Online Outsourcing: How Can Developing Countries Benefit?

By Elizabeth Melampy

In 2014, 40,000 Kenyans were registered on Elance, an online platform coordinating virtual employment for people living continents apart from their employers. With internet accessibility increasing worldwide, this kind of employment is becoming a more attractive possibility for the 201 million people unemployed in 2014.

McKinsey and Company wrote a report in 2013 suggesting that the internet could play a key role in economic development, especially in Africa. Africa’s iGDP, the internet’s contribution to the overall GDP, is currently 1.1 percent. This study estimates that by 2025, Africa’s iGDP will rise to somewhere between five and 10 percent. While only 16 percent of the continent has access to the internet today, estimates based on the rapid dissemination of mobile technology say that Africa has the potential to dramatically increase that number to almost 50 percent by 2025.

A visualization of a portion of the internet maps connectivity that spans the globe.

A visualization of a portion of the internet maps connectivity that spans the globe.

The internet is crucial for economic growth in today’s global economy; McKinsey says that up to 10 percent of the total GDP growth in China, India, and Brazil in the past five years is due to the growth of the internet. Developing the internet in Africa, as well as in other developing regions in the world, could inspire similar growth. Beyond merely increasing internet access for economic growth, big names in global development are thinking about how the internet can transform the job market. The World Bank and the Rockefeller Foundation just published a study on online outsourcing.

Online outsourcing has two major components: “microwork,” a process in which companies contract virtual workers from around the globe to complete low-skill “microtasks” online; and “online freelancing,” where companies can hire out more complex, professional services via a virtual platform. The main differences between those two types are the size and difficulty of the tasks. Microtasks, appropriate for people with limited training and basic literacy, might include image tagging, data entry, or text transcription. Workers are paid per task. Online freelancing requires greater skill and is more lucrative; this might involve graphic design or web development. There are many platforms already coordinating this type of outsourcing (cloudfactory, CrowdFlower, and UpWork, just to name a few).

The World Bank’s study highlights the potential for youth and women, groups with historically high unemployment rates, to benefit from this unconventional style of employment. For youth, online outsourcing is a flexible source of income that could coexist with school or another job. The report states that since cultural and social norms keep women at home caring for family, online outsourcing could offer employment even within those constraints. Jobs lead to empowerment, many argue, and provide women with an independent source of income.

There are also important limitations to online outsourcing. There are huge infrastructure barriers to this type of employment; the reach of the internet is growing, yes, but it is not everywhere yet. Internet accessibility is expanding mainly in urban areas, where power reaches households reliably. Rural areas may benefit from employment opportunities not tied to the internet instead. There are also hardware limitations; computers are often expensive investments.

For the target groups of youth and women, encouraging virtual work around other existing structures like school or home life may actually reinforce suppressive cultural values. Students might drop out of school to complete easier microtasks, and women might find themselves even more tied to their homes with less freedom. Online outsourcing also requires some skill, and vocational training curricula would need to be established to build people’s capacities. A final limitation to consider is the role of governance; essentially no one is overseeing these online outsourcing endeavors, and online workers have very few traditional protections.

To understand which areas might benefit the most from online outsourcing, the World Bank developed a toolkit for country preparedness. It measures many factors within countries (internet access, literacy rates, infrastructure costs, quality of education, etc.) that determine whether or not a country could benefit from systematized online outsourcing. Not every country is ready for this type of employment opportunity, but many are, including Kenya. Kenya has already seen massive growth in the online outsourcing sector, with 40,000 individuals registered on Elance in 2014 and with other sites growing in popularity. There is a social media community springing up around these virtual employment opportunities called freelancerkenya.com. Country-specific strategies are needed to ensure that online outsourcing would be successful and competitive in local contexts.

Despite possible challenges to effective online outsourcing, the international industry could grow to a market size of $15-25 billion by 2020, employing over 30 million people. With appropriate regulation and attention to cultural externalities, online outsourcing could provide safe platforms for people with internet access to participate in a global job market.

Elizabeth Melampy is a researcher with the Project on U.S. Leadership in Development.

Photo: “Internet map 1024” by The Opte Project – Originally from the English Wikipedia. Licensed under CC BY 2.5 via Wikimedia Commons.

One thought on “Online Outsourcing: How Can Developing Countries Benefit?

  1. Pingback: Development Unplugged: Driving Progress Without the Internet | Prosper

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