The Difference between Crowdsourcing and Outsourcing

The word “crowdsourcing” was first use in writing by Steve Jurvetson in February 2006 to describe “a collective effort to manage an online discussion forum on Flickr.” In June 2006, a Wired Magazine contributing editor came out with the first definition of “crowdsourcing” in a blog post to his Wired Magazine article.

Crowdsourcing is now used by a lot of people who need a collective effort from a crowd of people in getting work or funding done which is usually online. The term is coined from the two words “crowd” and “outsourcing”. The idea is to distribute tasks to a large group of online people in order to solicit intelligence and assess the quality of work in parallel. It is often used to subdivide tedious work or to raise funds for start-up companies and charities. The combination of efforts from crowds of volunteers or part-time workers adds up to a relatively large or significant result.

One famous example of crowdsourcing is Wikipedia, where instead of Wikipedia owners hiring their own writers and editors, the crowd is enjoined to create the information on their own resulting to the most comprehensive online encyclopedia the world has ever known.

Capitalizing on the principle of “more heads are better than one”, any task becomes comprehensive, wide-ranging and far-reaching. Imagine what will result from a combined ideas, skills, information, and participation from a host of people of varied background – superior quality content and idea. 

Outsourcing

On the other hand, outsourcing is the process of contracting out an internal business process to a third party organization specialized in specific task or work, in exchange for payment for the services rendered. Businesses find this process more cost effective than maintaining in-house employees to do the task.

The term “outsourcing” was popularized in the United States near the turn of the 21^st century when several businesses started contracting out some of the in-house business functions such as IT, payroll and accounting, general maintenance, and advertising and marketing services. Outsourcing can both be foreign and domestic contracting which means the third party service provider can be from another country.

This practice has been around for as long as work specialization has existed. In most cases, the outsourced function is usually not related to the core business. An insurance company, for example, might outsource its janitorial and landscaping operations, or the IT maintenance services, which are both considered non-core to the business. Large manufacturing companies outsource the catering services for its workers to third party service providers.

In recent years, outsourcing has included even the narrow functions such as billing and data entry, payroll services, or human resource recruitment. These processes are handled in more efficient and more cost-effective ways by service providers that are specialized in carrying out such tasks. These providers have specialized tools, software programs and systems, facilities, and specially trained personnel for the specific tasks and functions they offer.

The most common and popular forms of outsourcing include ITO or Information Technology Outsourcing and BPO or Business Process Outsourcing. BPO includes call center outsourcing, human resources outsourcing, accounting and finance outsourcing, internet marketing outsourcing, and claims processing outsourcing.