It’s been over a decade since corporations started leveraging outsourcing to better manage capacity, costs, quality, risk and speed to market. From offshoring to managed services, there has been a dramatic evolution in corporations’ thinking about outsourcing. Corporations are challenging existing business models as they seek ways to speed innovation, focus on their core competencies, and scale to capitalize on opportunities and outpace competitors. Today, many corporations are looking beyond back-office, labor-intensive tasks to outsource more complex business processes – from investment and pricing analytics to inventory management to aircraft engine maintenance forecasting. It is no longer a debate as to whether to outsource but rather what functions can be outsourced. As a business consultant, I hear often about companies’ abilities to achieve cost and/or capacity advantages, and yet, many are still not satisfied. For some, it has not given them much advantage from a competitive standpoint and for others it is just moving the “cost” around. I hear often from businesses, when will I see significant value?

It is not hard to understand why the question of value is still raised when you consider that today’s outsourcing models have some inherent limitations that reduce the overall gains companies can achieve: low worker retention, lack of control and visibility for clients, and long, inflexible agreements to cover execution and investment risks for both parties. These issues are more pronounced due to recent trends in internet and social networking capabilities that have us rethinking outsourcing from a geography game (i.e. “cheap labor force”) to a game of skill and expertise (i.e. recruiting a team of all-star experts). Few business “futurist” or industry pundits would argue that the popularity of social networking, collaboration tools and the pervasiveness of Web-based applications from email to CRM have given corporations greater visibility, control, and speed than ever before. We have become accustom to “always on” services and give little thought to the backend processes that deliver those applications to our laptop – it just happens. It is what many people today refer to as “cloud computing.” I believe there is a lot of value in an outsourcing model that borrows a page from cloud computing - on-demand, pay-as-you-go, unbound by geographic constraints, and where tasks are assigned to a team of distributed workers. Seriously, what’s not to like? I call this next phase in outsourcing, “cloudsourcing.”

Cloudsourcing combines on-demand business process outsourcing (BPO) with crowdsourcing technologies to enable companies to purchase quality BPO services on-demand through a pay-per-use model. Cloudsourcing allows corporations to launch new business process work types, scale and innovate in Internet time and maintain real-time visibility and control to minimize risk. Further, it enables corporations to have immediate access to the right worker, with the right skill, at the appropriate price point, regardless of location.

For those in the consulting world, there is no doubt that the world is truly flat as Thomas Friedman presented so vividly in his book. With cloudsourcing, “The Flat World” becomes more visible and the creation of on-demand workforce can be realized. Imagine being able to hire what skills you want, when you want and for how long you want! This not only converts your fixed costs to a variable structure but also enables you to launch new programs in internet speed -- broadband, of course! Cloudsourcing also enables BPOs and individuals who have particular skills or expertise new avenues to offer their services on-demand.

So when will cloudsourcing be a reality? Interestingly, there are examples of work being deployed in this model today. Take for instance, LiveOps, a Silicon Valley technology company run by Maynard Webb, the former Chief Operating Officer of eBay. It has been cloudsourcing through a virtual workforce of more than 20,000 independent contractors, and recently launched a new work marketplace, LiveWork, as a platform for on-demand business process outsourcing. While the company provides on-demand contact center services to a wide range of businesses, the impact of cloudsourcing is best illustrated with the services they provide with natural disaster emergency relief efforts where fast response to the “unpredictable” is the norm:
When Hurricane Katrina hit the Gulf Coast of the U.S. in 2005, a toll-free communications center was urgently needed to put victims in touch with their families. Every other outsourcer that was approached to provide communications services declined to take on the project, because they couldn’t mobilize agents fast enough. Within three hours, LiveOps launched a call center with over 300 independent, home-based agents ready to help reunite victims of Hurricane Katrina with their family members. The virtual call center, with no fixed investment in buildings or technology infrastructure, was established with skill workers in hours and then subsequently wound down when work was done.

Consider what all of this may mean for your business or industry - a retailer during its high season being able to scale to meet call volumes, a technology company needing to rapidly staff up its email customer support team in response to a new product release, , or a gaming company needing an on-demand workforce to augment their existing team to help moderate their online chatrooms. I believe the possibilities are huge and will lead to more work types being outsourced.

In the summer of 2007, I wrote an article titled “Futurized Corporation,” describing a company that shines in its ability to seamlessly stitch together component-based, composable services from different providers and its own operations to re-create self-standing business functions – i.e. a virtualized supply chain. This vision is cloudsourcing at its best. I believe with this new trend, companies now may be able to achieve significant gains by taking advantage of on-demand BPO model that increases velocity and agility and thus creates sustainable competitive advantage.

Atul Vashistha is Chairman & Founder of Neo Advisory, a leading global services and sourcing management consultancy. He is also Chairman & Founder of NeoGroup, an outsourcing firm focused on vendor management, and program management of governance, regulatory and compliance initiatives.