStates,althoughthisdemandbaseisexpanding.Inmostcases,OO
inthedevelopingworldisdrivenbyclientsinthedevelopedworld.

However,notallcountriesandindividualswillbeabletoleveragethepromiseofOOforemployment
andeconomicgrowthequally.Severalquestionsarise,including:

WhatcontributioncouldOOmakeinstrengtheningemploymentmarkets,particularlyfor
womenanddisadvantagedyouthwhomaybelackinginthebasicresourcesorconditionsto
participateequallyinsociety?
TowhatextentwillemergingmarketsbeabletotakeadvantageofOO?
HowcanworkersbenefitfromtheeconomicandsocialimpactsofOO?
WhatarethepotentialrisksofOO?

2

Inordertounderstandtheopportunityfordevelopingcountries,thisstudyestimatedthecurrentsizeof
themarketandprojecteditsgrowth,andprofiledOOworkthroughacombinationofdeskresearchand
structuredinterviewswithacademics,onlineworkers,firms,andindustryanalyststobetterunderstand
OOspotentialimpactonhumancapitalandemployment.Thestudyalsoconductedfocusgroup
interviewswithonlineworkersinKenyatogatheradditionalinsightintothesocioeconomicimpactsof
OO,andcarriedoutcasestudiesinKenyaandNigeria.

ESTIMATINGTHEMARKETANDITSGROWTH
Estimatingthecurrentmarketsizeandprojectingischallengingbecauseofthelimitedavailabilityof
publicdata,thenascentstateoftheindustry,andthehighuncertaintyregardinghowtheindustrywill
evolve.Nevertheless,thestudyestimatesthatgrossservicerevenuewithintheOOindustrywasabout
$2billionin2013,with48millionregisteredOOworkers,10percentofwhomareconsideredtobe
active.Themicroworkmarketisdominatedbytwofirms,bothofwhichfollowopenservicesplatform
businessmodels:AmazonMechanicalTurkandCrowdFlower.Industryexpertssuggestthatthesefirms
currentlyhavecombinedannualglobalgrossservicesrevenueofabout$120million;togethertheyform
about80percentofthemicroworkmarket.Theonlinefreelancingmarket,whichgrossedabout$1.9
billionin2013,isover10timeslargerthanthemicroworkmarket.Industryexpertssuggestthatthetop
threefirms(Upwork,Freelancer,andZhubajie/Witmart)formabouthalfoftheentireOOmarket.
Upworkistheclearleaderofthesethreefirms,with$750millionincombinedrevenuein2013.

Themarketsizeforonlinefreelancingisprojectedtogrowto$4.4billionin2016,whilethemarketfor
microworkisestimatedtoreach$0.4billion.ThusthetotalOOindustryisprojectedtobe$4.8billionin
2016.Mediumtermmodelsestimatethat,in2020,theOOindustrywillgenerategrossservicesrevenue
intherangeof$15billionto$25billion.

PROFILINGONLINEOUTSOURCINGWORKERS
Onlineoutsourcingisaglobalindustrywithworkersdrawnfromacrosstheworld.Thedistributionof
workersissimilarforbothmicroworkandonlinefreelancing.Almosttwothirdsofworkerscurrently
comefromtheUnitedStates(whichhasthemostworkers),India,andthePhilippines.InEurope,Serbia
andRomaniacontributehighnumbersofOOworkersrelativetotheirtotalpopulations.Africastillhasa
smallrepresentation,butSouthAfricaandKenyaaretheleadingcountriesonthecontinent.

Workersarepredominantlymaleandbelowtheageof35.Educationlevelsdiffersignificantly
dependingonwhethertheyengageinmicroworkoronlinefreelancing:75percentofonlinefreelancers
haveauniversitydegree,butonly33percentofmicroworkersdo.Onaverage,mostworkersengagein
thistypeofworkforfewerthan20hoursperweek.Incomegenerationisthemostcommonmotivating
factorinallcases.MostmicroworkersseeOOasameansofearningsupplementaryincome;bycontrast
almosthalfofonlinefreelancersreportOOtobetheironlymeansofincome.

SOCIALANDECONOMICIMPACTSONWORKERS
TheeconomicimpactofOOvariessignificantlyacrossplatforms,accordingtotypeofwork,andlevelof
engagement.AparttimeFilipinoonlineworkerreportedearningsof$34perhouronoDesk
(rebrandedasUpwork),performingtaskssuchastranscription,dataentry,andbasicadministrative
services.Incontrast,anexperiencedNigerianonlinefreelancerreportedearningsof$20perhourfor
softwaredevelopmentandwebsitedesign.Atthehighend,onlinefreelancersconsultingonpatentsor
venturecapitalcanearnmorethan$40perhour(Horton2012).

3
InitialfindingssuggestthatfulltimeonlineworkersinKenya,Nigeria,andIndiaearnsalariesthatare
comparableto,orhigherthan,theirpeersintraditionalwork.Althoughsalariesvaryacrosscontexts,
spendingpatternsappeartobesimilar.Infocusgroupsandstructuredinterviews,onlineworkersin
KenyaandNigeriareportedthattheyspenttheiradditionalincomeonrent,food,workexpenses
(includingaccesstoacomputerandtheInternet),furtherstudies,andsupportingotherfamily
members.

Aswellasgeneratingadditionalincome,onlineworkersreportedthatOOallowsthemtodevelopskills
andprogressprofessionally.Interviewssuggestthattheydevelopbothtechnicalskills(forexample,
basicITproficiencyandInternetliteracy)andsoftskills(forexample,theabilitytocommunicate
professionally,managetheirowntime,andworktoadeadline).Managedserviceplatformsputinplace
specifictrainingprogramstohelpdeveloptheserequiredskills.Forexample,CloudFactoryruns
compulsoryweeklymeetingsforworkerstodiscussmanagementskillsandlongtermcareeraspirations.
Inonlinemarketplacemodels,suchasAmazonMechanicalTurkandoDesk,workersneedtostartwitha
basicskillset;theseskillsarerefinedthroughexperientialonthejoblearning.

Infocusgroupsandstructuredinterviews,onlineworkersreportedthattheyrelyonfriendsandpeers
tolearnnewskills(forexample,ITliteracy,communicationskills).Thestudyfoundthatonlineworkers
oftenformstrongonlinecommunities(usingforumsandsocialplatformssuchasFacebook)tohelp
eachotherdevelopskillsandnavigatethesystem.

However,OOalsocomeswithrisks:onlineworkersareexposedtogreatercareeruncertaintyandhave
fewerprotectionsthanworkersintraditionalemployment.Onlineoutsourcingdoesnotclearlyfitinto
traditionalemploymentlegislation(forexample,laborpolicies,lawsonemployeesprotectionand
benefits,andtaxregulation).Therefore,onlineworkersinmostcountriesdonotreceivethebenefitsof
unionization,collectivebargaining,socialbenefits,orlegalprotectionsuchasminimumwagelaws.
However,theonlineworkersconsultedinthisstudydidnotexpressconcernabouttheseissues,and
traditionalfreelancersalsoexperiencesomeoftheserisks.Thismightbebecauseworkersmaynotbe
awareoftheseissues.EthnographicresearchofAMTworkers(knownasTurkers)suggeststhattheydo
notwantgovernmentregulationofOO,andsurveysofElance(tobemergedeventuallyintoUpwork)
showthat90percentofonlinefreelancersareashappy,orhappier,thantraditionalemployees.
Furthermore,industryexpertsreportthatregulatingtheindustryinitsearlystagescouldimpedeits
growth.

Youthunemploymentremainsamajordevelopmentissueformanycountriesinregionssuchasthe
MiddleEast,NorthAfrica,SubSaharanAfrica,andSoutheastAsia.Onlineoutsourcingisanemerging
industrythatcouldpotentiallycontributetoaddressingtheyouthunemploymentchallenge.The
economicimpactofOOvariessignificantlyacrossplatforms,typeofwork,andlevelofengagement.
Initialfindings,however,suggestthatitcanhaveasignificanteffectatthehouseholdlevelforsome
individuals.OOalsooffersnonfinancialbenefits:aflexibleworkingscheduleallowsindividualstotake
bettercareoftheirfamilies,continuetostudy,orstarttheirownbusinesseswhileworkingandearning
asalary.Furthermore,itprovidesopportunitiesforonthejoblearningandskillsdevelopment.
However,formanydisadvantagedyouthswholacktechnicalprofessionalskills,thebarriertoentryfor
onlinefreelancingishighwiththevastmajorityofcurrentworkerspossessingatertiaryorpostgraduate
degree.

Onlineoutsourcingappearstobedrivingpositivesocialchangeforwomen.Womeninfocusgroupsand
structuredinterviewsreportedthatOOcontributestowardgenderequitybecauseitismorecompatible

4
withsomecountriesculturalandsocialnormsthantraditionalemployment.Forexample,InIndia,
femaleonlineworkersuseOOasawayofearningcashwhilecaringforchildrenandelderlyfamily
members,andEgyptianwomenfromtraditionalIslamichouseholdsuseonlinefreelancingasan
alternativetoworkinginmaledominatedworkplaces.

ASSESSINGCOUNTRYREADINESSFORONLINEOUTSOURCING
Astructuredassessmentframework,andanonlinetoolkitisavailableatwww.ictforjobs.org,inorderto
assistpolicymakersanddevelopmentpractitionersassessacountry'sreadinesstoleveragetheOO
opportunity.Thereadinessassessmentframeworkhasfourmaincategoriestalentavailabilityand
quality,cost,infrastructure,andenablingenvironment.Thesecategoriesarefurtherdividedintofactors
andsubfactorsasappropriate.TheOOtoolkitprovidediseasytouse,webbased,andprovidesaquick
readinessassessmentintermsofacountrysrelativenationalstrengthsandweaknessesinorderto
participateintheOOindustry.Itallowstheusertomodelacountrysreadinesspositionfordifferent
marketsegments,basedonthecountrystargetingoflow,mediumandhighcomplexitytasks,andits
associatedmarketsegments.

THEROLEOFGOVERNMENTS
GovernmentscanplayasignificantroleinmaximizingtheirowncountrysreadinessforOO,andtakea
numberofactionstopromoteitsgrowth.Theseincludepromotingandimplementingpositivepolicies
andremovinglegislativeandregulatorybarrierstostimulatethegrowthoftheOOindustry:

Developingarelevantstrategyforthetargetedmarkets.TheOOindustrydevelopmentprograma
countryundertakeswilldependtoalargeextentonwhetherthecountrytargetseither(orboth)online
freelancingormicroworkand,toalesserextent,oneither(orboth)openormanagedservices
marketplaces.Onlinefreelancingworkersneedtohavesignificantlyhigherskillsforhighercomplexity
tasks,whilemicroworktypicallyrequiresbasiccomputerandInternetliteracy(andtheassociated
language)skillsforlowercomplexitytasks.Themicroworksegmentisalsomoresensitivetothe
countryscoststructure,sincelowercomplexitytaskscouldbecompetedforbydevelopingcountry
workerswhocouldgenerallyoffermorecompetitiveratesforwork.Openservicesplatformsalso
requiremoreextensivetrainingprogramsingeneral,unlikemanagedservicesplatformsinwhich
trainingisprovidedbythefirms.Countrieswithlargergeographiesandpopulationsizesaregenerallyin
abetterpositiontotargetmultiplesegmentsandmarketplaces,giventheirhigherdiversityintermsof
capabilitiesandresources,whilesmallercountriesmayhavetobemoreselectiveandtargeted.A
countrysindustrydevelopmentstrategycouldalsoincludeanintermediaryoragencyapproach,
wherebyinternationalorlocalOOfirmsareencouragedtostartupoperationsinthecountry.Countries
mayalsooptforaphasedapproachbytargetinglowercomplexitytasksintheinitialstage,andmoving
upthevaluechaininthelaterstages.

Ensuringthesupplyofwelltrainedworkers.Althoughapotentiallylargeglobalpoolofonlineworkers
exists,thereareconcernsaboutthelevelofskillsandreliabilityoftheseworkers,particularlyin
developingcountries.AllformsofOOrequirebasicITproficiencyandmostplatformsrequirefluencyin
English.Onlinefreelancingalsorequiresspecifictechnicalskills.Examplesofinitiativesthatgovernments
cantaketosupportthedevelopmentofincountrytalentandtopromoteparticipationofworkersin
thisindustryincludesettingupanationallevelaccreditedtrainingandcertificationprogramtoprepare
workersforOO,includingbasicITandEnglishskills,anddevelopingshorttermtrainingtotargetspecific
skillsgaps.

5
Raisingawareness.Governmentsshouldorganizeworkshopsandrunonlineadvertisingcampaignsto
raiseawarenessamongpotentialworkers.Publiceventscanteachpotentialworkershowtonavigate
thecomplexOOsystem,includinghowtoregisterondifferentplatforms,howtogetpaid,andhowto
marketthemselvestofindwork.

Expandaccessto,andqualityof,infrastructure.Inmanydevelopingcountries,infrastructureremainsa
majorbottlenecktoengaginginOO,especiallyforruralresidents.Policiestoexpandaccesstofast,
affordable,andreliableelectricityandInternetarekeyforOOindustrydevelopment,particularlyfor
ruralpopulations.OtherpolicyinitiativestosupportOOdevelopmentincludeutilizingexisting
investmentstocreatecoworkingspacestoprovidepotentialworkerswithaccesstocomputersandthe
Internet,andpartneringwithexistingnongovernmentalorganizations(NGO)orgovernmentalprograms
thatalreadyprovideITinfrastructure.

Generatingdemand.IndustryexpertsandOOfirmsexpectthegrowthoftheindustrytobelimitedby
demandgenerationratherthanworkersupply,becausethesupplyofworkersisgrowingfasterthan
demand.Thisisparticularlythecasefortheplatformsthattrainandhiredisadvantagedyoungpeople,
mostofwhicharestillinnascentstages.Governmentsindevelopingcountriesareunlikelytobeableto
incentivizeglobaldemandbuttheycanraiseawarenessofOOintheirlocalprivatesectorsthrough
publicevents,andcanstimulatelocaldemandbyputtinginplacetaxregimesforlocalfirmstohire
onlineworkers.Finally,demandcouldalsocomefromthegovernmentitselfthrough,forexample,
utilizingOOplatformstoconductdigitizationofgovernmentrecords.However,currently,toaccess
publicsectorcontracts,outsourcingfirmsmustovercomethelengthyandcomplexprocurement
processesthatmostgovernmentshaveinplace.

Taxation.UncertaintyexistsaroundtaxrequirementsforOOworkers.Mostworkersdonotpaytaxeson
theirearning,butreportthatsuchtaxeswouldcreateabarrierforgrowthoftheindustry.Some
countries,however,haveenactedtaxbenefitpoliciesforonlineworkers.Forexample,Bangladeshhasa
policywhereallearningsfromOOworkarecurrentlytaxfree,encouragingmoreworkerstoparticipate.

Minimumwageandparttimeworklaws.InapplyingminimumwagelawsonOOworkers,governments
needtomakeanexplicitdecisionbetweenthesocialgoodofensuringafairminimumwageforworkers
andthepotentialeconomicimpactthatminimumwagelawsmayhaveonthegrowthoftheOO
industry.Governmentsalsoneedtomakedecisionsonlawsconcerningparttimework.Somecountries
ensurethatparttimeworkers,whohaveworkedforaspecificlengthoftime,receivethesamerights
andbenefitsasfulltimeemployees.Indeterminingwhichpolicyactionstotake,governmentsshould
alsobeawarethatalthoughlawsonminimumwagesandparttimeworkmayprotectworkersfrom
exploitation,theyarenotuniversalandcancreateasymmetriesinthemarket.

Easeofdoingbusiness.CommonbarrierscitedbyOOfirmsinterestedinsettingupbusinessesinlocal
marketsincludedifficultyinobtainingworkpermits,administrativebureaucracyinformallyregisteringa
company,anddifficultyinregisteringbankaccounts.Governmentscanaddresssuchbarrierswith
policiesthatwouldimprovethegeneralbusinessenvironmentthat,inturn,wouldpromoteprivate
sectorgrowthandemploymentbeyondjustOO.

WHATISONLINEOUTSOURCING?
Onlineoutsourcing(OO)hasbecomeapromisingalternativetotraditionalemploymentintodaysdigital
era.Ithastransformedwhere,when,andhowworkisperformed.Foremployers,OOprovidesbroader
accesstospecializedskills,moreflexibleandfasterhiringprocesses,and24hourproductivity.For
workers,thisformofoutsourcinghascreatednewopportunitiestoaccessandcompeteinglobaljob
markets,fromanywhereatanytime,aslongastheyhavecomputerandInternetaccess.Thisstudy
focusesonOOspotentialasanewandinnovativechannelforsocioeconomicdevelopmentfor
developingcountrygovernmentsanddevelopmentpractitioners,particularlyintermsofyouth
employment,servicesexports,andparticipationinthedigitaleconomy.

DEFININGONLINEOUTSOURCING
Inthisstudy,onlineoutsourcing(alsoreferredtoaspaidcrowdsourcingoronlinework)isdefinedas:

Thecontractingofthirdpartyworkersandproviders(oftenoverseas)tosupplyservicesor
performtasksviaInternetbasedmarketplacesorplatforms.Thesetechnologymediated
channelsallowclientstooutsourcetheirpaidworktoalarge,distributed,globallaborpoolof
remoteworkers,toenableperformance,coordination,qualitycontrol,delivery,andpaymentof
suchservicesonline.

Onlineoutsourcingishighlyrelevanttoimpactsourcing,sincethelatterreferstoanyformofoutsourcing
thatbenefitsdisadvantagedindividualsinlowemploymentareas(BullochandLong2012).Asdiscussed
throughout this study, OO could be a highly socially responsible form of outsourcing that could bring
significantpositiveimpacttotheseindividuals.HoweverOOssocialandeconomicimpactdependsonthe
profile of workers, the financial remuneration that they receive, and the skills that they develop. This
study explored existing impact sourcing models within OO, and also looked beyond this sector. This
definitionalsoencompassestwomajorsegments:

Microwork,whereprojectsandtasksarebrokendownintomicrotasksthatcanbecompletedin
secondsorminutes.Microworkersrequirebasicnumeracyandliteracyskills,forexample,for
imagetagging,texttranscription,anddataentry.Workersaretypicallypaidsmallamountsof
moneyforeachcompletedtask,andbarrierstoentryarelowerthaninonlinefreelancing,
makingitparticularlyattractivetounemployedandunderemployedindividualswithno
specializedskills.Monitoringthequalityoftheworktakesplacelargelyautomaticallythrough
algorithms.ExamplesofmicroworkfirmsincludeAmazonMechanicalTurk(AMT),CrowdFlower,
CloudFactory,andSamasource.

Onlinefreelancing,whereclientscontractprofessionalservicestodistributedthirdparty
workers.Onlinefreelancingoftenrequiresahigherlevelofexpertisethanmicrowork,with
workerstypicallypossessingtechnicalorprofessionalskills.Onlinefreelancingtaskstendtobe
largerprojectsthatareperformedoverlongerdurationsoftimehours,days,ormonths.
Examplesincludegraphicdesign,webdevelopment,andtechnicalreportwriting.Theevaluation
ofthequalityofthegeneratedworkistypicallydonebysupervisors,andnotthrough
algorithmicorautomatedmeans.Manyonlinefreelancershavepursuedsometypeofhigher
educationandholdauniversitydegreeoradiploma.Financialremunerationtendstobehigher
foronlinefreelancersthanformicroworkers.ExamplesofOOplatformsprovidingfreelancing
workareUpwork(formerlyElanceandoDesk),1Freelancer,andZhubajie/Witmart.

Thereisoftensignificantoverlapbetweenmicroworkandonlinefreelancing.Taskssuchaswritingblogs
orproductdescriptions,typingdataintoaWorddocument,ortranscribinganaudiofiledonotrequire
specializedskillsandcanbefoundintraditionalmicroworkmarketplaces(forexample,Amazon
MechanicalTurk)aswellasintraditionalfreelancingmarketplaces(forexample,Upwork).

Themajordifferencebetweenmicroworkandonlinefreelancingisoftenthesizeandcomplexityofthe
tasks,aswellasthecompensationoffered.Ingeneral,microworkconsistsoflowcomplexitytasksthat
requirebasicliteracyandnumeracy,butnospecializedortechnicalskills.Onlinefreelancingconsistsof
highcomplexitytasksthatrequirespecializedtechnicalknowledge,oftengainedthroughvocational
trainingorauniversitydegree.Mediumcomplexitytasks,whichrequiresoftandadvancedlanguage
skillsontopofbasicliteracyandnumeracy,canbecategorizedaseithermicroworkoronline
freelancing,dependingonthetimerequiredtocompletethetasks,degreeofskillrequired,and
remunerationprovided.Tables1.1and1.2illustratesomeofthemostpopularmicroworkandonline
freelancingmarketplaces.

Table1.1OverviewoftheLargestOnlineFreelancingMarketplaces(2014)

Source:Publiclyavailabledatafromeachfirm.
Note:Thenumberofregisteredworkersmaynotrepresentthenumberofactiveworkersregularlyperforming
tasksoneachmarketplace.ElanceandoDeskhavemergedandlaunchedUpworkinMay2015.

Table1.2OverviewoftheLargestMicroworkMarketplaces(2014)

Source:Publiclyavailabledatafromeachfirm.
Note:Thenumberofregisteredworkersmaynotrepresentthenumberofactiveworkersregularlyperforming
tasksoneachmarketplace.

ThedefinitionofOOabovemayincludeotherrelatedindustries,buttheyfalloutsidethescopeofthis
study.Theseinclude:

Traditionalonshoring,nearshoringoroffshoringforoutsourcingofIT,businessprocessand
knowledgeprocessoutsourcing(ITO/BPO/KPO),whereclientsdirectlycontractbusinessservices
(forexample,customercareorhumanresourcesmanagement)orITservicestothirdparty
outsourcingcompanies.ThistraditionalindustryisnowalsoknownasITandbusinessprocess
management(ITBPM).Thesizeofthetraditionaloutsourcingindustryisseveraltimeslarger
thanOO.ThetypesoftaskscontractedtotraditionalandOOfirmsareoftensimilar,astheyare
forITO/BPO/KPOservices,especiallyfornearshoring/offshoringfirmsastheyprovidethese
servicesacrossborders.Themaindifferenceisthattraditionaloutsourcingfirmsprovide
managedservicesdirectlytotheirclients,hireemployeesandcontractworkers,andrequire
workerstobecentralizedinthesamephysicallocation.Onlineoutsourcingisanewapproach

forprovidingITO/BPO/KPOservices,andcandeliverfasterandmoreflexibleaccesstoabroader
poolofworkersthantraditionalapproaches,oftenatlowercost.Itremainstrue,however,that
traditionaloutsourcingapproachescanoftenconductagreaterrangeoftasksandhavestronger
formalmechanismstoguaranteethequalityoftheworkthanOO.AsOOgrows,itisanticipated
thatitwillincreasinglycannibalizeworkcurrentlyconductedbytraditionaloutsourcingfirms,
althoughitisexpectedthatthesizeoftheBPOandITOmarketswillremainsubstantiallybigger
thanthatofOOintheshorttomediumterm.

Gamingservices,whereanonlinegameplayerhiressomeonetoplaythegameontheirbehalf.
Exampletasksincludegoldfarming,whereaworkerplaysthegametoproducevirtual
currencywithinthegame,whichtheysellinexchangeforrealmoney;andpowerleveling,where
anindividualispaidcashtotakecontrolofaclientscharacterandplaythegame,tobuildup
theskillorpowerofthecharacterwithinthegame(LehdonvirtaandErnkvist2011).Thisstudy
excludedthisindustryfromitsscope,giventhedifferentethicalconsiderationsandincentives
forthiskindofworkintermsofthepromotionofemploymentindevelopingcountries.

Cherryblossoming(orcrowdturfing),wherepeopleperformsmalldigitaltaskstohelpincrease
theonlineprofileandbrandoffirms(LehdonvirtaandErnkvist2011).Examplesofthesetasks
includelikingafirmsFacebookpageandfollowingitsTwitteraccount.Attimes,this
contractingtakesplacethroughmicroworkmarketplacesand,therefore,aspectsofthistypeof
activityfallwithinthedefinitionofOO,butitcanalsooccurthroughdirectcontactingfroma
marketingagencythathasitsowndatabaseofpotentialworkers.Thisstudydidnotincludethis
industrygiventhedifferentethicalconsiderationsandincentivesforsuchwork.

Onlinemarketplacesforphysicalservices,suchasUberandTaskRabbit.Intheseexamples,the
Internetisusedtoconnectemployersandworkers,buttheworkrequiressomephysical
interactionbetweenemployersandworkers.Exampletasksincludemakingdeliveries,buying
goods,andassemblingfurniture.Inthesemodels,workersarenotabletoaccesstheglobaljob
marketbecauseworkisnotconductedonline.Somefirms(forexample,Zhubajie/Witmartin
China)runcombinedmarketplacesforbothOOandforphysicalservices.

10


IDENTIFYINGONLINEOUTSOURCINGBUSINESSMODELS
FivekeyelementsarecommontomostbusinessmodelswithintheOOindustry(seeFigure1.1).

Figure1.1KeyElementsofOnlineOutsourcingModels

Onlineoutsourcingfirmsconnectemployersandworkers,oftenplayingtheroleoftransformer(thatis,
convertingtheworkreceivedfromclientsintotasksthatcanbesharedwithindividualworkers)and/or
theroleofaggregator(thatis,conveningtheworkforceneededtocompletethework).Afterworkers
havecompletedtherequiredtasks,thesefirmspaythemfortheirservices.Workersperformtheirwork
overtheInternet,usingeithertheirownITinfrastructureorthatprovidedbytheOOfirm.Inaddition,
someOOfirmsalsoprovidetraining.

ThetwoprimaryarchetypesamongOOfirmsare"openservicesplatforms"and"managedservices
platforms:

Openservicesplatforms.Thesefirmsofferanonlineplatformwhereworkersandemployerscan
connectandnegotiatedirectly.Employerspayaservicefeetopostjobsontheplatformsand
workerscanbeselectedbasedonthepricetheywillchargeorontheirreputation(includingpast
employerfeedback).2Thismodelresultsinadistributedglobalworkforcewithworkersusingtheir
owncomputerstoperformOO.Openservicesplatformshaveabroadrangeoftargetclients,
rangingfromindividuals,startups,andsmallandmediumenterprises(SMEs)tolargemultinational
corporations.

Althoughmostopenservicesplatformshaveasimilarcoremodel,theadditionalorvalueadded
servicesforworkersandclientsmayvary.Forexample,someopenservicesplatformsofferworker
trainingandonlineaccreditationtohelpenhanceaworkerscredibility(forexample,Upwork).An
exampleofaserviceforclientsthatisnotofferedbyallplatformsisprovisionofreportsonthe
performanceoftheOOworkerbasedonrandomscreenshotsandkeyboardandmouseactivityto
helpclientsmonitorandsuperviseworkers.Inaddition,althoughsomeopenservicesplatforms
offerclientsspecializedskillsandspecifictypesofwork,othersoffertheopportunitytofulfillmore

11


generalfunctions.Forexample,99designsfocusesongraphicdesignwork,whileFreelancerpostsa
widevarietyofjobs.

Managedservicesplatforms.SomeOOfirmsmanagetherelationshipwithbothclientsandworkers
directly,eventhoughpartoftheoutsourcingprocessiscompletedontheirplatforms.These
managedservicesplatformstakecareoffindingandhiringindividualworkers.Theyalsoexercise
somedegreeofownershipoverthework,andperformqualitycontrolforclients.Inaddition,
workersareoftenprovidedwithITinfrastructureandtraininginhardandsoftskillsbythefirm.In
contrasttoopenservicesplatforms,thetargetclientsformanagedservicesplatformsfirmsare
mainlylargemultinationalcorporations.ExamplesofsuchmarketplacesincludeSamasource3and
CloudFactory.

Theboundarybetweenopenandmanagedservicesplatformsisnotalwaysclear.Forexample,Rev.com,
amarketplacethatspecializesintranscriptionandtranslation,selectsworkerscarefullytoensurehigh
qualityoutputandassignsthemautomaticallytoclients,thuseliminatingtheneedfortheworkertobid
forthework.However,Rev.comdoesnotprovidequalitycontrolforclients,nordoesitprovideIT
infrastructureortrainingforworkers.Theemergenceofformalandinformalmanagedservicesagencies
furtherblursthelinebetweenthesetwoformsofoutsourcing.Theseagenciesprocureworkortasks
throughexistingmarketplaces(forexample,Upwork)andsubcontractthemtoincountryOOworkers.
Suchagenciesprovidevaryingdegreesofmanagedservicesfortheirworkers.Sometakeresponsibility
onlyforbiddingforworkandmanagingcontracts,othersprovidecomputersandInternetaccess,and
someevenprovidetrainingfortheirworkers.

CurrentlythemajorplayersinOOareopenservicesplatforms:thetopthreeonlinefreelancingfirms
(Upwork,Freelancer,andZhubajie/Witmart)andthetopmicroworkfirm(AmazonMechanicalTurk)are
openservicesplatforms.

InfrastructureisacorecomponentofallOOmodels.Atthecountrylevel,thisencompasseselements
rangingfromthecost,availability,andreliabilityofelectricityandaccesstobroadbandInternettothe
costofmobileconnectivity.Attheleveloftheindividualworker,infrastructurealsoincludesaccessto
computers.ThepotentialformobileandtabletbasedOOtoprovideemploymentindeveloping
countrieshasbeendiscussed(WorldBank2012b),butworkersandfirmsreportthateffectiveand
efficientOOrequiresalaptopordesktopcomputer.Therangeoftasksthatcanbeperformedusingonly
amobilephoneislimited,andcomputersareincreasinglyperformingthesebasictasksthroughmachine
learningalgorithms.AlthoughUpworkhasamobilepresence,OOworkersreportthattheyusethe
mobileinterfaceonlytofindandbidforwork.PerformingOOworkaccuratelyandefficientlyrequiresa
largerscreen,aphysicalkeyboard,andoftenamouse,makingapersonalcomputerorlaptopacore
requirementformostOO.

Compensationandpaymentmechanismsarealsoessential,althoughtheformvariesacrossthese
differentplatforms.Somefirmsrequireaminimumwageforworkers(forexample,Upwork),while
othersallowthemarkettodetermineworkercompensation(forexample,AmazonMechanicalTurk).
Someofthemostpopularformsofpaymentarefinancialtransactionsthroughonlinepayment
platformssuchasPayPal,Skrill,andwiretransfers,(forexample,Upwork,Freelancer),Payoneerdebit
cardsthatusetheMasterCardplatform(forexample,Freelancer),orAmazonstorecredit(forexample,
AmazonMechanicalTurk).

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SEGMENTINGONLINEOUTSOURCINGTASKS
BecauseofthedynamicandrapidlyevolvingnatureoftheOOsectorandthetypesoftaskspostedon
thesemarketplaces,thestudysegmentedthecomplexityofthetasksbasedontheskillsandeducation
ortrainingrequiredasaproxytodeterminetaskcomplexity.Thisapproachallowsbothmicroworkand
onlinefreelancingtaskstobecategorizedinasimplewaywhilekeepingthesegmentationflexible
enoughtoaccommodatenewtasksthatmightemerge.

Lowcomplexitytasksrefersprimarilytomicrowork,wherenospecializedskillsortrainingarerequired;
mediumcomplexitytasksrequirebasicliteracy,numeracy,andsomedegreeofsoftskills,oftenincluding
bothmicroworkandonlinefreelancingtasks;highcomplexitytasksareprimarilyassociatedwithonline
freelancingthatrequirespecializedtechnicalknowledgethatofteninvolvesvocationaltrainingora
universitydegree(Figure1.2).

Figure1.2CommonJobCategoriesbyComplexity

UNDERSTANDINGDEMANDDRIVERS
ThissectionconsidersthemainfactorsdrivingdemandforOOandassessestheroleplayedbylocal,
regional,andglobaldemand.ThisassessmentaimstoensurethatprojectionsforgrowthofOOreflect
futurepotentialdemand,andafocustoanchorpolicyoptionsthatcanbetakenbygovernmentsto
supporttheindustry.Thefourprimaryelementsdrivingdemandaretheneedsofindustrialsectors,the
skillsrequired,theexplosionofdata,andtheneedsofagroupofparticularcountries.

13


TYPESOFCLIENT
Onlineoutsourcingfirmsreportthatitistheprivatesectorthatisdrivingmostofthedemand,but
publicsectordemandforOOisapotentialsourceofitsfuturegrowth.Althoughthereareafew
exampleswheregovernmentsintheUnitedStatesandEuropearecurrentlyusingOOforexample,the
U.S.FoodandDrugAdministration(FDA)hasusedAmazonMechanicalTurktoprocesshandwritten
drugaccidentsafetyreportsmostofthedemandisprivate.However,publicsectordemandcanbe
usedtoshowcasetotheprivatesectortheopportunitythatthisnewindustryoffers,thushelping
kickstartthedevelopmentofanindigenousOOindustryindevelopingcountries.

Withintheprivatesector,demandforonlinefreelancingisdrivenbySMEs85percentofbusinesses
usingElance(tobemergedeventuallyintoUpwork)in2011,forexample,hadfewerthan10employees
(Elance2011).SMEsandstartupsreportarangeofdifferentmotivationsforusingonlinefreelancing.
Themostcommonisthatonlinefreelancingallowsastartuptoaccessaspecificrequiredskillwithout
hiringafulltimeemployee.Therearealsoavarietyofothermotivations,suchasreducingriskand
flexibility.Forexample,anInternetbasedstartupinIndiareportedusingonlinefreelancingasalowrisk
waytotryoutnewfulltimeworkers.Onlinefreelancersaregivenafewsmallpiecesofwork,andif
theiroutputisofsufficientquality,theyareofferedalongtermcontractorafulltimeposition.Other
firmsreportusingonlinefreelancingprimarilybecauseoftheflexibilityitofferstohireworkers
seasonallyorbyproject.

Incontrast,demandformicroworkisdrivenbymediumandlargeenterprises80percentofmicrowork
clientsgeneratemorethan$10millioninannualrevenue(Crowdsourcing.org2012).Qualitative
interviewswiththeglobalmicroworkmarketplaceCrowdSourceconfirmthisfact.CrowdSourcereports
thatlargeenterprisesaredrivingdemandfortheirservices:theseenterprisesareinterestedincustom
workforcesolutionsthatdrivedowntheircostsandallowthemtoworkmoreefficientlyandquickly.
Isolatedexamplesofstartupsusemicroworkservicesaswell.OneU.S.basedtechnologystartup
employedAmazonMechanicalTurkworkerstoplaytheonlinegametheyweredeveloping.Thisallowed
theirsophisticatedmachinelearningalgorithmtolearnfromrealhumanbehaviors,allowingthemto
bettermodelartificialintelligence.

Somelargemultinationaltechnologycompaniesarealsosettingupinhousemicroworkmarketplaces.
Theseallowthemtooutsourcemicroworktasks(forexample,digitizationandimagetagging)while
keepingcommerciallysensitivedatainhouse.Suchmicroworkplatformscouldalsohelptechnology
companiescomplywithdataprotectionlaws(forexample,whendigitizingmedicalrecords).Public
informationabouttheseinhousemarketplacesislimited,however.Thebestknownexampleis
MicrosoftsUniversalHumanRelevanceSystem(UHRS),amarketplaceoriginallydesignedtoimprove
theBingsearchengine,whichisownedbyMicrosoft.

JustunderhalfofthedemandforOOiscurrentlydrivenbythetechnologyindustry(includingInternet
servicessuchasecommerceaswellashardwareandsoftwaretechnology)(Crowdsourcing.org2012).
Theremainderofthedemandisbroadlyspread:20percentisdrivenbymediaandentertainment,and
13percentbymanufacturing,withfinancialservices,retaildistribution,travelandhospitality,and
healthcareaccountingfortheremainder(Figure1.3).4

14


Figure1.3DemandDriversbyIndustrySector

Source:Crowdsourcing.org2012.
Note:Dataarebasedonthepercentageofrevenuefromeachsectorfromasurveyof15onlineoutsourcing
marketplaces.

SKILLS
AlthoughsoftwareandwebdevelopmentstillaccountforalargeproportionofdemandforOOservices,
overtimedemandisbecomingmorediversifiedwithawiderrangeofskillsrequired.Thisstudyfound
that,ofthejobspostedonoDesk(rebrandedasUpwork)onJune6,2014,40percentcorrespondedto
softwareorwebdevelopment.AsOOmatures,itisincreasinglybecomingalongtailmarket(Anderson
2006)wherealargenumberofdifferentskillsarerequired,butonlyarelativelysmallnumberofeach
skillsetarepurchased.oDeskreportedthatskillsconcentrationisdecreasingovertime(in2007,four
skillsformed90percentofthemarket;in2013,35skillsformed90percent).Moreover,thosewith
specializedskillsaredemandinghigherwages(oDesk2013c).In2013,demandonoDeskwasgrowing
fasterforskillsinvolvingsocialmediaannualdemandforPinterestskillsweregrowingat415percent,
academicwritingat312percent,anddesign(animationandmodeling)at233percent(oDesk2013b).
FreelancershowedsimilartrendsbetweenQ42013andQ12014:thefastestgrowingjobcategories
were3Drendering,ghostwriting,andsoftwaredevelopment(Freelancer.com2014).

ClientdemandforOOservicesmaybelimitedbyaperceptionthatskilledworkersarehardtofind.
AlthoughindustryexpertsreportedthattheperceivedlowqualityofOOworkersislimitingdemand
fromnewclients,firmsactuallyusingOOappeartobesatisfiedwiththeoutputtheyreceive.Offirms
usingElancein2012,73percentreportedthattheywereplanningtohiremoreonlinefreelancers
(Elance2012a).Qualitativeinterviewswithmajorfirmsinthisstudysuggestthatover80percentof
clientsarerepeatcustomers.Onaverage,thelevelofspendingofeachcohort(thatis,businessesthat
startusingOOinaspecifictimeperiod),remainsstableovertime,accordingtotheexecutivesofmajor
OOfirms,suggestingthatemployerscontinuetousethesamehighqualityworkersthattheyinitially
find(orthatforeveryfirmthatstopsusingOO,anotherfirmexpandsitsusage).

Itispossiblethatmisperceptionofpoorqualityislimitingdemandfromfirmsthatarenotcurrently
usingOOplatforms.Ifthisisthecase,thisdemandsidedrivercouldbeaddressedthroughanumberof

15


policyoptions,includingusingpublicsectordemandtodemonstratethequalityofoutput.Atthesame
time,itisimportanttoensurethatthereareenoughhighqualityworkerswhocanrespondtothe
demandandOOmarketplacescancreateamechanismtoprovideequalopportunitiesfornewly
enteredworkers.

DATAEXPLOSION
Anexplosioninbigdataiscurrentlytakingplacepartlyasaresultoftheincreasinguseof
smartphonesandtabletsandrisingglobalconnectivity.In2013,BostonConsultingGroupreportedthat
90percentofthestoreddataintheworldhadbeencreatedinthepasttwoyears,andthatannual
growthratefordatawasbetween40and60percent(Deanetal.2013).

Businesseshaverealizedthehugeopportunitythatthistrendoffersforthemtoderivevaluefrombig
datatoimproveoperationsanddriveinnovationandgrowth.Manyfirmshavestartedtothinkabout
themselvesasdatamanagersandscientists,andareinvestingheavilyinwaystoembedbigdata
analyticsintoexistingbusinessprocesses.

Industryexpertsforecastthatthistrendwillcontinueinthefuture.TheInternationalDataCorporation
(IDC)predictsthatthebigdatatechnologyandservicesmarketwillgrowata27percentcompound
annualgrowthratetoreach$32.4billionby2017aboutsixtimesthegrowthrateoftheoverall
informationandcommunicationtechnology(ICT)market(IDC2013).

BigdatarepresentsauniqueopportunityforOO.Expertinterviewsforthisstudyconfirmthatan
increasingnumberofgovernmentsarejoiningtheopendatamovement.Alongwiththegrowingneeds
ofbusinessesfordatagathering,cleaning,mining,andpackaging,theuseofopendatabygovernments
willfuelthegrowthindemandforOOservices.Otherpossiblecontributorstogrowingdemandinclude
NGOs(seeBox1.1).

Box1.1ContributionsofHumanitarianandEmergencyReliefOrganizationstotheDemandforOnlineOutsourcing

Theflexible,lowcost,andrapidlyscalablenatureofOOisparticularlyusefulinemergencyand
humanitariansettings.Forexample,thedistributedworkforcemobilizedaftertheHaitianearthquake
usedCrowdFlowerandSamasourcemarketplacestohelpmanageemergencytextmessagessentby
peopleinHaiti(Mission4636).Haitianswereencouragedtosendemergencytextmessagesto
shortcode4636.Microworkerswereemployedtoprocesstextmessages,translatethem,categorize
them,geolocatepeople,andsendinformationbacktohumanitarianagenciesinHaiti.Intotal,around
80,000messageswerereceived,withamedianturnaroundtimeoffiveminutespermessage(Munro
2013).Becauseoftheemergencynatureoftheresponse,noeffectiveimpactevaluationwasconducted
butanumberofcasestudiesandqualitativefindingssuggestthatthisservicehelpedhumanitarian
agenciestodeliveraidandemergencysuppliestoatriskpopulations(Hester,ShawandBiewald2010).
Microworkerswereinitiallyunpaidvolunteers,largelyfromtheHaitiandiaspora.Towardthesecond
halfoftheinitiative,apaidworkforcewasestablishedinHaiti,fundedbytheU.S.StateDepartment.In
total,around25percentofthemessageswereprocessedbypaidemployeesinHaiti(Munro2013).
Thereistremendouspotentialforhumanitarianagenciestousemicroworkservicestogather
informationfrom,communicatewith,andprovideemployment(andincome)forlocalpopulationsto
helpchannelandcoordinateemergencyresponses.

16


Countries
ThemajorityofglobalprivatesectordemandforOOservicescomesfromjustfourcountriesAustralia,
Canada,theUnitedKingdom,andtheUnitedStates(75percentofalldemandonElanceto2014came
fromthosefourcountries,forexample).5Nevertheless,astheOOindustrymatures,thedemandbaseis
expanding.Upworkreportsthatthetopfivefastestgrowingclientcountriesin2014wereFinland,
China,France,Russia,andSweden(ElanceoDesk2014a).

GlobaldemandalsoappearstobedrivenbyAnglophonecountriesandclients.Fourofthetopfiveclient
countriesonElance(Australia,Canada,theUnitedKingdom,andtheUnitedStates)werealmost
exclusivelyAnglophone.Inthefifth(India),Englishisoneof20officiallyrecognizedlanguagesandisthe
preferredlanguageforbusinesstransactions.ThereareexamplesofnonEnglishlanguagemarketplaces,
thelargestbeingZhubajie/Witmart,aChineselanguagemarketplacethatclaimsalmost12million
registeredfreelancersandtargetsChineseclientsandworkers.IsolatedexamplesofArabiclanguage
marketplacesexistonasmallerscale(forexample,TasktyintheArabRepublicofEgyptandNabbeshin
Dubai),whichtargetMiddleEasternclientsandworkers.Althoughtheapparentdominanceofthe
EnglishlanguageinrequestsforOOworkersmaysimplyreflectthefactthatEnglishisthecurrentlingua
francaontheInternet,itappearsthatdevelopingcountrieswithlargeEnglishspeakingpopulationsare
bestplacedtobenefitfromthepotentialgrowthinthisindustry.

WorkersandOOfirmsinKenyaandNigeriareportthatverylittleoftheirworkisdrivenbylocalor
regionaldemand.Inmostcases,OOinthedevelopingworldisdrivenbyclientsinthedevelopedworld.
Thereareisolatedexamples,however,wheredemandforOOisdrivenbylocalandregionalsmall
enterprises(forexample,JobreneurinthePalestinianTerritories);thesefirmsprovidespecialized
services,suchasArabiclanguagesupport.

SomeOOfirmshavefirstreliedonlocaldemand,andtargetedglobalclientsonlyafterhavingperfected
theirmodelinthelocalmarket.Forexample,WorkNHireinIndiawasabletoactivelyemploy15,000
onlinefreelancersbytargetingIndianclientsalone,mostlystartupsandSMEs,whorequiredgraphic
design,websitedevelopment,andcontentwriting.6WorkNHireiscurrentlyexpandingitsportfolioby
targetingclientsfromothercountries,includingtheUnitedStatesandtheUnitedKingdom.Skillsmixin
NigeriaisanewOOmarketplaceattemptingtoreplicateasimilarmodel.

17


ESTIMATINGANDFORECASTINGTHEMARKET
Theopportunityforonlineoutsourcing(OO)totransformeconomiesandrevolutionizemodelsof
employmenthaslongbeenpartofmanagementspeculation.ItwasfirstdiscussedintheHarvard
BusinessReviewin1998(MaloneandLaubacher1998).Elanceenteredthemarketin1999andAmazon
MechanicalTurkfollowedin2001(Frei2009).Despitethislonghistory,themarketisonlynow
beginningtofulfillitspotential.In2013,atleast145onlineoutsourcingmarketplacesorplatformswere
identified,althoughthetruenumberislikelytobehigher,giventhepotentialnumberofsmall,targeted
marketplacesthatarenotgloballyknown(KarpieandNurthen2014).

TheOOindustryisnowgrowingrapidly.In2013,twoofthelargestonlinefreelancingfirms,Elanceand
oDesk,merged.Inthesameyear,FreelancerbecamethefirstindependentmajorOOfirmtoundergoan
initialpublicoffering(IPO).Onlineoutsourcingfirmsarereportingextremelyhighgrowth,bothinterms
ofhoursworkedandrevenue.Thethreelargestonlinefreelancingfirms(Upwork[formerlyElanceand
oDesk],Freelancer,andZhubajie/Witmart),alongwiththetwolargestmicroworkfirms(Amazon
MechanicalTurkandCrowdFlower),aretogetherestimatedtohaveaccountedforover$1billionin
grossservicesrevenueintotalin2013.7oDeskreporteda60percentincreaseinthenumberofhours
workedbetween2012and2013(Karpie2013);Freelancerreportednetrevenuegrowthof77percentin
thefinancialyear2013(FreelancerLimited2014b).

Themonetaryvalueofthemarketcanbedefinedintermsofnetfirmrevenue(thatis,theincome
generatedbyeachOOfirm)orgrossservicesrevenue(thatis,thetotalvalueofalltransactionsthat
passthrougheachOOmarketplace,whichincludesincomegeneratedbythefirmsandpaymentsto
workers).GiventhefocusonthepotentialforOOtocreateemploymentandincomeopportunitiesin
developingcountries,thisreportdefinesmarketsizeasgrossservicesrevenue,asthisestimateaccounts
forworkerincome.

METHODOLOGY
Estimatingthecurrentmarketsizeandprojectingitsgrowthhasprovedchallengingbecauseofthe
limitedavailabilityofpublicdata,thenascentstateoftheindustry,andthehighuncertaintyregarding
howtheindustrywillevolveincludingpotentialgamechangingtechnologicalinnovations.

Thisstudyreliesonpublicdata,whereavailable,toassessthesizeofthemarket.Wherepublicdata
werenotavailable,estimatesandassumptionsbasedoninterviewswithOOfirmsandindustryexperts
wereused.InordertounderstandshorttermandlongtermgrowthoftheOOindustry,supplyside
constraintswereassessedandtheOOindustrywascomparedwithsimilartechnologydrivenindustries
(forexample,theBPOindustry).ThegrowthofOOisdifferenttothegrowthoftheoutsourcingindustry
itselfsincethemajorityofthecustomersforOOareSMEsandnotlargecorporations,whichisthecase
fortheoutsourcingindustry,andbecauseitismoreflexibleandlesscapitalintensive.Therefore,while
thestudyborrowsfromthemodelofoutsourcingforitsoverallframework,itappliesabottomup
analyticalapproachforprojectinggrowth.

Giventheuncertaintyofthemarketsprospects,thismethodologyandthefinalestimateswerestress
testedusingthefollowingcombinationofapproaches:

18


ComparingthemethodologyandestimateswithapproachesusedbyStaffingIndustryAnalysts,
crowdsourcing.org(Crowdsourcing.org2012),andtheWorldBank(tosizethemicrowork
market)(WorldBank2012a).
Validatinggrowthprojectionsagainstforecastsretrievedfromexpertinterviewswithindustry
analystsandOOfirms.
Anchoringmarketprojectionsonpatternsobservedincloselyrelatedandrelativelymore
matureindustries,suchastheBPOindustryandthecloudcomputingindustry
(PricewaterhouseCoopers2005).

ESTIMATINGTHECURRENTPENETRATEDMARKET
Estimatingthemarketinvolvesbothdeterminingtheapproachforcollectingavailabledataand
estimatingmissingdata,aswellasactuallydeterminingthemarketsize.

APPROACH
Abottomupapproachwasused,basedondatacollectedthroughinterviewswithindustryexpertsand
OOfirmsandavailablepublicdata.Theapproachconsistedof:

Compilinggrossservicerevenuedatafromthetopmicroworkandonlinefreelancingfirms:the
three freelancing firmsUpwork, Freelancer, and Zhubajie/Witmart; and the two microwork
firmsAmazonMechanicalTurkandCrowdFlower.
Estimating the share of the market held by these firms: The study estimated that Upwork,
Freelancer, and Zhubajie/Witmart form 50 percent of the global online freelancing market; 8
AmazonMechanicalTurkandCrowdFlowerform80percentoftheglobalmicroworkmarket.
Verifying and validating data against other publicly available estimates. For example, Staffing
Industry Analysts estimated a total market size of $1.6 billion in 2013 and $2 billion in 2014
(StaffingIndustryAnalysts2013).

MARKETSIZE
ThestudyestimatesthatgrossservicerevenuewithintheOOindustrywas$2billionin2013,with48
millionregisteredOOworkers,10percentofwhomareconsideredtobeactive(Table2.1).9

Table2.1EstimatedGlobalOnlineOutsourcingIndustrySize,2013

Two firms dominate the microwork market, both of which follow an open services platform business
model:AmazonMechanicalTurkandCrowdFlower.Industryexpertssuggestthatthesefirmscurrently
havecombinedannualglobalgrossservicesrevenueofabout$120million;togethertheyform80percent
of the microwork market. A number of smaller firmsincluding open services platforms such as
Microworkers.com and clickworker.com, and managed services platforms such as Samasource and
CloudFactoryarealsopartofthemicroworkmarket.

19


Theonlinefreelancingmarket,whichgrossedabout$1.9billionin2013,isover10timeslargerthanthe
microwork market. Industry experts suggest that the top three firms (Upwork, Freelancer, and
Zhubajie/Witmart)formabouthalfoftheentireOOmarket.Upworkistheclearleaderofthesethree
firms,with$750millionincombinedrevenuein2013(ElanceoDesk2013).

Figure2.1EstimatedGlobalOnlineOutsourcingPenetratedMarket,2013,$million

Source:Dalberganalysis,basedonIpeirotis2010a;ElanceoDesk2013;TheFounderMagazine2012;Freelancer
Limited2014a.
Note:AmazonMechanicalTurkrevenuedataarenotpubliclyavailable.Revenuewascalculatedbyduplicatingthe
approachofIpeirotis:http://www.behindtheenemylines.com/2012/11/ismechanicalturk10billion
dollar.html;CrowdFlowerrevenueestimatedtobeequaltoAmazonMechanicalTurksrevenue,basedonexpert
interviews;Zhubajie/Witmartsrevenuedataarefrom2012,asnoreliable2013estimateswereavailable.Itis
estimatedthat80percentofZhubajie/WitmartsrevenueisfromOO;theother20%isfromphysicalwork
contractedovertheInternet.ElanceandoDeskhavealsomergedinMarch2014,andrebrandedasUpworkinMay
2015.

Aswiththemicroworkmarket,alargenumberofother,smalleronlinefreelancingfirmsarepartofthe
system.Someofthesefirmstargetlocalorregionalmarkets.TheseincludeTasktyinEgyptwhich
targetsArabicspeakingworkersandclients,andChinesewitkeymarketplaces.Witkeyisagenericterm,
commoninChina,forOOmarketplaces.Zhubajie/WitmartisthelargestChinesewitkeymarketplace
(ChinaInternetNetworkInformationCenter2013),andtheonlyonethatappearstobetargetinga
globalmarket,throughitsEnglishlanguagewebsiteWitmart.Somesmalleronlinefreelancingfirms
targetanichemarketintermsoftechnicalskillsforexample,99designs,whichfocusesexclusivelyon
graphicdesign,andiWriter,whichspecializesinarticlewritingservices.

20


EstimatingthetotalnumberofworkerscurrentlyinvolvedinOOalsoprovedchallenging.Available
publicdataarelimited,andOOmarketplacesreportonlythetotalnumberofregisteredworkers,not
whetherworkersareactivelycompletingtasksonthemarketplace.Furthermore,publicdatadonot
accountforworkerswhoregisteronmultiplemarketplaces.

Basedonavailabledata,however,itisestimatedthattherearecurrently48millionworkersglobally
registeredonOOmarketplaces,withabout10percentofthem(4.8millionintotal)activelycompleting
tasks.10Justover10percentofactiveworkersareregisteredwithmicroworkmarketplaces,andjust
fewerthan90percentareregisteredwithonlinefreelancingmarketplaces(seeTable2.1).Thereisno
clearmarketleaderintermsofnumberofregisteredworkers.Freelancerappearstobethelargest
marketplace,currentlyreportingmorethan15millionregisteredusers;Upworkreportsnearly10
millionregisteredworkers;andZhubajie/Witmartreportsnearly12million.

PROJECTINGMARKETGROWTH
Projectingmarketgrowthisessentialtounderstandhowtobesttakeadvantageofthemany
opportunitiesthisnewindustryoffers.

APPROACH
Itishelpfultodistinguishbetweenshortterm(to2016)andmediumterm(to2020)estimatesin
determiningthepotentialsizeofthemarket.Projectionsalsoneedtoconsidersupplysideconstraints.

ShortTerm Estimates
TheshorttermestimateforthegrowthoftheOOindustryisbasedontheassumptionthat,inthenear
future,itwillcontinuetogrowalongthesamegrowthtrajectoryithasexperiencedforthepasttwo
years(33percentperyear).Revenueofmajormicroworkandonlinefreelancingfirmshasgrownrapidly
inthepasttwotothreeyears,andindustryexpertsandOOfirmsreportthattheyexpectthisgrowthto
continue,withnomajorshocks(eitherpositiveornegative)intheshortterm.

Themethodologycomprised:
Gatheringcurrentandhistoricalrevenueandworkforcedatafromthetopmicroworkandonline
freelancingfirmsglobally.
Calculatingthecompoundannualgrowthrate(CAGR)foreachfirmmentionedearlierwithinthe
pastfouryears(basedonpubliclyavailabledata).
CalculatingaweightedaverageCAGRfortheindustryasawhole,weightedbyeachfirms
revenuein2013(seeFigure2.2),andapplyingthisaveragegoingforwarduntil2016.

21


Figure2.2AverageOnlineOutsourcingGrowth,20112014,percent

Source:Dalberganalysis,basedonhistoricalrevenuedatafromindividualfirms.
Historically,themicroworkindustryhasshownsimilarratesofgrowth.AlthoughgrowthinAmazon
MechanicalTurkhasslowedrecently,thisisprobablytheresultofpolicydecisionsmadebythe
marketplacein2012toincreasethestringencyofidentityrequirementsforworkerregistration.
WorkersandacademicsinIndiareportthatthisisamajorconstrainttotheregistrationofnewworkers
ontheplatform.Uptodatedataontherevenuegrowthoftheothermajormicroworkmarketplace
(CrowdFlower)arenotpubliclyavailable,althoughintervieweesestimatedthatgrowthinthiscompany
isequalto(orgreaterthanthatof)AmazonMechanicalTurk.

MediumTerm Estimates
Mediumtermgrowthoftheoverallmarketisafunctionoftwofactors:
TherateatwhichclientsadoptOO,thatiswhethertheOOindustryisstillatanearlystageinits
developmentorwhetherithasreachedatippingpoint(Rogers2010).
ThecannibalizationrateoftheBPOindustrybyOO.
Thusthestudyexploredthreescenariosbasedonthesetwovariablespessimistic,intermediateand
optimistic.Forallthreescenarios,thetotalmarketforOOisafunctionofnewandsubstitutional
demand.Newdemandformsabout50percentofthecurrentmarket,11representingnewopportunities
forworkthatwouldnotfeasiblybeperformedwithoutanOOmarketplace.Examplesincludelargescale
imagetaggingandcategorization,drivenbyrapidgrowthindata.Substitutionaldemandformsabout50
percentofthecurrentmarketforOO,12representingworkthatcouldalsobeperformedbytraditional
impactsourcingandBPOfirms,butistransferredtoOOmarketplaces.Examplesofsubstitutional
demandformicroworkincludedigitizingpaperrecordsandprovidingaudiotranscriptionservices.Thus,
thethreescenariosweredefinedasfollows:

Pessimisticscenario:itisassumedthatOOisstillearlyintheinnovationprocess,onlyearlyadoptersare
willingtotryoutOO,whichmeansthatthegrowthrateoftheindustryisnotexpectedtoaccelerateand
willcontinuealongitshistoricaltrajectory.Thisscenarioalsoimpliesnomajorcannibalizationofthe
BPOindustry.

22


Intermediatescenario:inthisscenario,atippingpointhasbeenreached,wheretakeupmovesfrom
earlyadopterstoanearlymajority,andthegrowthrateofOOwillaccelerate.Inordertoestimatehow
muchitwouldaccelerate,comparisonwasmadewiththeBPOindustrytoidentifythetippingpointand
theaccelerationrateandthosefiguresusedforthisscenario.Again,inthisscenariothereisnomajor
cannibalizationofBPOindustry

Optimisticscenario:thetippingpointhasalsobeenreachedinthisscenarioandsodemandwill
accelerate.However,intheoptimisticscenariotherewillbemajorcannibalizationoftheBPOindustry
anditisassumedthat25%ofthecurrentBPOdemandwillbeservedthroughOOby2025.Thisresults
inastepchangeindemandandmuchquickergrowth.

SIZEOFTHEMARKET
Thesedifferentapproachesweretakentoestimatethefuturemarketsizeintheshort(to2016)and
medium(to2010)term.Sincetheindustryischangingrapidlyandishighlysusceptibletodisruptive
technologicalinnovation,forecastingbeyond2020wouldbehighlyspeculativeandconfidenceintervals
toohightoprovideusefulinformation.

Usingthemethodologyoutlinedabove,in2016themarketsizeforonlinefreelancingisestimatedto
reach$4.4billion,andformicroworkingthemarketisforecasttobe$0.4billion,resultinginatotalOO
industryprojectedmarketof$4.8billion(seeFigure2.3).

Figure2.3EstimatedShortTermGrowth,$billion

Source:Dalberganalysis,basedonrevenuedataaccessedJune,2014,fromChinaTechNews2011;Ipeirotis2010a;
ElanceoDesk2014b;FreelancerLimited2014a.
Thismarketwillsupportjobs(mostlyparttime)foranestimated112millionworkers9millionin
microworkand103millioninonlinefreelancing(seeFigure2.4).13

23


Figure2.4EstimatedShortTermGrowthinNumberofRegisteredOOWorkers,million

Source:Dalberganalysis,basedonpublishedworkforcedataaccessedJune,2014,fromElance,oDesk,Freelancer,
Zhubajie/Witmart,CrowdFlower,andAmazonMechanicalTurk.

Themediumtermscenarios(seeFigure2.5)estimatethat,in2020,theOOindustrywillgenerategross
servicesrevenueintherangeof$15billionto$25billion.

Figure2.5EstimatedGrowthinOnlineOutsourcingRevenue,20132020,$billion

Source:Dalberganalysis,basedonhistoricalrevenuedataaccessedJune2014fromPricewaterhouseCoopers
2005;NASSCOM2009,2013.

24


Thesefiguresarecomparablewiththoseofotherindustryexpertestimates.StaffingIndustryAnalysts
projectthatthe2020marketrevenuewillrangefrom$16billionto$46billion(StaffingIndustry
Analysts2014);Upworkestimatethattheirownannualrevenuewillreach$10billionin2020(Arabian
Gazette2014).Assumingtheirmarketshareremainsatpresentlevels,thetotalOOmarketwouldhit
$25billionin2020.

SUPPLYSIDECONSTRAINTSTOGROWTH
ToprojectthefuturegrowthoftheOOindustry,themodelconsideredhistoricalgrowthand
assumptionsfromindustryexperts,aswellashowsimilarindustries(suchasBPO)havegrowninthe
past.

Interviewssuggestthatthesupplyofworkersisnotaconstrainttogrowth,andthatgrowthisdrivenby
clientdemand.Thisisborneoutbydataindicatingthatthesupplyofworkersisgrowingalmosttwiceas
fastasdemandinthissector(Crowdsourcing.org2012).Qualitativeinterviewswithworkersfoundthat
theywouldliketoworkmorethantheycurrentlydotheamountofworktheyhaveislimitedbyclient
demandfortheirservices.Inordertosupporttheseassumptions,theoverallsupplysideconstraintsto
futuregrowthwereestimatedusingathreestepapproach:

UnderstandthepotentialnumberofOOworkersglobally.
DevelopaconservativeestimateofhowmuchofthetotalgrossrevenuesoftheOOindustry
theseworkerscouldabsorb.
ComparethispotentialfigurewithfutureprojectionsofthesizeoftheOOindustry.

Forthepurposesofthisstudy,todeterminewhethersupplyofOOworkerscouldmeetdemand,a
worstcasescenariowasconsidered.Inthatcase,onlyunemployedgraduatesfromthe15countries
mostsuccessfulintheindustrywerehired.14Withtheseassumptions,thereareover90millionpotential
OOworkerslivinginthese15countries.SurveysandinterviewsconcludethatOOworkerscouldearn$5
perhour,15eachworkinganaverageof10hoursaweek.Accordingtotheseassumptions,thesecollege
graduatescouldpotentiallygenerate$240billionannually(seeFigure2.6),afigurethatisanorderof
magnitudegreaterthanthe$25billionoptimisticforecastoftheglobalOOmarketby2020,suggesting
thatitisunlikelythatthesupplyofOOworkerswillconstrainthegrowthofthisnewindustry.

Figure2.6EstimatedCapacityofOnlineOutsourcingWorkers,20132020,$billion

25


Source:Dalberganalysis,basedondatafromPricewaterhouseCoopers2005;NASSCOM2013;UNESCO2014;OECD
2012;Mahapatra2013.
Note:Thetop15nationsthatsupplyOOworkerswereselectedbasedondemographicdatafromoDesk,Elance
andCrowdFlower.

Theseestimatesconfirmtheinitialanalysisthattheoverallsupplyofworkersdoesnot,atpresent,limit
thegrowthoftheOOindustry.DemandforOO,however,maybeincreasedthroughsupplyside
interventionsthatimprovetheskillsofOOworkersandtheperceivedqualityoftheirwork.These
interventionsarefurtherdiscussedinChapter6.

LIMITATIONSOFTHISAPPROACH
Thisapproachandmethodologyforestimatingthepotentialsizeofthemarketanditssupplyside
constraintshasbeendrivenbypubliclyavailabledataandinsightfromexpertinterviews.Estimatesare
limited,however,bythreemainfactors:thepooravailabilityofdataintheindustryasawhole,the
nascentnatureoftheOOindustry,anduncertaintyabouthowdemandforOOwillevolveinthecoming
years.

POORDATAAVAILABILITY
Publicrevenuedataareavailablefrommost(butnotall)oftheleadingOOfirms;thesedatawereused
whentheywereavailable.Thereare,however,hundredsofsmallermicroworkandonlinefreelancing
firms.Thepubliclyavailabledataonboththeirrevenueandtheirmarketshareareverylimited.Asa
result,estimatingthecurrentsizeofthemarketprovedchallenging,soassumptionshadtoberestricted
toavailabledatafromlargermarketplacesandinsightfromindustryexpertinterviews.

NASCENCEOFTHEONLINEOUTSOURCINGINDUSTRY
AlthoughtheOOindustrybeganin1999,itisstillnew.Althoughitattainedglobalrevenuesof$1billion
in2012(StaffingIndustryAnalysts2014),itisgrowingrapidlyandonlyoneoftheleadingmarketplaces
ispubliclytraded.Becauseofthisnascentindustrypicture,growthtrajectoriesareuncertainand
dependheavilyonthespeedwithwhichpotentialclientswilladoptthisnewformofwork.Itisthis
speedofadoptionthatwilldeterminetheshapeofthedemandcurve.

26


Thereisnoabsolutecertaintythatgrowthwillcontinueinexistingsectors,andtheindustrysexpansion
isstillsubjecttospeculation.Largeclientsareyettoshowsignsofmassadoptionandcurrent
marketplacesarestillworkingtodevelopoperatingmodelsthatcanunlockbiggeropportunitiesthan
thosecurrentlyofferedintheirtargetmarkets.

LONGTERMUNCERTAINTY
Noagenciesorinstitutionshaveattemptedtomakeforecastsbeyond2020.Longtermprojectionsare
vulnerabletounexpectedchangesinindustrystructureandtechnologydisruptions.Newbusiness
models,competitiveforces,andtheconstantlychangingglobaleconomiclandscapeallcontributeto
thishighlevelofuncertainty.Suchuncertaintyimposessomelimitationsonthereliabilityofindustry
forecasts.

27


PROFILINGONLINEOUTSOURCINGWORKERS
Onlineoutsourcing(OO)isaglobalindustry,withworkersdrawnfromacrosstheworld.Anyonewith
theprerequisiteskillsandaccesstotherequiredinfrastructure(acomputerandtheInternet)can
engageinOOwork.AcrosstheOOindustryasawhole,almosttwothirdsofworkerscurrentlycome
fromtheUnitedStates(whichhasthemostworkers),India,andthePhilippines.InEurope,Serbiaand
RomaniacontributehighnumbersofOOworkersrelativetotheirtotalpopulations.Africastillhasa
smallrepresentation,butSouthAfricaandKenyaaretheleadingcountriesonthecontinent.

Althoughspecificworkerdemographics,motivations,andengagementlevelsmayvarydependingon
geographicalcontexts,languages,culturalnorms,andpractices,somecommonalitiesacrossOOworkers
fromdifferentcountriesandbackgroundsareevident.Workersarepredominantlymaleandbelowthe
ageof35.Theyhavedifferenteducationlevelsdependingonwhethertheyengageinmicroworkor
onlinefreelancing:75percentofonlinefreelancershaveauniversitydegree,butonly33percentof
microworkersdo.Onaverage,mostworkersengageinthistypeofworkforfewerthan20hoursper
week,althoughalargerproportionofmicroworkersworkparttimeinthisway.Incomegenerationisthe
mostcommonmotivatingfactorinallcases.MostmicroworkersseeOOasameansofearning
supplementaryincome;bycontrastalmost50percentofonlinefreelancersreportOOtobetheironly
meansofincome.

METHODOLOGY
TodeterminewhereOOworkersarelocated,publiclyavailabledataweregatheredandcollatedfor
boththeonlinefreelancingandmicroworksegmentsoftheindustry.Datatoestimatethegeographical
distributionofOOworkerscamefromthreefirms:Upwork(formerlyElanceandoDesk),CrowdFlower,
andAmazonMechanicalTurk.Upwork,theonlyfirmforwhichgeographicdistributiondatawere
availableforonlinefreelancing,represents8millionworkersabout20percentofregisteredonline
freelancersglobally,butalargerpercentageintermsofactivityandrevenues.Dataonthedistribution
ofmicroworkersfromCrowdFlowerandAmazonMechanicalTurkareestimatedtorepresentabout80
percentoftheglobalmicroworkmarket(CrowdFlower2014;Ross,etal.2010).

ToestablishtheprofilesofOOworkers,qualitativedatafrominterviewswerecombinedwithpublicly
availablequantitativedatatogenerateinsightsintoarepresentativeportionoftheglobalOO
workforce.PubliclyavailabledatawereavailableonlyfromCrowdFlower,AmazonMechanicalTurk,and
Upworkmarketplaces.Giventhatthesefirmsuseddifferentsurveymethodologiesandpresenteddata
indifferent(notalwayscomparable)formats,thetrendsdiscussedbelowmaynotbedefinitiveforthe
entireOOmarket.

28


MAPPINGONLINEOUTSOURCINGWORKERS
MostOOworkersliveintheUnitedStatesandIndia,with23.9percentand21.5percentofglobal
workerscomingfromthesetwocountries,respectively(seeTable3.1).Thedriversforthisareunknown,
althoughIndiaslargepopulationskewsthetotalnumberofworkers.Overall,thedistributionofworkers
acrosstheworldissimilarformicroworkandonlinefreelancing.Asmallsetofcountriescontributesthe
majorityofworkers,whilealargenumberofcountriesproviderelativelyfewworkers.Workerscome
fromhigh,middleandlowincomecountriesandfromallcontinents,althoughAfricaandSouth
Americaareunderrepresentedatpresent(seeFigure3.1).TherelativeunderrepresentationofSouth
AmericamayreflectthefactthatmostdemandiscurrentlygeneratedinEnglishspeakingcountries;
challengesrelatedtoinfrastructureandskillsdevelopmentmaylimitAfricasinvolvementinthis
industry.

Table3.1TopFiveOnlineOutsourcingCountries

Source:Dalberganalysis,basedondatafromRossetal.2010;CrowdFlower2014;Elance2014;WorldBank2014.

Figure3.1GlobalSupplyofOOworkers,Top25Countries

Source:DatafromRossetal.2010;IpeirotisandHorton2012;Elance2014;CrowdFlower2014.
Note:DataareavailableonlyfromElanceforthetop25countriesontheElancemarketplace.Thisfigureestimates
thetotalnumberofallOOworkersforallofthosetop25countriesextrapolatedfromtheElancedata.

29


Itisworthnotingthatwhenpopulationsizeandsizeofthelaborforcearetakenintoaccount,the
Philippines,Romania,andSerbiahavethegreatestproportionoftheirpopulationsengagedinOO(see
Table3.1andFigure3.2).AlthoughthePhilippineshasthemostexpensiveandslowestInternetspeedin
SoutheastAsia,16areportonTheStateofFilipinoFreelanceMarketissuedbyElancestatedthatthe
countryisaprimedestinationforthosehiringonlinefreelancersbecauseoffactorssuchasaskilledand
hardworkingworkforce,technologicallysavvypopulation,andacceleratingentrepreneurial
communities(TeamAsia2013).AlthoughCrowdSource,amicroworkmarketplace,doesnotpublish
informationaboutthegeographicaldistributionofitsworkers,ininterviewsitreportedthatthe
countriescontributingthegreatestproportionofitsworkersaretheUnitedStates,thePhilippines,
India,andtheUnitedKingdom.

Figure3.2GlobalSupplyofOOworkersperCountryPopulation,Top25Countries

Source:DatafromRossetal.2010;CrowdFlower2014;Elance2014;WorldBank2014.

Concretedataarenotavailableonhowthetypesorcomplexityoftasksdifferbetweencountries.
Qualitatively,intervieweesreportedthatthereappearstobenodifferenceinthetypesoftasks
performedindevelopinganddevelopedcountries.Clientsreport,however,thattheytargetworkers
fromspecificcountriesforcertaintasks.Forexample,clientsreporttargetingUkrainianworkersfor
complexsoftwareprogramming,becausetheyperceivetheseworkerstoprovideahigherquality
output.SomeclientsreporttargetingworkersfromtheUnitedStatesforallprofessionaltasks,because
ofaperceptionthatAmericanworkershavebettersoftskills.CloudFactoryreportsthattheirworkersin
NepalarebettersuitedtodataentrytasksandtheirworkersinKenyaarebettersuitedtoaudio
transcriptiontasks.ThisislikelytobeafunctionoffamiliaritywithconversationalEnglish.

ItmustbenotedthatthesefiguresreflectthedistributionofOOworkersonlyonglobalmarketplaces.
Anestimated12millionmainlyChineseworkersareregisteredwithZhubajie/Witmart,whichhasa
limitedimpactontheoutsideworld.Atasmallerscale,thereareanestimated50,000Indianworkers
registeredonWorkNHire,anIndiaspecificmarketplacenowbeginningtotargetglobalclients.

PROFILINGWORKERS

30


InordertoprofileworkerswhotakeupOO,thissectionconsidersgender,age,andeducation
distribution.

GENDERDISTRIBUTION
The majority of OO workers are male (see Figure 3.3). In both microwork and online freelancing
marketplaces, there appear to be more male OO workers than female OO workers, with one major
exception:AmazonMechanicalTurkintheUnitedStates,whichemploysmorewomen.

Figure3.3GenderDistributioninSelectedMarketplaces

Source:DatafromIpeirotis2010b;Elance2012b;CrowdFlower2014.
Note:CrowdFlowerandElancedatapresentworkerprofilesfromtheglobalworkforce,whereasAMTdatafocuson
workerprofilesfromIndiaandtheUnitedStates,whichrepresentedthemajority(80.8%)oftheirworkforceatthe
time.

AccordingtoIpeirotis(2010b),thereappearstobeacorrelationbetweengenderandwhetherworkers
considerOOtobeaprimaryorsecondarysourceofincome.InIndia,whereOOisconsideredtobea
sourceofprimaryincome,themajorityofworkersaremale.IncountrieswhereOOisconsidereda
secondarysourceofincome,themajorityofOOworkersarefemale.Thismayreflectculturalattitudes
andpreconceptionsaboutthesocietalroleofwomen.

AGEDISTRIBUTION
MostOOworkersaremillennials(individualsbornbetween1981and2000)(seeFigure3.4).Millennials
areexpectedtomakeup75percentoftheglobalworkforceby2025(Deloitte2014).

31


Figure3.4AgeDistributioninSelectedMarketplaces

Source:BasedondatafromElance2012b;CrowdFlower2014;Ipeirotis2010b;Elance2013a).
Note:CrowdFlowerandElancedatapresentsworkerprofilesfromtheglobalworkforce,whereasAMTdatafocuses
onworkerprofilesfromIndiaandtheUnitedStates,whichrepresentedthemajority(80.8%)oftheirworkforceat
thetime.

InterviewswithOOworkersrevealthatalargenumberofuniversitystudentsengageinOOtoearn
additionalmoneywhilestudying.Indevelopingworldcontexts(forexample,India),universitycomputer
labsprovidestudentswithaccesstocomputersandITinfrastructure,enablingthemtoworkonline.
Elances2013Predictionsanticipatedthatoneinfouruniversitystudentswouldworkonlinein2013
(Elance2013b),whileoDesks2013surveyrevealedthat21percentoftheirworkerswerestillincollege
(oDesk2013a).

EDUCATIONDISTRIBUTION
Microworkersandonlinefreelancershavesignificantdifferencesintheireducationlevels(seeFigure
3.5).Only38percentofmicroworkersarereportedtohaveearnedabachelorsdegreeorhigher,
whereas75percentofonlinefreelancershave.Thisdisparitycanbeattributedtothedifferenceinthe
natureoftheworkandcomplexityoftasksperformedonthesedifferentmarketplaces,asdiscussed
above.

32


Figure3.5EducationofWorkforceinSelectedMarketplaces

Source:Dalberg,basedondatafromCrowdFlower2014;Elance2012b.

Ingeneral,thecurrentprofileofworkersonmostmarketplacesdoesnotfitatypicaldefinitionof
disadvantagedyouth.Forexample,80percentofIndianworkersonAmazonMechanicalTurkhave
completedabachelorsdegreeorhigher(Ipeirotis2010b).17FewerthanthreepercentofIndianworkers
onAmazonMechanicalTurkfallintoalowincomedemographic(earninglessthan$1,700peryear)
(Khanna,etal.2010).Theexceptiontothisruleisthatcertainmanagedservicemarketplaces(for
example,Samasource)specificallytargetdisadvantagedyoungpeopleasawayofmaximizingtheir
impact.

MOTIVATIONSANDLEVELOFENGAGEMENT
AlthoughOOworkersreportdifferentmotivationssuchasimprovingautonomy,gainingflexibility,and
engaginginworkthattheyarepassionateaboutincomegenerationisthemostcommonmotivating
factor.Avarietyofsecondarymotivationsalsocomeintoplayforsomeworkers.Theserangefrom
entrepreneurswhoneedaflexiblesourceofincomewhilestartingtheirownbusinessestoworkerswho
participateinOObecausetheyareunabletofindorperformtraditionalwork(forexample,workers
sufferingfromsocialphobia).

PRIMARYMOTIVATION:INCOMEGENERATION
Themajorityofmicroworkersdonotseemicroworkastheirprimarysourceofincome;incontrast,
however,48percentofsurveyedElanceworkersreportOOtobetheirsolesourceofincome.

Figure3.6illustratesthemotivatingfactorsforworkersonAmazonMechanicalTurkintheUnitedStates
andIndia(Ipeirotis2010b),andgloballyonCrowdFlower(CrowdFlower2014).Themajorityofworkers
(5069percent)perceiveittobeafruitfulwaytospendtimeandearnsomemoney.Asignificant
numberofU.S.microworkers(63percent)alsoindicatedthattheycompletedtasksonAmazon
MechanicalTurkasasourceofsecondaryincome.

33


Figure3.6MotivationforParticipatinginSelectedMicroworkPlatforms,percentoftotalresponses

Source:CrowdFlower2014;Ipeirotis2010b.
Note:RespondentsontheAMTsurveyhadtheoptionofpickingmorethanonemotivator;respondentsonthe
CrowdFlowersurveywererestrictedtoasingleresponse.

QualitativeinterviewswithOOworkersfromKenya,Nigeria,thePhilippines,Ukraine,andtheUnited
Statesprovidedinsightintothereasonswhymanyworkersdonotseemicroworkasaprimarysourceof
income:18

Workersciteaseasonalityeffectthenumberofjobspostedonmicroworksitesreduces
significantlyduringtheholidayperiods(Christmasorsummerholidays),whenincomeismost
needed.Someintervieweesindicatedthattheyvalueapredictableincomemorethana
potentiallybetterpayingopportunitythatislesspredictable.
Incomefrommicroworkmaynotbesufficienttomeetprimaryneeds,partlybecauseofthe
hoursofworkavailable.

Thesituationisdifferentforonlinefreelancers.AlmosthalfofworkersonElancereportedonline
freelancingastheirsolesourceofincome(seeFigure3.7).Thisfindingwasconfirmedbyother
platformsininterviews:WorkNHiredoesnotcollectformaldata,butitsfounderestimatesthatabout60
percentofitsworkersconsideronlinefreelancingtheirprimarysourceofincome.19

34


Figure3.7MotivationforParticipatinginOnlineFreelancingonElance

Source:Elance2012b.

Informationgatheredthroughstakeholderinterviewsshowsthatworkersoftenseeparttime
freelancingaspartofanexitstrategyfromfulltimeemploymentintoselfemploymentor
entrepreneurship,astheyacquirebothsoftandhardskillsthattheycanusetosetuptheirown
businesses.20WorkersreportthatOOaffordsthemtheflexibilityandtimeneededtoestablishnew
ventures.

SECONDARYMOTIVATIONS
WorkersreportawiderangeofsecondarymotivationsforparticipatinginOO.Theymay:

Beunabletofindtraditionalwork:
o OftheAmazonMechanicalTurkersfromtheUnitedStates,24percentreportedthat
theywereunemployedandwouldprefertofindtraditionalwork(Shapiro,Chandlerand
Mueller2013).
o IntheUnitedStates,convictedfelonshavebeenreportedtoengageinOOafterhaving
servedtheirprisonsentences.Exoffendersarelesslikelytofindgainfulemployment
thanaverageAmericancitizens;lackofemploymentisasignificantriskfactorfor
recidivism(James2014).
o InAfrica,onlinefreelancersreportthattheyturntoOOafterspendingalongtime
unemployedandsearchingforprofessional,traditionalwork.

Beunabletoperformtraditionalworkforhealthreasons:
o About50percentofAmericanworkersonAmazonMechanicalTurkmeetclinicalcriteria
forsocialanxiety(overseventimeshigherthantheprevalenceofsocialanxiety
disordersinthegeneralpopulation)(Shapiro,ChandlerandMueller2013).Leadersof
microworkeronlinecommunitiesreportanumberofcasesofworkerswhouseAmazon
MechanicalTurkbecauseofphysicalormentalhealthissuesthatlimittheirabilityto
performtraditionalwork.

35


Beunabletoperformtraditionalworkforculturalreasons:
o QualitativeresearchfromIndiasuggeststhatthereisacohortofIndianwomenwhouse
OOasawaytoearnmoneywhilefulfillingtraditionalsocialobligations,includingcaring
forchildrenandelderlyfamilymembers.21
o Taskty(anEgyptianonlinefreelancingcompany)reportedthatsomeoftheirworkers
areEgyptianwomenfromtraditionalhouseholds,whouseonlinefreelancingasaway
ofearningmoneywithoutneedingtoentermaledominatedworkplaces.

Requireautonomyandflexibility:
o OfonlinefreelancersonElance,70percentreportedthattheabilitytohavecontrol
overmyownscheduleisveryimportanttothem(seeFigure3.8).
o Inanewreport,70percentofworkersonUpworkreportthattheyvaluebeingableto
choosetheprojectsthattheyworkon,and70%reportthattheyvaluebeingableto
balancetheirworkandpersonallives(ElanceoDesk2014a).
o QualitativeinterviewsrevealedinstancesinIndia,Kenya,andNigeriawheresomeOO
workersuseOOtoearnmoneywhilestudyingorwhiletryingtosetuptheirown
businesses.
o Infocusgroups,anumberoffemaleOOworkersreportedthatonlinefreelancing
allowedthemtoearnmoney(andgainindependence)whiletakingcareoftheirchildren
andfamilies.

Figure3.8MostImportantSelfReportedMotivation,PercentofTotalResponses

Source:Elance2012b.

Bereluctanttomigrateawayfromfamilytofindwork:
o Someworkers(particularlyinSouthAsiaandSoutheastAsia)reportedthattheychoose
toworkonlinefulltimeasawaytoearnmoreincomethantheycouldintraditional
workandavoideconomicmigrationbothruraltourbanmigrationandemigrationto
developedcountries.

36


Haveapassionforthework:
o InKenya,OOworkersreportedininterviewsthattheyworkoniWritertofulfilltheir
passionforwriting;inthesecases,earningmoneyseemstobeasecondarymotivation.
o InEgypt,therearereportsofOOworkerswhoarepassionateaboutacquiringtechnical
skills(forexample,softwaredevelopment),andtheyfreelanceasawayofgainingextra
skillsintheirhobbyareawhilemaintainingthestabilityandregularincomeoftheir
traditionalworkinofficeadministrationorretail.

ENGAGEMENTLEVELS
TheamountoftimethatOOworkersspendengagingintasksvariessignificantlyacrossthedifferent
typesofmarketplace.Thereasonsforthisareunknown,butthetimespentcouldbeinfluencedbythe
availabilityofwork,personalmotivation,andthecompensationlevelperjob.

Figure3.9comparesthetimeworkersspendononlinefreelancingandmicroworkmarketplaces.

Figure3.9NumberofHoursSpentonOnlineOutsourcingPerWeekonSelectedMarketplaces

Source:DatabasedonsurveysconductedbyElance2012a;andAmazonMechanicalTurkIpeirotis2010b.

Inthecaseofbothonlinefreelancersandmicroworkers,themajorityofpeopleworkupto20hoursper
week,althoughtherearemoreparttimeworkersonAmazonMechanicalTurkthanonUpwork.Thiscan
beattributedtothefactthatmicroworkisconsideredasourceofsecondaryincome,hencetheworkers
arelikelytospendmorehoursfocusingontheirprimarysourceofincome.

Incontrast,onlinefreelancerstendtospendmoretimeonopenservicesplatforms,probablybecause
thisistheirprimarysourceofincomeandtheyarethereforeengagedintheworkonafulltimebasis.
OftheworkerssurveyedbyElance,66percentindicatedthattheyworkedontwoormoreprojectsata
time(Elance2012b).

37


ONLINEOUTSOURCINGWORKERARCHETYPES
FocusgroupsandoneononeinterviewswithOOworkersinKenyaandNigeriahaveledtoanumberof
workerarchetypes,detailedinthesectionbelow,althoughthesamplesizeissmall.Thereisnosingle
typicalprofileofanOOworkerinKenya:OOworkersrangefromuniversityeducated,middleclass
workerswhochoosetoworkonlinebecausesalariesarehigherthanintraditionalwork,tounemployed
studentswhoworkonlinebecausetheycannotgettraditionalwork,andsinglemotherswhowork
onlinebecausetheycansupporttheirfamilywhilefulfillingtheirresponsibilityascaregivers.This
sectionprofilesvariousOOworkerstohelpunderstandthebreadthofexperiencesandthechallenges
thatworkersface.22

THEBREADWINNER(KENYA)

Elizabeth, 55, originally worked as a stenographer. Her husband died in 2003, and she is the sole
breadwinnerforthreeofherownchildrenandoneotherorphanwhoshehasinformallyadopted.She
worksonlineonwritingmarketplaces,andiscurrentlybeingonboardedtostartworkwithCloudFactory.
Atthemoment,sheearnsaround$5080perweekworkingonline.Thisishersolesourceofincomefrom
whichshepaysforherfamilysrentandlivingexpenses,andtoservicehershorttermSavingsandCredit
CoOperative(SACCO)loans.23Ilostmyhusbandin2003,soIamthemotherandthefather.Iamself
sufficientOnlineoutsourcingdoesnotconfinemetoan85timeframe.Icanworkatmyconvenience,
andIcanmanagemyownhomewhileIwork.

THESELFSUPPORTINGSTUDENT(KENYA)

Chrisphine,35,startedauniversitydegreein2013,andwasdependentonloansfromfamilyandfriends
topayhistuitionfees.Strugglingtomakeendsmeet,heborrowedmoneyfromaloansharkwhocharged
100percentinterest.Heinitiallytriedtoearnmoneythroughpayperclickscams,butwasunabletoraise
tuitionfeesandhadtoleavehisstudies.HestumbledacrossWalterAkolosfreelancerkenyacommunity
andhasbeenworkingonlinefulltimeforthepastsevenmonths.Heisnowearning$40100perweek,
andhopestoresumehisuniversitystudiesintheautumn.

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THEPARTTIMEWORKERPURSUINGTHEIRPASSION(KENYA)

Laban,26,hasbeenaparttimeOOworkerforthepastyearandahalf.Heworksfulltimeinabank,but
ispassionateaboutwritingandworksonlineasawaytoearnextramoneyandasawayofturningmy
passionintoaprofession.LabanvaluestheflexibilityofOOasyoucanwakeupat2am,dowork,and
thenhavetherestofthedayfree.Labanearns$100perweekonaverage,butcanearnnothinginabad
week.Hespendsthemoneyonrentandsupportinghisfamilymembers;hesavesandinvestsanymoney
thatisleftover.

THEJOBCREATINGENTREPRENEUR(KENYA)

Joan,24,hasbeenworkingonlineforthreeyears;shestartedasauniversitystudent.IstartedwhenI
wasinuniversityIhadtomoveout[frommyparentshouse]andfigureoutawayoftakingcareof
myself.Iendeduppayingmyfeesforuniversity,stayedatmyownplace,boughtmyownthings.After
three years of experience, she now primarily writes on Asiawriters. She has six accounts, which she
manages,andemploysfivepeoplewhocometoherhomeofficeeverydaytoworkonline.Sheprovides
computersandanInternetconnection,andisresponsibleforprocuringwork;theywritearticlesforher.
Inagoodweek,Joanearns$200afterpayingheremployeesthetotalincomefromeveryoneis$1,000.

THECOMMUNITYLEADER(NIGERIA)

Femi,40,hasbeenworkingonoDeskandElancesince2011.Heisuniversityeducatedand,beforestarting
online freelancing, he was a systems analyst developing interactive elearning software. At first, Femi
struggledtogetanycontracts,andittookhimoverayeartostartearningmoneyfromOO.Feminow
worksonlinefulltime,earningupto$750perweek.FemiissoenthusiasticaboutOOthathenowsees
himselfasamentorfornewNigerianOOworkers.BothinformallyandasanElancemobilizer,Femigives
presentationsandrunsinformalofficehourstointroducepeopletoOOwork,helpsbuddingOOworkers
navigatethroughOOmarketplacesandpaymentmechanisms,andhelpspeoplewincontractsandcreate
wealthforthemselves.[Onlineoutsourcing]givesmethefreedomtochoosewhoIworkwith,whenI

39


work,andhowIwork.IlovethatIcanworkwithoutborders,oninterestingjobs,andwithclientsspanning
severalcountriesandorganizations.

THESELFMADEENTREPRENEUR(NIGERIA)

Ayodeji,29,startedworkingonlinefourorfiveyearsagobecauseoftheseriouslackofemployment
opportunities in Nigeria. He was university educated in microbiology but always more interested in
technology,andtaughthimselfwebsitedesignusingonlineresources.AyodejijoinedFreelancerin2009
andElancein2011,butfoundthathereallystruggledtogetworkonthesemarketplaces,reportingthat
globalclientsdonottrusthimbecauseheisNigerian,andthereisaglobalperceptionthatallNigerians
arescammers:

ThemainissuewithgettingcontractsawardedtoyouisthereputationthatNigeriaalreadyhas.Unable
togetworkonFreelancerorElance,AyodejistartedtoprocureOOworkforhimselfdirectlywithclients.
He identified potential clients on LinkedIn, Skillpages.com, and through his own network of contacts.
Throughthis,Ayodejihasbuiltuphisownsuccessfulfreelancingbusinessfocusedonwebdesign,search
engineoptimization,andonlinemarketing.Hehasmanagedtowincontractswithmajormultinational
corporationssuchasSamsungandHP.HenowcontractssomeofhisworktoElanceandoDeskworkers.

THEASPIRINGWORKERWHOCANNOTWINACONTRACT(NIGERIA)

Nnenna,28,isastayathomemotherwithtwochildren.Nnennagraduatedinlinguisticsandisanaspiring
online writer. She stumbled across Freelancer while browsing the Internet three years ago. Despite
creatingafullprofileandspending23hoursperdaybiddingforwritingcontracts,shehasnotwonany
contractsforwork,becausepeopledontlikeNigeria.Everyonethinksthatyouarescammingthem.
Nnennahastriedregisteringforothermarketplaces,includingfiverr.com,buthasnotbeenabletoget
any paid work through them. Nnenna knows workers that change their name and profile pictures to
pretendthattheyarenotfromNigeria,butsheisnotwillingtodothat.Atthemoment,Nnennawrites
forherownblogandistryingtogetpaidtowritearticlesforlocalNigerianwebsites.

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SOCIALANDECONOMICIMPACTONWORKERS
Giventhepotentialforonlineoutsourcing(OO)toprovidelargescaleemploymentforpeopleinthe
developingworld,thereisaneedtobetterunderstandthepotentialsocioeconomicimpacts(both
positiveandnegative)ofOO.Clearlyaneconomicbenefitisderivedbyprovidingjobopportunitiesto
previouslyunemployedandunderemployedpeople.Thisincludessecondordereconomicbenefits,such
asremittancemoneysentfromOOworkerstosupporttheirruralrelatives.Therearealsosignificant
potentialsocialimpacts,bothpositiveandnegativepositiveintermsofskillsdevelopmentandcareer
advancement,andnegativeintermsofthepsychologicalstressofmicrowork.

METHODOLOGY
Todetermineitssocioeconomicimpact,structuredinterviewswereusedtogatherdataandinsights
fromarangeofactorsintheOOspaceOOfirms,clients,andworkersthemselves.Ingeneral,available
quantitativedatadocumentingtheimpactofOOarelimited.However,theethnographyofworkerson
microworkmarketplacessuchasAmazonMechanicalTurkhasbeenstudiedbothinIndiaandtheUnited
States,andinsightshavebeendrawnfromtheavailablescientificliterature.Researchintotheimpactof
onlinefreelancingisatanearlierstage.Althoughanumberofresearchprojectshaverecentlybeen
launched,theyhavenotyetpublishedconcretedata.Whereverpossible,initialinsightsfromthese
researchprojectshavebeendrawnthroughinterviewswithacademics,OOworkers,andOOfirms.

ECONOMICIMPACT
ThissectionexplorestheprimaryeconomicimpactofOOatanindividuallevel.Althoughsecondorder
impactisanareathatshouldbeconsidered,thereisanabsenceofavailabledata.Samasource
estimatesthateachofitsworkerssupports3.6dependents(Samasource2013a).Theglobaleconomic
impactofthismethodofemploymentisdetailedinChapter2.

Table4.1summarizesestimatedaveragemonthlywagesacrossselectedOOmarketplaces.Monthly
earningsaredrivenbyhourlywagesandbythehoursworked;giventhattherearesignificant
differencesacrossmarketplaces,thereislimiteduseindirectcomparisonofmonthlywagesacross
differentplatforms.Forexample,oneFilipinoonlinefreelancerworkingparttimereportedthatshe
earned$34perhouronoDeskforperformingtaskssuchastranscription,dataentry,andbasic
administrativeservices.AnexperiencedNigerianonlinefreelancerreportedthatheearnedaround$20
perhourforsoftwaredevelopmentandwebsitedesignonUpwork(formerlyElanceandoDesk).Atthe
highendoftherange,onlinefreelancersonoDeskwhoprovideconsultingonpatentsorventurecapital
consultingearnaround$40perhour(Horton2012).Ingeneral,however,fulltimeOOworkersinIndia,
Kenya,andNigeriathecountriesforwhichthisreporthasaccesstoactualdataearnmonthlysalaries
thatarecomparableto,orhigherthan,theirpeersintraditionalwork.Thisissupportedbysurveydata;
28%offreelancersonUpworkreportedthattheyearnmoreormuchmorethanotherpeoplein
theircommunity(ElanceoDesk2014a)

41


Table4.1SelfReportedMonthlyWagesinSelectedMarketplaces

Source:DalbergsqualitativestakeholderinterviewswithdatafromiGraduateandEducationUK2009;Ipeirotis
2010b;GinoandStaats2012;OfficeofthePrimeMinister,Kenya2012;MehraandRoy2014.
Note:TheseearningsareselfreportedbyasmallsampleofOOworkerswhowereinterviewedforthisstudy.The
figuresmaynotberepresentativeofwhatOOmarketplacessuggestworkerscanearn.
a. CloudFactorydeliberatelylimitsthehoursthateachmicroworkercanworkperweek,toenablethe
marketplacetobeasupplementarysourceofincomeforasmanypeopleaspossible.
b. MostworkersonAmazonMechanicalTurkseemtowork1020hoursperweek,earningabout$80per
month.AsmallsetofworkersuseAmazonMechanicalTurkfulltime;theyapparentlyearnabout$1,000
permonth(Ipeirotis2010b).
c. Thehoursworkedbyonlinefreelancersvarygreatly,dependingonworkavailable.Mostfulltime
workersreportthattheycanworkfor2040hoursperweek,andearn$200750permonth.Thereisa
smallsubsetofhighlyskilledworkerswhocanearnupto$3,000permonth.

Althoughresearchhasexploredhowworkersspendthisincome,fewdataareavailable.OnUpwork,
63%ofworkersreportedthattheyprovideatleasthalfoftheirfamilystotalincome(ElanceoDesk
2014a).Samasourcereportedthattheirworkersspendmoremoneyonshelter,nutritionandfood
security,education,discretionaryitems,andlocalremittancesthantheydidbeforestartingworkwith
Samasource.Inparticular,Samasourceworkersincreasedtheiraveragemonthlyspendingonshelter
(includingcleanwaterandelectricity)from$21to$48permonth,onnutritionfrom$20to$40per
month,andonlocalremittancesfrom$5to$13permonth(Samasource2013a).Theselocal
remittancesleadtoadditionalsocialbenefitsforexample,OOworkersarereportedtousetheir
additionalincometohelpsupporttheirrelativeseducation.

InterviewsandfocusgroupswithKenyanandNigerianOOworkersconfirmthattheincomegenerated
throughotherOOmarketplacesisalsooftenspentonshelter,nutrition,education,andsupporting
otherfamilymembers,inadditiontocoveringworkexpenses(thatis,computerandInternetaccess).
ThisstudyfoundcasesinwhichOOhadallowedindividualstofundpropertypurchasesorreturnto
schooltocontinuewiththeirstudies.

42


NONFINANCIALIMPACT
ThisstudyidentifiedfourprimaryareasofnonfinancialimpactforOO:(1)theskillsthatOOworkers
develop(bothtechnicalskillsandsoftskills),(2)thecareerprospectsofOOworkers,(3)thesocial
networksthatworkersbuild,and(4)theemploymentbenefitsthatOOworkerscanreceive(for
example,healthinsuranceandretirementbenefits).

TECHNICALANDSOFTSKILLS
InterviewssuggestthatOOworkersdevelopbothtechnicalandsoftskillsboththroughformaltraining
programsandthroughonthejoblearning.SixtythreepercentofworkersonUpworkreportedthatthey
valuetheopportunitytolearnnewskillsthroughonlinefreelancing(ElanceoDesk2014a).

Technicalskills:Thetechnicalskillsthataredevelopedvarysignificantlybetweenworkerswhoperform
microworkandthosewhoworkinonlinefreelancing.Microworkersdevelopbasictechnicalskills,
includingbasicITliteracy,forexample,theabilitytotypeaccurately,andbasicInternetliteracy,for
example,theabilitytouseGoogleandothersearchenginesefficiently.Bycontrast,onlinefreelancers
reportedthattheycandevelopabroadrangeoftechnicalandprofessionalskills,suchasproficiencyin
newprogramminglanguages,ortheabilitytouseadesktoppublishingprogram.

Onlinefreelancersmustpossessatleastabaselineofvaluabletechnicalskillstobegin,butthey
reportedthattakingonnewjobsallowsthemtorefineandimprovethesetechnicalskills.Upworkoffers
aservicecalledElanceUniversity,anoptionalresource(withsomefreeandsomepaidforcourses)
whereworkerscanwatchtechnicalvideostopickupnewskills(forexample,3Danimation,useofthe
engineeringsoftwareSolidWorks,anddirectmarketingtechniques).

Thepotentialtodeveloptechnicalskillsinonlinefreelancingisgreaterthaninmicrowork,butformany
disadvantagedyoungpeoplewholacktechnicalorprofessionalskillstobeginwith,thebarriertoentry
ishigh.Thenatureofonlinefreelancingworkismorediversethanmicroworkandtendstorequirea
morecomplexsetofskills.Thisdiversityandcomplexity,combinedwiththefactthatonlinefreelancers
aremoreskilledthanmicroworkerstobeginwith,makesiteasierforthemtobuildmoreadvancedskills
throughselflearning.

Softskills:OOoffersopportunitiesforworkerstodevelopbasicsoftskills,althoughtheactualbenefit
accrueddependsontheprofileoftheworker.Microworkandonlinefreelancingalsooverlap
substantiallyintermsofsoftskillsdevelopment.GenerallyalltypesofOOcanhelpworkersdevelop
basicprofessionalskills.Amongtheseareprofessionalandresponsivecommunicationskills(which
clientsreportastheskillstheyvaluemostinOOworkers),timemanagement,workingtoadeadline,
andworkingunderamanager.Therearealsoadditionalsoftskillsthat,becauseofthenatureofthe
work,onlinefreelancerscandevelop.Theseincludenegotiatingwithclientsandmanaging
subcontractedworkers.

Somemanagedservicesplatformsputspecifictrainingprogramsinplacetohelpdevelopthesesoft
skills.Forexample,CloudFactoryrunsmandatoryweeklyteammeetingswhereOOworkersmeetwith
eachother,andaregiventheopportunitytodiscussmanagementskillsandlongtermcareer
aspirations.Inthiscontextthenonfinancialimpactofmanagedservicesmarketplacesthattarget
disadvantagedpopulations(suchasSamasourceandCloudFactory)issubstantial.Thesemarketplaces
areabletoprovideformalemploymenttopeoplewhohavepreviouslyworkedonlyintheinformal
sector,andtheirworkerscandevelopsoftskillsthatpreparethemfortraditionalemployment.

43


CAREERPROSPECTS
Becausemicroworkisrelativelyunskilled,workersdousuallyupskillandgainsubstantiallyhigherwages.
TypicalwagesonAmazonMechanicalTurkare$23perhour;experiencedworkersreportthattheycan
earn$68perhourastheylearntoworkmoreefficiently.

AlargeproportionofmicroworkersfrommanagedservicesmarketplacesleaveOOtopursuetraditional
jobsorfurtherstudies.Careerpathwayswithinsuchmanagedservicesmarketplacesvary,anddataon
theproportionofworkerswhoclimbcareerladdersarelimited:Samasource(2013a)reportedthat32
percentoftheirworkersgoontofulltimeeducationwhentheyleaveSamasource,24percentcombine
workandeducation,and33percentgoontofulltimework.Managedservicesmarketplacesthatfocus
onsocialimpact(suchasCloudFactory,MobileWorks,andSamasource)providealimitednumberof
opportunitiesforOOworkerstoadvancewithinOOtobecomefulltimeemployeesofthemarketplace,
responsibleforqualityassuranceandworkermanagement.

Withinonlinefreelancing,surveyssuggestthatsomeworkersseeonlinefreelancingasanattractive
longtermproposition.In2013,70percentofmillennialworkers(aged1434)reportedthatonline
freelancingwasamoreinterestingpropositionthanregularwork(oDesk2013a).Ininterviews,online
freelancersreportedarangeoflongtermcareerprospects.Somesaidthattheyintendedtofreelance
longterm,somesaidthattheywereonlinefreelancingwhileseekingtraditionalemployment,andsome
saidthattheywereonlinefreelancingtogainskillsandearnmoneywhiletryingtosetuptheirown
businesses.

SOCIALNETWORKS
AnoftenignoredimpactofOOappearstobethesenseofcommunitythatarisesamongworkers.A
socialbenefitarisesfromworking,andformingsocialnetworks,withcolleagues.Managedservices
marketplacescreateaphysicalspaceforcolleaguestomeet,whileopenservicesplatformsdonotoffer
thesamespaces.Indiscussionswithacademicsandworkers,longtermworkersonAmazonMechanical
Turkfindwaystorecreatethesecommunitieswiththeircolleagues.U.S.basedworkersseemto
becomepartofstrongonlinecommunities(usingforumsandFacebook,forexample).InIndia,
academicsreportedseveralcaseswheremicroworkersformphysicalcommunitiescenteredon
universitiesorInternetcafs.Withinthesecommunities,workershelptheircolleaguesusetheAmazon
MechanicalTurksystemasitcouldbenonintuitivetosome,findhighpayingtasks,andidentify
unreliableclients.Thesecommunitieshaveoftendevelopedarangeoftools(includingwebscripts)that
helpworkersbetternavigatethesysteminordertomaximizetheirearnings.InKenya,online
freelancershaveformedaninformalcommunityonFacebook,allowingthemtosharetipsandtricks,
includinginformationaboutwhichOOmarketplacespaythemostandwhichpaymentservicesworkin
Kenya.Thiswouldseemtosuggestthat,althoughasocialbenefitexistsintheformofthecommunities
thatarisearoundmanagedservicesmarketplaces,longtermworkersonopenservicesplatformsare
abletoindependentlyfindandbecomepartofsimilarcommunities.

EMPLOYMENTBENEFITS
Dependingoncountrynormsandregulations,traditionalworkmayprovidearangeofnonmonetary
benefits.Thesecanincluderetirementbenefits,grouphealthinsurance,administrativesupport,and
childcarebenefits.SomeOOmarketplacesarebeginningtoofferthesebenefitsfortheirworkers,but
sofartheseexamplesarerareandappeartoberestrictedtoworkersinCanadaandtheUnitedStates.
oDeskoffersaservicecalledoDeskPayroll,wherebypeoplewhoworkatleast30hoursperweekon
averagecanregistertobeclassifiedasW2employeesofoDesksstaffingagency.24Workersableto

44


registerforthisservicereceiveadministrativesupporttoinvoicecontractorsandpaytaxes.Inaddition,
workersareeligiblefor401(k)savingsplansandgrouphealthinsuranceplansthroughoDesk,which
usuallyprovidehigherbenefitsandfewerrestrictionsthanindividualplans.

POTENTIALRISKS
Onlineoutsourcingoftendoesnotfitintotraditionallegalorsocietalnorms.Becausethiswayof
workingisnovel,extensiveattentionhasbeenpaidtoitspotentialnegativeimpact.

Workingconditions:Onlineoutsourcingmarketplaceshavefacedcriticism,intheliteratureandin
discussion,onlegalandethicalgroundsbecauseworkersdonotreceivethebenefitsofunionization,
collectivebargaining,legalprotectionssuchasminimumwagelaws,orthejobsecuritythatoftencomes
withtraditionalwork(Fort,AddaandBretonnelCohen2011).Ininterviews,someindustryexperts
believethattheseconcernsareexaggeratedbecausethesameprotectionsarenotaffordedto
contractorsworkingasindependentfreelancersintraditionalwork.Surveysofworkersonmicrowork
andfreelancingmarketplacessupportthispointofview.A2009surveyofAmazonMechanicalTurk
foundthatworkersperceivedonlineemployerstobeashonestandfairasemployersintraditionalwork
(workersestimatedthat69percentofAmazonMechanicalTurkrequesterstreatedworkersfairlyand
honestly,comparedwith64percentoftraditionalemployers)(Horton2011).Ethnographicresearchof
TurkerssuggeststhattheydonotwantgovernmentregulationoftheOOmarketplace,partlybecause
theyareafraidthatinterferencewillleadtothemarketplacebeingclosed(Martin,etal.2014).Thisis
alsotrueoffreelancingmarketplaces:surveysofElanceshowthatover90percentofonlinefreelancers
reportthattheyareashappy,orhappier,infreelancing,thantheywereastraditionalemployees
(Elance2012b).

Volatility:JobsinOOmarketarevolatilebecausetheyaredoneonafreelancebasis,aretypicallyof
limitedsizeandduration,andarepiecemealordiscreteinnature.ItisdifficultforanOOworkerto
predicttheflow,volume,ortimingofworkthattheymayreceive,andtheassociatedincomefromsuch
work.VolatilityaffectsnewOOworkersmorethanexperiencedonesbecausetheydonothavethe
reputation,experience,andregularclientstoattractasteadyflowofwork.NewerOOworkersmayfind
itchallengingtomanagetheirexpectations,andtheimpactofOOworkontheirtimeandincome.Most
developingcountriestreatOOasparttimework,andthismaymitigatetheimpactofvolatility.

Natureofthework:Othercriticismsofmicroworkhaveincludedsocialconcernsaboutitsnature.Work
iscloselyassociatedwithapsychologicalsenseofself.Fewdataarefoundonthispointbutin
interviews,workersindicatedthatmicroworkcanbeisolating;performingrepetitiveandcognitively
unchallengingtaskscanleadpeopletoquestiontheirsenseofselfworth;someOOworkersevenreport
casesofdepressionfollowinglongperiodsofmicrowork.Thiscriticismappearstobelessrelevanton
managedservicesmarketplacesthanopenservicesmarketplacesbecausetheymakeagreatereffortto
ensurethatworkersfeelpartofacommunity,takeprideintheirwork,andfeelthattheyaredeveloping
bothtechnicalandsoftskills.Forexample,CloudFactorydeliberatelyplacesOOworkersinteams,holds
weeklyteammeetingsfacilitatedbyafulltimeCloudFactoryemployee,andteamsareexpectedtotake
partincommunityservice.

Racetothebottom:AfinalcriticismofOOisthatitmayleadtoaracetothebottom.Inthecontextof
OO,thiswouldinvolvegovernmentsderegulatingthelabormarketinanattempttoattractemployment
opportunities.Suchderegulationcouldleadtolowerwagesandpoorerworkingconditionsforworkers.
However,thisriskisnotexclusivetoOOitalwaysexistswhengovernmentsaretryingtopromotea

45


newindustryandattractinvestment.Thispotentialnegativeimpactcouldbemitigatedbycareful,
deliberateactionstoengageOOworkersbeforedevelopingnewemploymentpolicies.Aracetothe
bottomcouldalsobemitigatedbyensuringthatgovernmentsattractOObyraisingthequalityoftheir
workersandthereliabilityoftheirinfrastructure,ratherthanmerelybyofferingcheaplabor.

IMPLICATIONSFORDEVELOPINGCOUNTRIES

Youthunemploymentremainsamajordevelopmentissueformanycountriesinregionssuchasthe
MiddleEast,NorthAfrica,SubSaharanAfrica,andSoutheastAsia.Ofthe1.2billionyoungpeopleinthe
worldagedbetween15and24,87percentliveindevelopingcountries.Twothirdsofthemareeither
unemployedortrappedinlowqualityjobs(UNDESA2012;ILO2013).Thegapbetweennewlaborforce
entrantsandnewformaljobscreatedisenormousinthesecountries.InKenya,forexample,550,000
youngpeopleenteredthejobmarketbetween2009and2013,butonly70,000newformaljobswere
createdduringthesameperiod,absorbingjust12percentoftheentrants(IEAandFES2010;UNDP
2013).Highpopulationgrowthrateswillonlyexacerbatetheproblem,increasingthenumberofyouths
attemptingtoenterthelabormarket(ILO2010).

Onlineoutsourcingisanemergingindustrythatcouldpotentiallycontributetoaddressingtheyouth
unemploymentchallenge.Thisstudyconfirmsthatdevelopingcountriescouldbenefitfromthissector
bytappingintoanewsourceofincomeforsomeoftheirpopulationsegments.However,the
contributionofOOtostrengtheningemploymentmarketsindevelopingcountrieswillbelimited;broad
nationalemploymentstrategies,whichcouldincludeOObutlookbeyondthissector,arerequiredto
fullyaddressthischallenge.

TheeconomicimpactofOOvariessignificantlyacrossmarketplaces,typeofwork,andlevelof
engagement.Initialfindings,however,suggestthatitcanhaveasignificanteffectatthehouseholdlevel
forsomeindividuals.ThePhilippinesisamongthecountriesbenefitingthemostfromthisopportunity;
almost5percentofthecountrystotallaborforceisregisteredasOOworkers.InthePhilippines,where
theaverageannualfamilyincomeis$5,230,OOcanincreaseafamilysincomebyalmost50percentif
anadditional$50isearnedweeklythroughthischannelafigurethatisconsistentwithfindingsfrom
interviewsandfocusgroupswithOOworkersconductedaspartofthisstudy.25

Currently,20%oftheregisteredworkersonUpworkarefromtheUnitedStates(Elance2014),(Ipeirotis
andHorton2012).TheclientinterviewsconductedaspartofthisstudysuggestthatemployershireU.S.
workersbecauseoftheperceptionthattheycandeliverhighqualityquickly,butthatmostemployers
wouldbewillingtohireworkersfromothercountriesiftheycanperformatasimilarlevel.Thereis,
therefore,potentialfordevelopingcountryworkerstocompetewithU.S.workersandincreasetheir
marketshare.

Inaddition,thisstudyoutlinesothernonfinancialbenefitsthatOOcanbringtoacountry:aflexible
workingscheduleallowsindividualstotakebettercareoftheirfamilies,continuetostudy,orstarttheir
ownbusinesseswhileworkingandearningasalary.Furthermore,itprovidesopportunitiesforonthe
joblearningandskillsdevelopmentinareassuchasinformationtechnologiesandmarketing.

However,thestudyalsofoundthatOOis,inmostcases,asupplementaryratherthanaprimarysource
ofincome.EarningsfromOOworkareoftenusedbyworkersindevelopedcountriesfordiscretionary
itemsandnotfortypicalessentialexpenses.ThisallowsOOtoappealtodevelopedanddeveloping

46


countriesalike,asOOworkerswhoonlyworkonlineparttimecanstillbenefitbyaddingtotheir
discretionaryincome.Asaresult,governmentsshouldpursuepoliciesthatallowcountriestoleverage
theopportunitiesthatthisnewsectoroffers,butshouldavoidmakingOOthecoreoftheiremployment
strategies.Onlineoutsourcingcouldbeanimportantcomplementtoacountrysemploymentstrategy,
butsuchastrategyneedstobeanchoredinothersectorsorindustries.

ThestudyalsofoundsignificantbarriersfordisadvantagedyoungpeopletobenefitfromOO.Inthe
shortterm,governmentsshouldberealisticaboutthelikelyscaleoftheimpactthatOOcouldhaveon
thissegmentofthepopulation.Lackofaccesstotheinfrastructurerequiredand,morecritically,the
lackofskillsnecessarytoprocureworkandthriveonOOmarketplacesarestillmajorbottlenecks.These
barriersareunlikelytobefullyovercomeintheshortterm.

47


ASSESSINGCOUNTRYREADINESSFORONLINEOUTSOURCING
Astructuredassessmentframework,andanonlinetoolkitisavailableatwww.ictforjobs.org,inorderto
assistpolicymakersanddevelopmentpractitionersassessacountry'sreadinesstoleveragetheonline
outsourcing(OO)opportunity.Thisstudyreviewedexistingframeworksofrelatedindustriessuchas
offshoring,outsourcing,andimpactsourcing,inordertodevelopthereadinessframework.The
rationaleforapplyingthetraditionaloffshoring/nearshoringindustrydevelopmentframeworkforOOis
justifiedbecausesimilarkeyfactorsapplytobothindustries.BoththetraditionalandthenewOO
approachprovideITO/BPO/KPOservicesglobally,althoughOOistypicallymoreinformaland
unstructuredinnature.

Table5.1comparesthemaincategoriesthatthereviewedoffshoring/nearshoringframeworksinclude.

Table5.1FrameworkstoAssessCountriesCompetitivenessforOffshoring/NearshoringIndustries

Source:BullochandLong2012;Farrell2006;Sudan,Ayers,andDongier2010;A.T.Kearney2011;Gartner2008.
Note:n.a.=notapplicable.

AsillustratedbyTable5.1,existingcompetitivenessframeworksassesssimilaraspects,oftengrouping
andnamingthemdifferently.TherelevanceofthesedifferentfactorstotheOOsectorvaries.The
frameworkstructureproposedinTable5.2,constructedfollowingareviewoftheframeworksshownin
Table5.1,isintendedtoevaluatethereadinessofcountriesfortheOOindustry.

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Table5.2ProposedFrameworkforAssessingCountriesCompetitivenessforOnlineOutsourcing

ThefactorsshowninTable5.2werefurtherdividedintosubfactorsasappropriate;Table5.3illustrates
someofthepotentialmetricsthatcouldbeusedtoquantifythesefactors.Thepotentialdatasourcefor
eachmetricisshowninparentheses.

TheOOtoolkitdevelopediseasytouse,webbased,andprovidesaquickreadinessassessmentinterms
ofacountrysrelativenationalstrengthsandweaknesseswithregardtoitsparticipationintheOO
industry.Theoutputofthistool,combinedwithadditionalofflineanalysis,couldthenbeusedto
analyzeconstraintsandopportunitiesanddevelopstrategicoptionsforspecificcountries.TheOO
toolkithasadatabasethatextractsandaggregatestherelevantindicatorsanddatafromthedatasets
specifiedinTable5.3.Usersareabletoselectacountryandthetoolwillpresenttherelevantanalysis
andindicators.

TheOOtoolkitreliesonpubliclyavailabledatasets(thosedefinedinTable5.3).Thedifferentindicators
areweightedtocalculateanaveragescoreforeachofthefourmainmodelcategories:talent,cost,
infrastructure,andenablingenvironment.Thesefourcategoriesarethemselvesalsoweightedand
averagedintoasingleOOreadinessscore.Thetoolkitincludesvisualrepresentationofthesedifferent
scoresinradarchartsandcrosscountrycomparisonsalongthesefourdimensions.

Thetoolkitalsoallowstheusertomodelacountrysreadinesspositionfordifferentmarketsegments,
basedonthecountrystargetingoflow,mediumandhighcomplexitytasks,anditsassociatedmarket
segments.Acountrywillprobablyrequirethesameinfrastructureandenablingenvironmentnomatter
whetheritcompetesinhighorlowcomplexitytasks.Butcompetinginsoftwaredevelopment(thatis,a
highcomplexitytask)requirestrainedworkerswithspecificITskills,oftenfromuniversityprograms,
whiledataentry(thatis,alowcomplexitytask)mightrequirelesswelltrainedandexpensiveworkers,
oftenstraightfromsecondaryschool.Fromacountrysperspective,itisimportanttounderstandits
relativepositioncomparedwithothercountriestoselectthemostappropriatetargettasksand
segments,whichthetoolkitwillhelptoidentify.

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Table5.3ProposedMetricsforAssessingCountriesCompetitivenessinOnlineOutsourcing

Note:CC=cybercafes.com;FP=TheForeignPolicyGroup;GSMA=GSMAssociation;ILO=InternationalLabor
Organization;ITU=InternationalTelecommunicationUnion;WEF=WorldEconomicForum.

50


HOWCANGOVERNMENTSIMPROVECOMPETITIVENESS?
Asseeninindustriesrelatedtoonlineoutsourcing(OO),suchasITO/BPO/KPO,governmentscanplaya
significantroleinmaximizingtheirowncountryscompetitivenessinglobalemploymentmarketsby
puttinginplacepoliciestomaximizethesocialandeconomicbenefitsofOO.ThegrowthoftheIndian
BPOandsoftwareindustriesis,inpart,attributedtogovernmentpoliciesthatestablishedsoftware
parkswithfinancialconcessionsandreliableinfrastructure,largescaleinvestmentsinuniversity
researchanddevelopment,andaccreditationschemestoensurethesupplyoftrainedworkers(Kumar
andJoseph2005).

Throughstructuredinterviewswithworkers,OOfirms,industryexperts,andgovernmentofficials,this
studyhasidentifiedtwobroadactionsgovernmentcantake.Theymay:

enactpositivepoliciesthatenableandpromotethegrowthoftheOOindustry;and
removelegislativeandregulatorybarriersthatinhibitthegrowthoftheOOindustry.

Morespecific,contextbasedactionscanbeidentifiedbyapplyingtheOOtoolkitdescribedabove,asit
providesadeeperandmoredetailedanalysisoftheOOspecificissuesfacingeachcountryandcanbe
usedtoidentifyrelevantpolicyactionsthatcouldbetaken.

BecausetheOOindustryissonew,specificexamplesofpoliciesthatencourageitsgrowtharelimited.
Wherevertheseexamplesexist,attentionhasbeendrawntothem.Onlineoutsourcingissimilartothe
ITO/BPO/KPOindustry,inthatitrequiresInternetandenergyinfrastructure,anEnglishspeakingand
technologicallyliterateworkforce,andanenablingenvironmentthatfacilitatestradeacrossborders.
Whereverappropriate,policylessonshavebeendrawnfromthesemorematureindustries.

WhilegovernmentscantaketheOOindustrydevelopmentmeasuresdiscussedbelow,risksandissues
existwhenimplementingsuchpoliciesbecauseOOisstillatanascentstage.Itisrecommendedthata
lighttouchapproachtobetakenattheinitialstageofindustrydevelopment,suchastakingapiloted
and/orphasedapproached,inordertoexploreOOandmitigatetherisksatthesametime.

ENABLINGANDPROMOTINGONLINEOUTSOURCING
GrowthoftheOOindustryisdrivenbyanopenmarket,butanumberofactionscanbetakenby
governmentstopromotethisgrowth.Theseincludeidentifyingandtargetingmarketssegments,
developingtherelevantstrategy,implementingpoliciesthatensureasupplyofsuitableworkers,
expandaccesstoandqualityofinfrastructure,generatedemand,anddevelopintermediary/agency
models.

RELEVANTSTRATEGYFORTARGETEDMARKETS
TheOOindustrydevelopmentprogramacountryundertakeswilldependtoalargeextentonwhether
thecountrytargetseither(orboth)onlinefreelancingormicrowork,andtoalesserextentoneither(or
both)openormanagedservicesmarketplaces.Thisisbecauseeachoftheseindustrysegmentsandthe
typesofmarketplaceshavehighlydifferingrequirementsforparticipation,especiallyintermsofthe
qualityandquantityofavailabletalent,coststructure,andlastmileinfrastructure,suchasInternet
accessandpower.

51


Onlinefreelancingworkersneedtohavesignificantlyhigherskillsforhighercomplexitytasks,suchas
softwareprograming,graphicsdesign,accounting,andsoon.Incontrast,microworktypicallyrequires
basiccomputerandInternetliteracy(andtheassociatedlanguage)skillsforlowercomplexitytasks,such
asdigitizationordataentry.Themicroworksegmentisalsomorecostsensitive,sincelowercomplexity
tasksmaybecompetedforbydevelopingcountryworkerswhomaygenerallyoffermorecompetitive
ratesforworkoraremorewillingtotakeuplowerpayingtasksgiventheirgenerallylowerwage
structuresandGDPpercapita.

Openservicesplatformsalsorequiremoreextensivetrainingprogramsingeneral,unlikemanaged
servicesplatformswherebytrainingisprovidedbythefirms.Inaddition,openservicesmarketplaces
typicallyrequireahigherlevelofcomputerandInternetaccessbythepopulation,asfirmsoperating
managedservicesmarketplacesaremorelikelytoprovideworkfacilitieswiththenecessary
infrastructureforwork.

Countrieswithlargergeographiesandpopulationsizesarealsogenerallyinabetterpositiontotarget
multiplesegmentsandmarketplaces,giventhehigherdiversityintermsofcapabilitiesandresources
withineachcountry.Smallercountriesmayhavetobemoreselectiveandtargeted,giventhelower
diversityofcapabilitiesandresourcestheycanoffer.Asseeninthelargertraditional
offshoring/nearshoringmarkets,largeandsmallcountriescancompeteeffectivelyinproviding
ITO/BPO/KPOservices,particularlybyfocusingonnichemarketsegments.Inaddition,theless
structurednatureofOOprovidesagreateropportunityfordevelopingcountriesthan
offshoring/nearshoringbecauseOOhasrelativelylessstructuredrequirementsthanthetraditional
approach.OnlineoutsourcingdoesnothavesuchstringentrequirementsforInternetconnectivity,class
Aofficespace,ITrelatedlawsandregulations,taxincentives,andsoon.

Acountrysindustrydevelopmentstrategycouldalsoincludeanintermediaryoragencyapproach,
wherebyitencouragesinternationalorlocalOOfirmstobeginoperationsinthecountry.Thisapproach
couldhelptoaddressseveralcoreissuesthatarerelativelydifficulttoaddressfromthestrategic
perspectiveorwithintheindustrydevelopmentprogram,suchasthelackofinternational
micropaymentservices(forexamplePayPal)orlowcomputerandInternetaccessbythepopulationin
general.TheseintermediariescouldreceivepaymentsonbehalfofOOworkersanddistributethemvia
cash,checks,orlocalfundtransfermechanisms,andprovidethenecessaryworkingfacilitiesforOO
workers.Inaddition,theseintermediariescouldaddressthecoldstartissuebyacquiringjobsthrough
theonlinemarketplacesanddistributingthemtolocalworkers.CountriessubjecttoU.S.antiterrorism
financinglaws,wheremostOOworkoriginatesfrom,couldalsouseintermediariestoaddressthisissue.
Intermediariescouldalsoformalizethelaborastheycouldcontracttheseworkers,offerlocallabor
rights,andbringOOworkersintotheformaltaxationstructure.

Countriesmayalsooptforaphasedapproachforindustrydevelopmentbytargetinglowercomplexity
tasksintheinitialstage,andmovingupthevaluechaininthelaterstageswhenthecountryandits
workersaremorefamiliarwithOOmarketsegmentsandtaskrequirements,orhaveimprovedtheir
understandingoftheircomparativestrengthsandweaknesses.Theonlinereadinessassessmenttoolkit
eillhelpcountriestoidentifytheirareasofcomparativestrengthandweaknessintheinitialand
subsequentphases,andtargettheappropriatemarketsegmentormarketplacesforindustry
development.

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ENSURINGASUPPLYOFSUITABLEWORKERS
Ensuringasupplyofsuitableworkersrequireshavingtherighttrainingprogramsinplace,addressing
negativeperceptionsonOOfrompotentialworkers,andassessingwhetherthisindustryfitswellwithin
existingculturalandsocialnormsandbehaviors.

Training Programs
Governmentscouldsupportandsubsidizevarioustypesoftrainingfortheiryoungpeople,inorderfor
themtobetterunderstandtheOOmarketandhavetheskillstobemorecompetitive.Bundlingtraining
courseswithaninternationallyornationallyrecognizedaccreditationsystemtocertifythatstudents
haveattainedacertainlevelofskillscouldmakeiteasierforworkerstogetonlinejobs.Forexample,
theNASSCOMassessmentofcompetencyframework(NAC)andcommonindustrycertificationprovides
abenchmarkingofskillsrequiredtoworkintheITenabledserviceindustryinIndia(NASSCOM2008).

Shortterm:OOorientationtrainingforworkerswiththenecessaryskillsisapossiblequickwintorapidly
increasethelocallaborpool'sparticipationintheindustry.Internationalexperiencesuggeststhata
significantmajorityofworkerswiththeEnglish,computer/Internetandtechnicalskillsneededforeach
taskarestillnotabletoparticipateintheseOOmarketplacesbecausetheyarenotfamiliarwiththis
newindustryanditsapproachtowork.Theyneedassistancewith:

knowingandunderstandingthevarioustypesofOOmarketplacesthatexist;
thetypesoftasksthattheycouldundertakeandfindingtheircompetitiveniche;
improvingtheirprofilesandmarketingthemselves;
proposingandnegotiatingwithclients;
ensuringqualityandtimelydelivery;
receivingpayments;and
buildingalongtermrelationshipwithclients.

Hence,orientationtrainingmayincludeclassroomsessionswithintroductionstothevarious
marketplacesandtheselectionconsiderationsforeachworker,aswellaspracticaltrainingonhowto
search,bid,deliver,collectpayment,buildperformancereputation,andsoon.Someprivatetraining
institutionsinBangladesharealreadyofferingsuchtrainingonacommercialbasis.Forexample,the
OnlineLearningCenterBangladeshoffersspecifictrainingtoguideandteachstudentstheskillsrequired
tobesuccessfulinOO.ThecenterofferscoursesthatrangefromanintroductiontoOOskills,where
studentsareintroducedtosomeofthemostpopularmarketplacesandtaughthowtobidforjobs,and
usesomeofthebasictools(forexample,Excel,Word,Gmail,Skype,andFacebook).26

Mostlikelyitwillbenecessarytoprovideextensivehandsonguidanceandongoingadvisorysupportfor
workers,becauseOOorientationprogramsareunlikelytobesufficientfornewworkerstoleverageOO
forlongtermjobsandincome.Trainersandmentorscanprovideonthejobguidancetohelpworkers
winanddelivertheirfirstfewjobs,buildagoodonlinereputation,maintaintheircompetitiveness,and
moveupthevaluechainoftasksforincreasedearningsandcareerdevelopment.SuchOOorientation
programsshouldbecomprehensivebecause,althoughinternationalexperiencesuggeststhatlightor
limitedtraininghasbeenhighlyeffectiveinbuildingawarenessandregistrationinOOmarketplaces,this
hasnotbeeneffectiveinbuildingactiveparticipationbyOOworkers,asonlyalimitedproportionare
successfulinacquiring,delivering,andreceivingremunerationforOOjobs.AlthoughBangladeshhasOO
trainingprogramsthathelpscreateawarenessofOOworkandhashelpedhundredsofthousandsof
workersregisteronvariousmarketplaces,interviewssuggestthattherehasbeenlimitedactive

53


participationbytheseworkersbecausesuchlighttouchtrainingisinsufficientforworkerstobecome
familiarwithusingthemarketplacesortowinjobsonline.

Shorttermtechnicaltrainingforspecifictypesofworkormarketplacescouldalsohelpworkersto
accessmoreandbetterjobs.Thetechnicalskillsofworkerscouldbeappropriatelyrefinedand
strengthenedintheshorttermsothattheybecomemorecompetitive.Suchtrainingcouldbe
conductedforlowandmidcomplexitywork,suchascomputerandInternetusagefordigitizationor
dataentrytasks,orforhigherendworkinwebdesign,socialmediamarketing,andbasicsearchengine
optimization.SomeOOfirmsalsohavestringentcriteriafortheselectionofworkers.Forexample,
Rev.com,ahighendtranscriptionoutsourcingmarketplace,isopentoworkersfromanywhereinthe
world,althoughtheyhavetopassarigoroustestbeforebeingallowedtoregisterforwork.In
interviews,KenyanworkersreportedthattheyaspiretoworkonRev.combecauseofitshigherpay,but
thattheyoftenstruggletopassthetest;Rev.comreportsthataboutthreepercentofitsworkers
globallycomefromKenya.27Thebiggestchallengeforgreaterenrollmentinthisopenservicesplatform
seemstobetheabilitytoworkwith,andunderstandnuancesof,foreignaccentsathighspeed.This
however,isaskillthatcanbeimprovedwithappropriateshorttermtechnicaltraining.

Longterm:ThelackofEnglishlanguageliteracyandITproficiencyisamajorbarriertohiringhighschool
educatedworkers.28Onepotentialgovernmentinterventionthatcouldhelptomaximizetheimpactof
OOistoensurethathighschooleducationconveysbasicEnglishlanguageliteracyandITproficiency.
Improvingtrainingandeducationforabroadbaseofworkersimprovesthebroaderbusiness
environmentandprovidesusefulskillsbeyondtheOOindustry(Sudan,AyersandDongier2010).

Acountryscompetitivepositionmayalsobeimprovedbyinvestinginhighqualitytechnicaleducation
throughuniversities,vocationaltrainingcenters,orothertechnicalschools.Ukrainiananalystsreport
thatoneofthemajorcompetitiveadvantagesoftheircountryisthehighquality,Sovieteratechnical
trainingschoolsanduniversitiesthatremain.Asaresult,Ukrainianonlinefreelancershavestrong
technicalskills,particularlyforcomplexsoftwaretasks.

Evolving Perceptions
AnotherbarriertofurtherengagementofworkersinOOisaperceptionthatitistoochallenging,orthat
barrierstoentryarehigh.Inadditiontoskillsdevelopment,raisingawarenessamongpotentialworkers,
supportingonthejobtraining,andmentoringpotentialworkerstolearnhowtonavigatethesystem
arekeyinterventionsthatcanhelppotentialworkersgettheirfirstjob,performwell,andbuilda
reputation.Trainingandmentoringshouldincludedemonstratingtoworkershowtosignupfor
marketplaces,howtoregisterforpaymentsystems,andhowbesttomarketthemselvestofindwork.
Forexample,aspartoftheDigitalMalaysiaInitiative,in2014theMalaysianPrimeMinisterannounced
planstoestablishanumberofeRezekicommunitycenters,29toserveashubstosupporttheonboarding
andtrainingofthousandsofdigitalworkersinMalaysia.Thesewillbelinkedwithdigitalworkcenters
thatcanprovideICTanddigitalliteracytraining(andaccesstocomputers)fordisadvantagedworkersin
Malaysia(Crowdsourcing.org2014).TheWorldBanksupportedNaijaCloudinitiativeheldapublic
workshopin2013withcurrentworkersandstafffromElance,oDesk,CrowdFlower,MobileWorks,and
Samasourcewhotalkedtopotentialworkersandclients.Thissingle2013workshopledtoa28percent
increaseinthenumberofactiveNigerianworkersonoDesk30andthisinitiativeisnowbeingrolledout
acrossthecountrybytheNigeriangovernment.

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Compatability of the Work with Social Perceptions and Behaviors

Finally,raisingawarenessandenhancingtheworkforcesskillstocompeteinOOmightnotbeenough.
Insomecountries,thesocialnormsandbehaviors,aswellasotherexternalfactors,mightaffectthe
abilityoftheirpopulationstoengageinthisnewindustry.Forexample,Nigerianworkerssufferfrom
Nigeriaspoorglobalreputation,andsomeKenyanwomensuffertheoppositionoftheirfamilies,
becauseworkingwithcomputersisnotatraditionalroleforwomen.InadditiontousingtheOOtoolkit,
anofflineanalysisthattakesintoaccountperceptionsofthecountry,aswellasthecountryssocial
perceptionsandbehaviors,maygiveinsightintoworkerssuitabilityforOO.

INFRASTRUCTURE:ACCESSANDQUALITY
AcrossAfrica,alargepercentageofInternetsubscribersaccesstheInternetthroughmobiledevices.In
Kenya,forexample,99percentofInternetsubscribersusemobiledevicesforthispurpose(including3G
dongles,mobilephones,andtablets)(GSMA2014).

Internet Access and Electricity Infrastructure

Internetaccessindevelopingcountriesisincreasinglydrivenbythecostofmobiletariffs.Thecostof
mobileInternetvariesdramaticallyacrosstheAfricancontinent:a1GBpackageofdatacancostaslittle
as$4.7inKenya;thisislessthanonetenthofthecostof1GBofdatainCameroon(whereitcosts$53)
andBotswana(whereitcancostupto$85)(ResearchICTAfrica2014).Thesehighcostscanbe
addressedthroughnationalpoliciestoenablecompetitionandremoveregulatorybarriersformobile
networkoperators,byincreasingtheavailabilityoftheradiospectrumforhighspeedmobile
broadband,andbyprovidingsubsidiesforInternetserviceproviders.Byincreasingaccesstomobile
broadband,governmentscanensurelastmileInternetaccesswithoutrequiringtheslowinstallationof
highcostfixedbroadbandlines.

EnsuringaccesstoruralelectricityandtheInternetenablesthegrowthofruralOO,maximizingits
potentialsocialimpactbyreducingruraltourbanmigration.Somegovernmentshavelaunched
programstoimproveinfrastructurefortheirruralpopulations.Forexample,theIndiangovernmenthas
policiesthatincreaseruralaccesstogridelectricityandtheInternet,includinglargescalesubsidization
ofthegridconnectionfeeforbaseofthepyramidhouseholds(India,MinistryofPower,2014).This
improvedaccesshascontributedtothegrowthoftheruralBPOindustryandisalsoenablingayoung
ruralmicroworkindustrytodevelop.WorkNHirereportsthatinvestmentsinlastmileelectricityand
connectivityhaveallowedruraluniversityeducatedworkersinIndiatofreelanceonline.

Computer Access
AccesstocomputersisafundamentalrequirementtoengageinOO.ManypotentialOOworkersin
developingcountriesstilllackaccesstocomputers.Programsthatmaximizetheuseofexisting
infrastructure,andofcomputersspecifically,canhelplowertheentrybarriersfortheleastprivileged.
AnexamplecanbefoundinMalaysia,wherethegovernmenthasfundedmorethan2,000telecenters
thatprovidefreeaccesstocomputersandtheInternetforworkers.31Althoughlittlehardevidenceon
theeffectivenessofthistypeofinvestmentsexists,oncetheinfrastructurehasbeendeployed,
governmentscanopenthemtoOOworkerstomaximizetheiruseandsupportthegrowthoftheOO
industryinthecountry.

PartnershipswithexistingNGOsorgovernmentprogramstofacilitatecomputerandInternetaccess
couldhelpmakeOOmoreaccessible.Itmaybepossibletoleveragethesetypesofprograms,including
existinggovernmentsupportedfacilities,toprovidedisadvantagedyoungpeoplewithaccesstotheIT
infrastructuretheyneedtoparticipateinOO.

55


ThereislittleopportunityintheshorttermtoleveragetherapidgrowthofmobiledevicesforOO.
Smartphoneownershipisgrowingrapidlyat40percentperyearinAfrica(GSMAandDeloitte2012)
buttodate,nomarketplacesappeartoenablemobilephonebasedworkonalargescale.Thelargest
mobileplatform,Jana,targetsemergingmiddleclassconsumersandexposesthemtomarketingfrom
globalfirms.PeopleonJanaarepaidinmobileairtime.ConversationswithindustryexpertsandOO
firmsrevealaperceptionthatthemarketformobilephonebasedOOwaslimited(andshrinking)given
thelimitationsofmobilesoftware,andthefactthatthetypesofworkthatcanbeperformedonmobile
platformscanincreasinglybeperformedmorequickly(andatlowercost)byadvancedmachinelearning
software.

Payment Systems
Anotherfrequentlycitedbarrierisregulationthatrestrictsthetransferofpaymentsbetweencountries.
Directbanktobanktransfersareoftenlimitedbyhighcostsaswellasbyinternationalantiterrorism
andantimoneylaunderingregulations.Evidenceofwhetherpaymentplatformsarealimitingfactoris
mixed.Officially,OOfirmssaythatpayingworkersisnotamajorbarrier:servicessuchasPayPalworkin
mostcontexts.However,insomecountries(forexample,Nigeria),PayPaldoesnotyetallowdirect
paymenttoindividuals.Inthesecontexts,OOfirmssaythatalternativeplatformssuchasPayoneerand
Skrillallowworkerstobepaid.Payoneer,inparticular,transfersearningsontoaprepaiddebitcardthat
canbeusedinshopsoratATMstowithdrawcash,whichallowspaymentstodisadvantagedyoung
peopleandwomenwhodonothaveformalbankaccounts.Incontrasttothefirmsstatedpositions,OO
workersinKenyasaythatdifficultygettingpaidprovidesarealbarrierforthemtodomorework,and
furthermorethisdifficultypresentedabarriertothemstartingOO.

Thesourceofthisdiscrepancycouldbeworkersperceptionofthecomplexityandhighcostsof
receivingpayment;enablingOOworkerstobepaidintotheirmobilemoneyaccountswouldremove
anyreal(orperceived)paymentbarriers.PayingOOworkersintomobilemoneyaccountsis
theoreticallypossibleinsomecontexts,althoughnoOOworkersreportedthattheywereabletomake
thisworkinpractice.InKenya,93percentoftheadultpopulationhasregisteredformobilemoney
transferthroughMPESA(HanouchandKumar2013).SamasourceallowsworkerstobepaidwithM
PESAthroughtheirlocaldeliverycenters,althoughthisdoesnotoftenoccurinpracticeasitbecomes
complicatedtomanageHRprocessesifnormalpayrollproceduresarenotused.Italsoappearspossible
tosendmoneyfromSkrilltoMPESA,butOOworkersdidnotappeartobeawareofthisoption.
WorkersreportcasesintheinformalsectorwhereKenyanworkerstakingonotherpeoplesfreelance
workarepaidthroughMPESA,32butnootherexamplesofOOworkersbeingpaidusingmobilemoney
havebeenfoundinothercountries.

Payingworkersthroughmobilemoneyaccountswouldrequiresettinguppaymentmodelsthatinclude
anintermediarycompanythatreceivesinternationaltransfersthroughPayPal(orotheronlinepayment
methods),whichthentransfersthemoneylocallythroughmobilemoneyservices.Anotheroption
wouldrequireimplementinginternationaltransfersofmobilemoney.Thereisanewservice,called
BitPesa,adigitalcurrencyexchangethatcanconvertfromBitcointoMPESA.AsBitcoin,adigital
currency,canbetransferredinternationallyovertheInternetwithoutfees,BitPesafacilitates
internationaltransfersoffundsintoKenyanmobilemoneyaccounts.Thisisanewserviceandnoneof
theOOworkersreportedusingittoreceivepayments,althoughasBitPesagrows,itmaycontributeto
reducingthecostsrequiredtopayOOworkers.

56


However,governmentshavelittleinfluenceoverhowOOmarketplacespaytheirworkers.Governments
canenactpoliciesthatexpandaccesstobankingservicesfortheirpopulationsasafirststep.Inaddition
totheirregulatoryrole,governmentscanalsoactasfacilitatorsbetweeninternationalmarketplacesand
localpaymentchannels,creatingepaymentinfrastructuresthatbetterfitworkersneeds.

GENERATINGDEMAND
AsdiscussedinChapter2,onlineoutsourcingfirmsandindustryexpertsreportedthattheprimary
constrainttogrowthoftheOOindustryisclientdemand.Governmentshaveavarietyofrolestoplayin
generatingdemandforOO,bothinthepublicandprivatesectors.

Private Sector Demand

PrivatesectordemandforOOcanoriginateinglobalorregional/localmarkets.However,thereis
substantialdoubtaboutwhethergovernmentsinemergingeconomiescaneffectivelydriveprivate
sectordemandincountriessuchastheUnitedKingdomortheUnitedStates.BecauseOOfirmsare
privateentities,itisalreadyintheirinteresttogeneratedemandfortheirservices.InterviewswithOO
firmssuggestthattheyarealreadyworkingtogeneratefurtherdemandinthesecountries,andthat
theyarebetterpositionedtodosothangovernments.

Withregardtolocalorregionalprivatesectordemandinemergingmarkets,thereareonlyisolated
examplesofOOfirmsthattargetlocalmarkets(forexample,TasktyinEgyptandJobreneurinthe
PalestinianTerritories).WorkNHireisanexampleofaglobalOOfirmthatstartedbytargetinglocal
clients(inIndia),throughpublicandonlinemarketingcampaigns.

Governmentsaretakingdifferentapproachestoencouragelocalprivatesectordemand.InNigeria,the
governmentisplayingafacilitatorrole,holdingpubliceventstoraiseawarenessoftheOOindustry(for
bothworkersandclients)andbringingglobalOOfirms(forexample,Upwork)intothecountrytotalkto
potentialclientsabouthowtheycanuseOOservices.TheMalaysiangovernmentsDigitalMalaysia
initiativeisexploringhowdigitalandtechnologyenabledservicescandriveemploymentandeconomic
growthinthecountry.Projectsincludedevelopingondemandonlineeducationforcomputerliterate
youngpeopleandfacilitatingmicroworktogenerateincomeforthebottom40percentinMalaysia.

Publiceventsandcommunicationcampaignscanhelpmobilizelocalprivatesectordemand.Additional
targetedconversationswithpotentialclientsmaybeneededtoaddresstheconcernsthatclientsreport
whentransitioningfromtraditionalemploymentmodelstohiringOOworkers.Firmsthatcurrentlyrely
onOOreportedthattheywereskepticalaboutthisnewindustrybeforeregistering;theyoftenwaited
untiltheyhadseencolleaguesandcompetitorssuccessfullyuseOO.Governmentscanhelpbysetting
upandpublicizingdemonstrationprojectsthatprovethevalueofusingOOservicesforlocalfirms.

Thereisaconcernthat,bydrivinglocalprivatesectordemandforOO,governmentsmaysimply
redistributejobsfromphysicalwork(forexample,withinafirm)toOO.Inthissituation,indigenousOO
wouldnotleadtoanynewjobsandwouldnotaddressthechallengeofyouthunemploymentin
developingcountries.Noquantitativedataareavailabletoexplorethisinmoredepth,butitishighly
likelythatOOwillleadtoredistributionofsomejobs.Itisalsotruethattheopportunitiesgeneratedby
OOmayleadtothecreationofadditionaljobs.Forexample,SMEscanuseOOtohirelowcostgraphic
designerstocreatealogo,wherepreviouslytheywouldsimplynothaveanycorporatebranding.

57


Inthelongterm,OOfirmscanuselocaldemandtobuildaninternationalreputation,toperfecttheir
marketplace,andscalebeforetargetinginternationalclients.AnexampleisWorkNHire,anIndianOO
marketplacethatwasinitiallyopenonlytoIndianclients.Havingachievedsufficientscaleandfinancial
sustainability,WorkNHireisnowtargetingclientsfromacrosstheglobe.Althoughgovernment
programstogeneratelocalincountrydemandmayleadtotheredistributionofjobsintheshortterm,
inthelongtermitcanhelpindigenousOOmarketplacesgrowandpositionthemselvestocompetein
globalmarkets.

Public Sector Demand

Onlineoutsourcingfirmsandindustryexpertsreportthehighpotentialoftappingintopublicsector
demandforOO.However,significantdoubtsremainaboutpracticalandadministrativebarriers.Aspart
ofabroaderpushfortransparency,governmentsinAfrica(includingKenya,Nigeria,Rwanda,andSouth
Africa)aredigitizingtheirrecordsandputtingthemonline.Forexample,theRockefellerFoundation
fundedaninitiativefortheKenyanNationalCouncilforLawReportingtoconvertonlinecontentintoa
universallyaccessibleformatandforKenyattaNationalHospitaltodigitizeitsmedicalrecordsin2011
and2012respectively.WhiletraditionalBPOfirmsconductedbothoftheseprojects,theycouldhave
beenconductedbyOOfirms.Publicsectorcontractsfordigitizationrepresentasubstantialopportunity
forthegrowthofanOOindustryindevelopingcountries:firmsreportthataccessingonetotwolarge
scalegovernmentcontractswouldprovideregular,reliableincomeforfirms(thatwouldbepassedonto
workers)andraisetheprofileofOOinemergingmarkets.Inaddition,largegovernmentcontractswould
showcasethepotentialofOOandcouldhelpkickstartlocalandregionalprivatesectordemandin
emergingmarkets.

OOcoulddeliverbenefitsforgovernmentstoo,byprovidingdigitizationandanalysisofpaperdata
quickly,cheaply,andflexibly.Justasintheprivatesector,OOalsoprovidesgovernmentswitheasier,
quicker,andmoreflexibleaccesstohighlyskilledtalent.Governmentscanplayaroleinmakingtheir
procurementprocessessimplerandtheirsecurityrequirementsmoretransparent,enablingOOfirmsto
bidforpublicsectorcontracts.

Onlineoutsourcingfirmscurrentlyindicatethatlengthyandcomplexprocurementprocessesarea
barriertotheirabilitytoaccessgovernmentcontractsforOO.Riskaversegovernmentsarealso
perceivedtobereluctanttoemployadistributedworkforce,preferringinsteadtousefirmswitha
centralizedworkforceforreasonsofdataprotection.

Somegovernmentsareovercomingtheseobstaclesalready.Inthemicroworkspace,theEdostate
governmentinNigeriaisreportedtobeprocuringdigitizationoftheirtraditionalpaperrecordsusingOO
firms.Intheonlinefreelancingspace,theU.S.governmenthasaVirtualStudentForeignService
program33asystembywhichcollegestudentsfreelanceasonlineinternsfor10hoursperweekfor
departmentsincludingUSAIDandtheU.S.StateDepartment.Theseonlineinternsperformworkthatis
similartothatperformedonfreelancingmarketplaces:theycontributetowrittenreports,createonline
forums,andconductresearch,forexample.

Giventhechallengesfacedinimprovingpublicsectorprocurementprocessesandthesizeofthis
market,itspotentialappearslimitedatpresent.Governmentscan,however,createpoliciesormodify
existingpoliciesmakingprovisionsfortheuseofOO(forexamplespecifyingthatacertainpercentageis
outsourcedthroughOO).Suchpolicymeasureswouldincreasethegrowthofdomesticdemandand
encouragetheprivatesectortoalsooutsourcetoOOworkers.

58


REMOVINGLEGISLATIVEANDREGULATORYBARRIERS
BesidespromotingandimplementingpositivepoliciestostimulatethegrowthoftheOOindustry,
governmentscanplayaconstructiveroleinremovingregulatoryandbureaucraticbarriers.BecauseOO
(bothmicroworkandonlinefreelancing)representsanewwayofdoingwork,amajorchallengeisthe
lackofclarityandcertaintyabouthowexistingframeworksapplytoOO.Specifically,theseframeworks
includetax,minimumwage,andparttimeemploymentlaws.

EmploymentlawinmostcountriesiscurrentlypoorlyequippedtoregulatetheOOindustry.SomeU.S.
basedOOfirmsreportthattheuncertaintyoverlegalandregulatoryconditionsislimitingtheir
expansioninemergingmarkets.PuttinginplaceexplicitprovisionsthataccountforOOandclarifying
theresponsibilitiesofworkers,clients,andfirmswillminimizetheadministrativeandregulatoryburden
thatthesefirmscurrentlyfacewhenattemptingtoenterandgrowinnewmarkets.Suchcertaintycan
alsoencouragenewworkerstojointheOOmarket.Inaddition,generalbarrierstodoingbusinesscan
limitthegrowthofstartupsandSMEs,whichconstitutetheengineoflocaldemandforOOservices.

TAXATION
OOworkersreportthattheyoftendonotknowwhichtaxrequirementsapplytothem.However,most
donotpaytaxesontheirearningsfromOO.Thesesameworkersreportthattheenforcementof
compliancewiththeirtaxobligationsbythegovernmentwouldcreateabarrierforthegrowthofthe
industry.

SomecountrieshavetakentheoppositeapproachandenactedtaxbenefitpoliciesforOOworkers.
BangladeshhasapolicywhereallearningsfromOOworkarecurrentlytaxfree(Hardy2012),and
Malaysiahasnationalguidelinesstatingthatincomefromhomeworkingistaxexempt.34Howlong
thiswilllastisunclear,butthiskindofpositivepolicyhelpstominimizeregulatoryandpsychological
barriersandencouragesmoreworkerstoparticipate.

Insomecases(forexample,oDeskPayroll,ElancePayroll),anOOfirmgivesworkerstheoptionof
becomingformalemployees.Iftheychoosetodoso,thefirmputsworkersontoapayroll(currentlythis
onlyappliestoworkersintheUnitedStatesandCanada).Inthesecases,thefirmcanmanageinvoices
anddeducttaxesdirectly.Thisisappealingtoworkers,althoughtheadministrativechallengesof
complyingwithemploymentlawgloballymeanthatthisoptionislikelytobepossibleinonlyasmall
numberofcountries.

Insomecountries(forexample,Egypt),theburdenoftaxationfallsonOOfirmsbuttaxpolicydoesnot
haveexplicitprovisiontotaxOOworkers.ThisleadstoadministrativeandfinancialchallengesforEgypt
basedOOfirms.Makingexplicitprovisionwithintaxlawforonlinefreelancing(andtransferringthe
responsibilityforpayingtaxesdirectlytoworkers)wouldremoveabarriertoOO'sgrowthinEgypt.
Althoughthiswouldtransfertheburdenofmanagingtaxesontoworkers,itisunclearifthiswould
affectthesupplyofworkers.

MINIMUMWAGEANDPARTTIMEEMPLOYMENTLAW
Thereisconcernwithintheindustryaboutlegalactionthatmaybetakenifminimumwagelawsare
interpretedsothatOOcontravenesexistingregulation.Minimumwageregulations,inparticular
uncertaintyaboutwhethertheseregulationsapply,mayaffectthegrowthofOO.Governmentsin
developingcountriesneedtomakeanexplicitdecisionbetweenthesocialgoodofensuringafair

59


minimumwageforworkersandthepotentialeconomicimpactthatminimumwagelawsmayhaveon
thegrowthoftheOOindustry.

Theissueofparttimeemploymentlawalsoneedstobeconsidered.Somecountrieshavestrictpart
timeworklaws,andanyemployeewhoisemployedparttimeforaspecifiedperiod(forexample,one
year)mustreceivethesamerightsandbenefitsasafulltimeemployee.InIreland,whereparttime
workersmakeup20%oftheworkforce,theProtectionofEmployeesActprovidesequaltreatmentto
parttimeworkers,includingthoseengagedinmicrowork.Whilesuchlawsprotectparttimeworkers
fromexploitation,theyarenotuniversalandcancreateasymmetriesinthemarket.Inthisevent,
governmentsofdevelopingcountriescouldconsiderotherpolicyoptions.

EASEOFDOINGBUSINESS
Onlineoutsourcingfirmsthatoperatemanagedservicesmarketplaces(forexample,CloudFactory,
Samasource)needeithertosetupbusinessesineachcountrywheretheywishtooperate,ortowork
withanestablishedandcrediblelocalpartner.Whilethecurrentscaleofsuchfirmsismuchsmallerthan
openservicesplatformmodels,developinganindigenousmanagedservicesmarketplacesindustrycould
havealargesocialimpactifthismodelisusedtotargetdisadvantagedpopulations.

ThecommonbarrierscitedbysuchOOfirmsinsettingupnewcountryoperationsarelargelysimilarto
thosecitedbyotherforeigndirectinvestmentoperations.Theseincludethedifficultyinobtainingwork
permitsforexpatriatestafftoenablethemtosetupnewoffices,administrativebureaucracyinformally
registeringacompany,andthedifficultyinregisteringforbusinessbankaccounts.Addressingthese
obstacleswithspecificpolicieswouldstimulateOObusiness.Policiesthatimprovethegeneralbusiness
environmentwouldalsopromoteprivatesectorgrowthandemploymentbeyondjustOO.Online
outsourcingfirmstargetingthelocalmarket(forexample,WorkNHire)reportedininterviewsthat,
becausealargepercentageoftheirdemandcomesfromstartupsandSMEs,policiesthatpromotelocal
entrepreneurshipwillalsohelpgenerateadditionallocaldemandforOOservices.

60


WHATADDITIONALRESEARCHISNEEDED?
Thisreportrepresentsaninitialattempttounderstandtheglobalsizeandimpactoftheonline
outsourcing(OO)industry.Giventheindustrysnascentstateandthelimitedavailabilityofquantitative
data,anumberofgapsinglobalinformationaboutOOneedtobefilledtomakethemostofits
potential.Thesemajorresearchgapsarelistedbelow:

AdditionalinsightsintodemanddriversforOO.Thisstudyfoundthattheprimaryconstraintto
thefuturegrowthofOOisdemandgeneration.Inordertobetterunderstandandshapeits
growthanditsmarketsizeinthelongterm,afullerappreciationofhowdemanddiffers
betweenmultinationalcorporationsandSMEs,aswellashowitdiffersandacrossindustry
sectors,isneeded.ThisincludesascertaininghowthevaluepropositionofOOshouldbe
customizedtostimulatedemandacrossdifferenttypeoforganizations.

NonfinancialimpactofOO.ThereisinsufficientliteratureonthenonfinancialimpactofOOto
date.ThereportidentifiedonlyUpwork(formerlyElanceandoDesk)asaproviderofsocial
benefitsforOOworkers.Upworkoffers401(k)savingsplansandgrouphealthinsuranceplans
throughthemarketplaceiftheworkersworkatleast30hoursperweekonaverage.However,
thisserviceisstilllimitedonlytoworkersinCanadaandtheUnitedStates.Giventhedifficultyin
winningcontractswithUpwork,thenumberofthosewhoarebenefittingfromthiscouldbe
marginal.MoreresearchontheshortandlongtermeffectsofOOonworkersacrosstheglobe
wouldenabledeeperknowledgeandunderstandingofthisimportantimpact.

ActualsalariesofOOworkers.AlthoughsomedataareavailableonthehourlyratesthatOO
workerscharge,thisdoesnotreflectaverageearningsorthetimethatOOworkersspend
biddingforwork,nordoesitreflectthefactthatmostOOworkersarenotabletoworkfull
time.Thestudygatheredsomepreliminaryevidenceonthepotentialincomethatcouldbe
generatedthroughOOinKenyaandNigeria.However,additionaldatagatheringandresearchis
requiredtobuildamorecomprehensiveanddeeperunderstandingofthesocioeconomic
impactofOO.

Longtermcareertrajectories.ThestudyfoundthatlongtermcareertrajectoriesofOOworkers
arenotsufficientlyunderstood.Toacertainextent,thislackreflectstheyoungstateofthe
industry,butadditionalworkneedstobedonetobetterappreciatebothwhetherthe
experienceandskillsgainedthroughOOaretransferrabletootherprofessions,andwhether
workersareabletomakelongtermcareerswithinoroutsideofOOwork.

Factorsthatleadtodropouts.Thisstudysuffersfromadegreeofselectionbias,inthatthe
peopleinterviewedwerethosewhohavesucceededwithinOOwork.Alongitudinalstudythat
followednewlyregisteredworkerswouldcreateabetterunderstandingofwhatproportionof
workersareabletoturnOOintoacareer,andwhatfactorsdrivethedecisionforpeopleto
leaveOOwork.SuchinformationcouldhelpbetterunderstandtherealopportunitythatOO
offersindevelopingcountries.

Demographicinformationontheprofileofusers.Althoughthisstudyusedavailablepublicdata
tounderstandtheprofileofusers,andcombinedthiswithqualitativeinterviewstodevelop
workerarchetypesinKenyaandNigeria,muchofthisinformationisnotdirectlycomparable

61


acrossmarketplaces.Inordertofullyunderstandandcomparethedemographicprofileof
workersacrossmicroworkandonlinefreelancingmarketplaces,asingleconsistentsurveywould
beneeded.

ImpactofOOonjobcreation.Onlineoutsourcingisexpectedtohavetwodifferenteffects:on
theonehand,itprovidestheabilityforworkerstoperformjobsthatwerenotpreviously
accessiblelocally,orforcompaniestogetjobsdoneforwhichitwaspreviouslytooexpensiveto
hiresomeone.Thiseffectleadstonewjobcreation.Ontheotherhand,OOleadstoa
redistributionofexistingjobs,forexample,movingsoftwaredevelopmentjobsfromtheUnited
StatestoUkraine.Additionalresearchisneededtounderstandthesetwodifferentdynamics,to
quantifytheircontributiontothesizeofthetotalmarket,andtoidentifyleversthatcan
enhancethejobcreationpotentialofOO.

ConversionfromparttimetofulltimeOOworkers.Thereisstillinsufficientknowledgeofthe
likelihoodfornewOOworkerstotransitionfromparttimetofulltimework.Limitedresearch
todatesuggeststhatonceaworkerbuildsexperienceandestablishesapositivereputationon
suchmarketplaces,thenthereisasignificantprobabilitythattheywillconvertintothe
equivalentoffulltimework.However,furtherresearchisneededtounderstandwhetherthis
hasoccurredmainlyfordevelopedcountriesandonlinefreelancing,andnotfordeveloping
countriesandmicrowork.

Coldstartproblem.InOO,newworkersfaceachallengeinthattheyneedtohaveworkhistory
andreviewstobuildtheirreputationinordertosecurenewtasks.Thenumberofregistered
workersthatareinactiveunderlinestheextentofthisproblem.Itisimportanttoexamine
modelsformitigatingthischallenge.

AccesstoOOjobs.InOO,theprimarybeneficiariesarethepopulationthathasaccesstothe
Internetandonlinepaymentsystem.FurtherresearchisneededtoidentifywhetherOOisonly
applicabletothosewhoarereachableorwhetheritcanbeextendedtotheunreachable
populationthroughtrainingandextrasupport.

62


NOTES
1
ElanceandoDeskmergedinMarch2014,andUpworkwaslaunchedinMay2015.
2
Inmostcasestheclientselectstheworkersdirectly;however,insomecasestheplatformassignsworkersto
clients.
3
SamasourcedoesnotdirectlyhireOOworkers.Itpartnerswithdeliverycenters,andthedeliverycentershire
workerswhoperformtheworkonSamasource'sonlinemanagedservicesmarketplace.
4
Crowdsourcing.orgsurveyed32OOmarketplaces(microworkandonlinefreelancing),15ofwhichresponded
withdetailedgrossservicerevenuedata.Thetotalgrossservicerevenuedatafromthese15marketplaceswas
brokendownaccordingtotheindustrysectorthatgenerateddemandforOOwork.
5
Dalberganalysis,usingdatafrom(Elance2014).
6
Informationfromqualitativestakeholderinterviews
7
Dalberganalysis,usingavailablepublicdata.
8
Zhubajie/WitmartisanOOfirmthatalsoprovidesamarketplacetocontractlocalworkersforphysicaltasks.The
sizeofZhubajie/WitmartsrevenuefromOOhasbeenestimatedthroughexpertinterviews.
9
Ontheaverage,10percentofworkersregisteredonOOmarketplacesareactive,basedoninterviewswith
leadingOOmarketplaces.
10
Thisfigureisbasedonexpertinterviewswithacademicsandindustryexperts,whoconsideredaworkertobe
activeiftheycompleteatleastonetaskpermonth.Itisunlikelythatcompletingonlyonetaskpermonthcreates
sustainableincomefordevelopingcountryworkers,thereforethenumberofworkerswhocanmakealivingoutof
OOissignificantlylowerthanthefigureestimatedinthissection.
11
Dalberganalysis,basedonexpertinterviews
12
Dalberganalysis,basedonexpertinterviews.
13
ThenumberofgloballyregisteredOOworkerswasestimatedusingavailablepublicdatafromOOmarketplaces,
andthesameassumptionsusedtoestimatethesizeofthemarket.Futuretrajectoryinthenumberofregistered
OOworkerswasestimatedusingthesamemethodologyasthefutureprojectionsofthemarketsize.
14
Dalberganalysis,usingdatafromUNESCO,http://data.uis.unesco.org/index.aspx?queryid=161&lang=.
15
ThisisaconservativeestimateofwagesforOOworkers,whichtakesintoaccountinformationonhourlywages
fromonlinefreelancersandmicroworkers.
16
SeeNetIndexExplorer,http://www.netindex.com.
17
Whileconcernsaboutthequalityofuniversityeducationindevelopingcountriesandaboutemployment
opportunitiesforstudentsaftertheygraduateremain,itisassumedthatdisadvantagedyoungpeopledonothave
auniversitydegree.
18
OOworkerinterviews,Dalberg,June2014.Includingfocusgroups,thetotalsamplesizeofOOworkersengaged
inqualitativeinterviewsforthisresearchwas38.Ofthese,30workerswerefromKenya,sixfromNigeria,one
fromtheUnitedStates,andonefromthePhilippines.InsightintoworkersfromIndia,Bangladesh,andUkraine
wasgatheredthroughinterviewswithacademicsconductingethnographicresearchwithOOworkers,andindustry
analysts.
19
InterviewwithKumarMukul,cofounderofWorkNHire.
20
InterviewswithOOworkersandacademics,Dalberg,June2014.
21
Thisisongoingresearch,currentlyunpublished.
22
ProfilesareuptodateasofJuly2014.Someoftheworkershavesincemovedjobs,orchangedthetypeofwork
thattheydoonline.
23
Note:aSACCOisaSavingsandCreditCoOperative.Thesearememberdriveninstitutions,similartocredit
unions,andarethemainchannelforordinaryKenyanstoaccesscredit.
24
Seehttps://www.odesk.com/info/odeskpayroll_contractor.
25
PhilippineStatisticsAuthority,NationalStatisticsOfficeWebsite,accessedinOctober2014;interviewsandfocus
groupsconductedwithOOworkers;basedondatafromRossetal.2010;IpeirotisandHorton2012;Elance2014;
CrowdFlower2014.
26
Seehttp://www.olcbd.net/fordetailsofthisprogram.
27
DalberginterviewwiththefounderofRev.com,2014.
28
DalberginterviewswithmanagedserviceOOfirms,2014.

63


29
RezekimeanslivelihoodinMalay.
30
InformationfrominterviewwiththeNigerianMinistryofCommunicationTechnology.
31
InformationfrominterviewwiththeDigitalMalaysiaInitiative.
32
WorkersinKenyareportthatitishardtogetworkonoDeskuntilyouhaveastrongpositivereputation.Insome
cases,registeredusersonfreelancingmarketplacesactasaggregatorsofwork,takingonlargevolumesof
freelanceworkandpassingitontocontactsandcolleagues.Insomecases,thesesecondorderworkersarepaid
throughMPESA.
33
http://www.state.gov/vsfs/.
34
InterviewwithRedzuan,DigitalMalaysiaInitiative.

64


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