Why Are More and More Companies Outsourcing to Freelancers?

The number of businesses outsourcing to freelancers is increasing, which is fortunate because this means more work for more freelancers. Here’s some detailed insight into why more and more companies are outsourcing their work to freelancers.

Outsourcing to freelancers is a reflection of the world’s current trend of decentralization in the economy globally.

As the world has globalized and created avenues of growth in technology by enabling both the sharing economy and knowledge ecosystem, our ability to demand nearly anything is compounding.

The same is true for freelance working, remote working, interagency partnerships, reseller/white label programs, B2B and online startups. Cloud computing, cryptocurrency, blockchain, Web3.0 and the metaverse now represent further compounded effects.

So where is global outsourcing to freelancers headed and what are outsourcing risks? It might be better to ask, what are the risks of not outsourcing? These trends have major benefits to those who understand how to take advantage of the economics behind them.

Which is the best example of outsourcing?

The freelancer website Upwork grew during COVID and in 2020 reported that freelancers represent a third of the economy and, not only that, but are growing at scale as a workforce solution.

Salesforce, one of the largest software vendors for business customer relationships management tools, noted data from the U.S. Census Bureau that more than 4.4 million new businesses were created in the U.S. during 2020. That is the highest total on record and represented a 24.3 percent increase from the year prior. Over a decade, it was a 51 percent increase. Upwork is just a single platform. Many, including agencies, have expanded beyond it and incorporated the remote contract model.

In-house development vs outsourcing

A half-million new businesses were reportedly created during the first month of 2021 alone, the report continued. Freelancers, contractors and small businesses are often referred to as microbusinesses and they are more powerful in the economy than ever and command more leverage than ever before.

American freelancers pushed back hard on California’s proposed AB5 plan, which was a precursor to the federal PRO Act bill, which they’re also now pushing back on hard. But there continues to be a 20th Century mindset in government that hasn’t caught up.

Consider that The U.S. Senate Health, Education, Labor and Pensions Committee advanced the nomination of David Weil as administrator of the Wage and Hour Division of the Department of Labor.

“Weil, the author of ‘The Fissured Workplace,’ believes that the decline in unionized employees, coupled with the rise of independent contractors like us—who, at 59 million strong, comprise a third of the U.S. workforce—has created a great fissuring, or breaking, of our workforce that requires correction.” Kim Kavin and Jen Singer, The Hill

Ironically, there is a Freelancers Union as well in New York City. The global outsourcing racket is now homegrown too. It is not just a matter of cheap labor overseas. That labor isn’t always as affordable. Many remote professionals make higher salaries and nimble online startups and small businesses are able to scale in different ways. The “gig economy” is an oversimplified term.

Types of outsourcing

There are several types of outsourcing methods. Such methods include the following:

• Networking/referral business (highly recommended)
• Platforms (brokers with software as a service)
• Direct relationships (1099 contractors pitching)
• B2B/Reseller Vendor (very common)
• Interagency or agency-to-agency (A2A becoming even more common)
• Direct brokers (be careful, check reviews/reputation)
• Recruiters (difficult to find narrow niches)
• Affiliate marketing channels (can be a helpful resource)
• IT and creative outsourcing firms (wide ecosystem)

Each business approaches their strategy with a different approach or with a combination, depending on the need or vision for the future.

Post pandemic outsourcing trends

These benefits of outsourcing software development and other tasks, along with open source development, help the IT infrastructure of the world operate at increasing scale. Businesses of all sizes, including non-profits, can reap rewards from this paradigm shift, which was beginning to take full form and shape in the 2010s but was propelled faster by the covid pandemic.

Benefits from global outsourcing

Outsourcing has helped businesses across the globe achieve results in their fields by relying on a network of expertise distributed across a network of professionals in varying disciplines. Here are some examples:

• Lawyer SEO consulting
• SaaS and IaaS services for the medical industry
• Typesetting, design and desktop publishing for the print industry
• 3D printing networks and makerspaces in product design and manufacturing collaboration
• Office co-working with professional networking to help build referrals for small businesses
• Writing and editing services for agencies
• Film and TV professionals on demand
• Independent consultants providing a service to a business such as a restaurant

There are several more examples and methods, likely some that haven’t been considered yet and most exploring the same trends discussed here.

Outsourcing Risks

Outsourcing comes with a different set of business risks but none that cannot be managed. In fact, much of the reason to outsource is just as much about efficiency of operations as it is about budget matters.

Smaller, more focused professional teams or vendors in your network often help drive the background solutions your customers, employees, clients, etc. come to expect in terms of service, content, products, company message, etc. As the trends of decentralization in the economy continue to grow, the risks of not implementing a response with outsourcing as a central theme may be more potent however.

Conclusion

Outsourcing to freelancers has become a more common practice as more professionals seek a variety of benefits from technology. This helps, for many, balance a lifestyle, career and business all at once. When a company outsources to freelancers, both the company and the freelancers benefit.

Want to learn more about freelancing? Download my free e-book How to Shift Your Mindset from 9-5 to Freelancing.

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Images by krakenimages and Chris Liverani

Tim Absalikov

Tim Absalikov is a professional in digital marketing with more than a decade of experience in the field. He has held such positions as Senior SEM Account Manager and Digital Marketing Director. Currently, he is the Acting CEO of Lasting Trend Agency.

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