Small businesses are increasingly relying on foreign contractors to do work for them, thanks to a growing number of sites making finding and vetting contractors in low-income countries fast and easy.
That’s the takeaway from a recent National Bureau of Economic Research paper recounted in The New York Times. It used to be that mostly large corporations in the United States shopped out work to overseas contractors due to the hassles of finding contractors and dealing with contractual issues stateside. But it is becoming more commonplace throughout the economy for small businesses to look overseas, particularly to countries where workers earn far less than they do in the U.S.
In fact, many workers in countries like Bangladesh, Uzbekistan and the Philippines are finding they can make much more money by getting work from U.S. business owners than finding jobs in their local market. Freelancers in these countries are figuring out which skills are most in demand and then getting training so they can fulfill that need.
The big reason for this shift is the fast growth of sites like Elance, PeoplePerHour, Guru, ODesk and Freelancer, which make it easy for small-business owners to find foreign contractors, vet them and handle any contracts, legal issues, invoices and payments. Elance reports that 90 percent of its clients are small businesses, most of them in the U.S. However, its freelancer base is growing quickly in foreign countries.
Mike Scanlin of Long Beach, California, for example, was able to find Romanian and Russian programmers willing to build his Born to Sell online investment tool for $15 per hour. It would have been $150 per hour for a U.S. worker, he told CNN. Scanlin acknowledges that there were language barriers, but the programmers were experienced and the savings made the outsourcing worth any of the hitches.
The trend toward foreign contractors is good for U.S. small-business owners looking to outsource tasks—whether web design, social media, bookkeeping, accounting, legal review or marketing work. But it’s not so good for U.S.-based freelancers. They now have to compete against foreign contractors who are sometimes charging clients one-tenth the price for the same job.
Read more articles on outsourcing.
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