History of Offshore Freelancing along with its Successes and Failures

History of Freelancing

Posted by on September 28, 2012
history of freelancing

A History of Offshore Freelancing and How the Virtual Employee was born from the success and failure of the offshore freelancer

The beginning of this millennium was witness to cheap, fast broadband internet connections, and powerful PCs. In turn, this resulted in a shift in traditional thinking; the need to work from an office was diminishing; work could now increasingly be done from home or, for that matter, any where in the world.

This coupled with highly talented, low-cost English-speaking professionals from Third World countries and innovative entrepreneurial thinking gave birth to a new industry, “offshore freelancing.” Now the question is: Why was offshore freelancing categorized as an industry in its own right or how was it distinct from “freelancing” as it was known in the conventional sense. It was because of its two distinctive advantages over freelancing: a) an offshore freelancer would work from home, not on site b) offshore freelancers were being hired from Third World countries.

Why did this industry take off at such a frenetic pace and experience exponential growth? The first reason has already been mentioned above; there was no longer always a need for work to be done in the office. By hiring a freelancer to work from home, employers could significantly save on office rental, overhead and maintenance costs. And why freelancers from foreign countries? Partially because freelancers from Third World countries commanded lower fees but also because countries such as India have an abundance of talent in fields like software development. In summary, by hiring offshore freelancers employers were benefiting on several fronts: lower office costs, less investment in hardware, quick access to talent, no recruitment burdens, no tax, no insurance, no employee benefits, no labor law responsibilities, etc.

As freelancing is short-term, contractual work, the projects that were being outsourced to freelancers in countries such as India were low budget, the vast majority costing less than US $400 per project. Therefore, relatively speaking, there was not a lot SMEs had to lose by “trying the water.” In turn, this resulted in tens of thousands, if not hundreds of thousands, of clients eager and willing to outsource via this freelancing method. Because there was not a huge amount to lose by freelancing and results were often positive, the industry grew exponentially. Although there are widely acknowledged limitations and problems with offshore freelancing, the industry is an established business practice. It is no longer a rarity; rather a norm.

Following the success of the offshore freelancer, the Virtual Employee was always going to be a natural progression. If companies were successfully outsourcing short-term projects, was there any logical reason to stop there? If a US company could successfully utilize a freelancer in India for a one-off web design project (provided the company had the need), was there any justifiable reason not to hire the same individual on a permanent, full-time basis? If small- to medium-sized firms in the US were benefiting from outsourcing 1 week, 2 week and 6 week short-term projects it became obvious that US companies could also benefit by outsourcing on a more long-term and more permanent basis, i.e., hiring full-time employees. It quickly became apparent that SMEs had in actual fact even more to gain and benefit from outsourcing the more valuable and long-term position than low-budget, short-term contracts. To further reinforce this view, small companies only had to look up at their bigger counterparts for yet more justification. Multibillion dollar corporations such as Microsoft, Oracle, and British Telecom began outsourcing full-time, permanent positions to countries such as India by the thousands around the same time.

With the demand there, the transition from freelancer to Virtual Employee would be a very straightforward one, some might have presumed. Rather than hiring a freelancer for one month, simply hire a freelancer for 6 months or a year and the offshore freelancer is very easily transformed into, a full-time, long-term Virtual Employee or Remote Dedicated Employee. In fact this is what a lot of SMEs from the US started to do. When companies from the US realized the benefits of hiring a freelancer for 1 month, the same companies began wanting to hire on a more long-term basis. The problem arose, how to freelance for long-term project or how do you hire an employee in India for 1 year? The thought of going to a country such as India or China and setting up a subsidiary office was not only unappealing but also ineffective. The only viable solution for SMEs wanting to hire an employee from a country such as India on a long-term basis was to hire a freelancer on a long-term basis. With no other alternative this is what many US companies started to do. Sensing the huge potential benefits from outsourcing full-time positions to countries like India, US companies began hiring freelancers for long-term positions.

This move, however, often backfired and was usually a very unproductive and costly one. Firstly, there was a lot more at stake when hiring a full-time professional. The repercussions of a long-term position going pear-shaped are many times more damaging than a one-off, low-budget project. While there was more to gain by outsourcing full-time positions, there was also more to lose should the process go wrong. The chances of something going wrong when working with a freelancer on a long-term basis are much more than when working with a freelancer on a short-term basis. This is because for full time employment certain work environment practices and standards are mandatory, whereas for freelancing they are optional. When US companies were hiring freelancers on a long-term basis these fundamental aspects of full-time employment that were vital were missing.

For instance, the importance of professionalism or disciplined conduct in full-time employment is crucial. This is because a full-time employee is likely to be working on a more important aspect of your business than a freelancer. An employee not meeting a deadline, not working agreed hours, or being unavailable for a conversation is not only frustrating and unprofessional but, more importantly, very unproductive. In addition to poor work ethics, freelancers also became known for not taking responsibility; failing to observe clear instructions and rushing through work to get the project complete as quickly as possible. From one perspective, such conduct was almost inevitable; freelancing from home for multiple clients from a foreign country requires an individual with integrity and considerable faith and trust from the client’s side.

When unprofessionalism such as this creeps into one’s business it may begin to hurt the very core of a company. By contrast, when working on a short-term project, lower standards of accountability can often be tolerated. If a freelancer is unavailable for a conversation or works different business hours than the client, this may be unproductive but it is likely to be on a much smaller scale. This is because freelancers generally work on non-core related projects. Furthermore, due to the nature of short-term projects, clients often do not even have a need to frequently interact with their freelancer and so the client wouldn’t be in a situation where they would encounter the difficulties mentioned above. In contrast, to work with an employee productively he/she must be regulated, although this is not necessarily the case with freelancers.

The shocking reality is that such instances of poor work ethics are very common when working with freelancers for a longer period of time. Sometimes it can be even more disastrous. Freelancers disappearing in the middle of a project, stealing intellectual property rights or having lied about their skills and work experience have been known to happen.

Why is it so difficult to work with freelances on a long term basis? Why are offshore freelancers notoriously known for their unprofessional conduct? In one respect the fault does not lie with the freelancers. The discussion comes to a very obvious but often overlooked point, namely that a freelancer is a freelancer and so if utilized as a full-time employee, things are likely to go wrong. This is not necessarily the fault of the freelancer.

Often clients fail to appreciate the ground reality and the psychology of human nature. Even if a client hires a freelancer for a long-term position, psychologically the freelancer will always regard himself as a freelancer. There is no employment contract in place, no provisions that give the individual a sense of job security, no employee benefits, no physical office to work from, etc. Any individual will always appreciate and value a long-term, full-time job more than a long-term freelancing project. An individual has more to lose and gain from a long-term job than a long-term freelancing project and so when in full-time employment an individual likely to behave more diligently, professionally, and responsibly. Irrespective of the intentions of a client, the trust factor from a freelancer will always be that much less when working from home, for a client situated thousands of miles away. In short, even if a client wants to hire a freelancer for a long period of time, a freelancer will not regard himself as a full-time employee because the same level of security isn’t there. With a lot less to lose and gain standards can wane, and professionalism can be compromised.

This thinking and mindset that a project is simply a project, regardless of whether it is the intention of the client to hire on a long term basis, results in freelancers working with multiple clients. And because freelancers are not supervised it is difficult to know how many clients one freelancer is working with at any given time. There is a tendency, which clients are oblivious to, amongst freelancers from countries such as India, to take on as much work as possible, even when not pragmatic. This leads to prioritizing one client’s work over another’s and thus again compromising standards.

Another often never considered obstacle to hiring freelancers on a long-term basis is cultural differences. There is a cultural norm right across Asia, where freelancers will say they understand when they don’t, agree to deadlines they know they cannot meet, to say they can do something, when they know they can’t and to avoid expressing any of their views which may not be in harmony with that of the client’s. To summarize, freelancers from Asia are often “yes men.” This behavior stems from thousands of years of social norms. It is not that freelancers from Asia are acting dishonorably, rather conversely, their intentions are quite admirable, namely that to avoid disappointing, disrespecting or creating conflict with their client. The problem for clients becomes that they never know if a freelancer genuinely understands or if they can meet the stipulated deadline. What is required is cultural training and induction, not by the client but by a person who understands this mentality and thinking process. If not, it can lead to problems at some stage.

Finally, the way one works with a freelancer and a full-time employee will in general also differ drastically. When working with a full-time employee remotely, a client will, at some point, need to collaborate with their employees. To do this, stable infrastructure and powerful hardware are necessary. Provided an employee is equipped with such resources, working remotely and closely with an individual anywhere in the world is very easy. Freelancers from Third World countries are, however, once more known to have poor infrastructure and limited hardware resources. Frequent power cuts, unstable and slow internet connectivity, and outdated PCs make close collaboration virtually impossible. Video conferencing, PC sharing, downloading large files, etc. are very difficult obstacles to overcome. However, when hiring a freelancer for 3 weeks for a small, low-budget project, even basic and sporadic collaboration is not always possible. Due to the intrinsic nature of full-time employment it is simply not possible in the vast number of cases to hire an employee remotely if the client cannot collaborate closely with their employee. If an individual is unable to speak with their client because they lose internet connectivity or there is power failure, outsourcing can very quickly become more cost-ineffective and frustrating. The combination of the potential hurdles and inefficiencies often resulted in nightmarish outsourcing experiences for clients who hired freelancers on a long-term basis. Often clients were repeatedly contracting with numerous different freelancers, only to encounter the same unproductive experiences. This resulted in a vicious cycle continuously repeating itself, which eventually led to disgruntled clients. Ultimately, this resulted in a huge time and monetary investment from the client’s side which defied the objective of outsourcing in the first place.

The successes of offshore freelancing proved that SMEs outsourcing to countries such as India certainly could work; it also proved that Indians had the ability and talent to work successfully for US companies. The shortcomings of the freelancer, however, made it obvious that it was not realistic or practical to hire a freelancer working from home on a long-term basis. Offshore freelancers could only be hired for short-term, low-budget projects and even then sometimes there could be problems.

VirtualEmployee.com offers an innovative solution to overcome the problems of freelancing. Freelancing focuses purely on the individual; it does not cater to the setup and management required to work remotely on a long-term basis. “Outsourcing” and “Virtual Employee” in one respect are terms that mislead and inaccurately depict our services. In reality, clients can effectively open their very own offshore subsidiary office in India. Our office becomes a remote extension of the client’s local office. The Virtual Employee works solely and dedicatedly for the client. We manage the client’s employees on their behalf and in accordance with their instructions. Our managers are the client’s physical representatives in India, working with and for them. In practical terms, when clients outsource with us they open an offshore office in India, with a management team and dedicated employees ready to go.

So, whether a client hires just 1 or 50 employees, with us the client practically has their very own offshore office base in India. The only difference being the scale and size of their offshore team and “office.” Nevertheless, in both situations, the service and standards are exactly the same. And it is because the same high standards are maintained irrespective of whether a client hires 1 or 50 employees. Therefore, hiring a full-time employee on a long-term basis from India is now a economically viable concept.

It is not financially cost-effective for a US company to open an offshore office in India for just one or even a handful of employees. Opening an offshore office only becomes cost-effective when done on a mass scale. This is the heart of the problem that we have been able to overcome. Many US companies want to open offshore offices in India so that they can hire full-time, dedicated employees. However, this is not practical for these US companies and so they are forced to hire freelancers instead. This is why our service is innovative, because clients piggyback or “leach” off our economies of scale and management, such that it is practical and financially beneficial for a client to open an offshore office in India for even just one dedicated full-time professional. With the click of a mouse button, our clients can open an office in India and that too for just one employee.

Unlike freelancers who work from home, remote dedicated employees work from a professionally administered office. This is why they are equipped with first-class hardware and infrastructure. In some cases, they are even better equipped and have more resources to avail than the client themselves. Close collaboration is no longer an issue and physical distance has turned out to be irrelevant. Advances in computer technology mean that working remotely is now no different from working physically from the same office as an individual.

Furthermore, you can easily monitor the conduct and actions of your virtual professioanls. Small issues when working with freelancers that cause considerable inconvenience, such as attendance failure or slow correspondence are not issues when working with VEs. And if the client ever has any difficulty with their employee at any time, the problem can be quickly resolved since on-site managers are only a phone call away to follow up on the client’s employee and resolve the issue as soon as it occurs.

Virtual resources work for one client only and clients can be assured of this because VEs work from a supervised office. Not only does this mean that the client’s work is remote dedicated employee’s ultimate and only priority, but there is also an important psychological impact of this. Freelancers work with numerous clients simultaneously, but for a full-time, dedicated employee all stakes are in the hands of their one employer. The win-loss percentages are much higher in full-time employment and so a remote employee cannot afford to become complacent. The psychological impact of this is that employees are more likely than freelancers to go out of their way to appease their client. The professionals provided by us know they must conduct themselves in a dignified manner, otherwise they risk losing their full-time job.

Our managers are at all times supervising and monitoring the work of your dedicated employees. The significance of this cannot be underestimated for this physical presence is what holds them accountable for their conduct and results. Freelancers aren’t held accountable because there is no supervising body present nor is there a contract and hence no legal ramifications. Our physical presence and employment contract make sure your virtual resources are dedicated and have a better work ethics than offshore freelancers.

VirtualEmployee.com’s twin-layered recruitment process also helps match clients with their ideal employee. This is because our recruitment department invests considerable time and resources to first clearly understand what the client actually needs. From there on many candidates are screened, interviewed, and tested, thereby filtering out only the very best candidates. Furthermore, technical experts are utilized to screen potential candidates and to aid the client if they are not technically proficient. Later, the clients conduct their own round of interviews and tests before making any decision to hire. The accuracy and success rate of this system can be attributed to the fact that it cannot be corrupted and considerable diligent man hours and resources are invested to find qualified candidates. By contrast, the reviews of freelancers are open to manipulation as individuals with strong feedback reviews often sell their accounts to other freelancers. When hiring a freelancer, clients are solely reliant upon feedback reviews. This system is a lot less reliable than our iron-clad recruitment process. From the outset we kick-starts the outsourcing process in the right direction by ensuring the client has a talent pool of highly qualified candidates to select from. With the right employee, the rest is very smooth sailing with us.

Our service also includes induction and training programs so that cultural differences do not become barriers to working productively. Dedicated technical support, HR and accounts departments are also available for both client and employee to be utilized at any time. If a client wants to know the number of leaves an employee took in a year, needs some HR-related advice, wants to review the time sheet of their employee or wants us to speak on their behalf with their employee, etc. the client can avail any such services at any time. Ultimately, this makes outsourcing and working remotely easier, simpler, and efficient.

With VirtualEmployee.com, clients can hire employees from any office-based background e.g., law, accounts, software programming, SEO, graphics design, engineering, architecture, data entry, etc. All the client’s outsourcing and employment needs are thus in one place, “under one roof.” The advantage of this is that a client’s entire offshore team can all work from one place.

Finally, a client has a lot more security when hiring a Virtual Employee over a freelancer. As all the parties enter into a legally binding contract, clients have confidence that their employees won’t simply abscond halfway through an important project, unlike a freelancer. Furthermore, because of Non-Disclosure Agreements (NDAs), legally binding contracts, our physical presence, restricted hardware access, protective on-site processes and measures such as cloud computing, clients do not need to fear about data security or intellectual property theft.

We have pushed the boundaries much further than freelancing, optimizing outsourcing to such a degree that clients now have a truly efficient and cost-effective way of hiring offshore full-time professionals. Our service is far beyond anything that can be matched when hiring a freelancer. Not only do the remote dedicated professionals eradicate the problems encountered when working with freelancers, we also usher in a revolution in new areas like recruitment, data protection, client control, and remote collaboration.

In hindsight, one can say it was inevitable that small to medium enterprise outsourcing started from offshore freelancing. The virtual resources could only rise once the offshore freelancing model had been tested, proven, and established. Only once US companies felt comfortable working with offshore freelancers would the confidence then be there to take the process one stage further into full-time employment. In this respect, it is only because of the success of the offshore freelancer that the remote dedicated professionals could come into fruition. Learning from the failures of freelancers, Virtual Employees were able to understand what clients truly needed.

The offshore freelancer and the Virtual Employee address two different markets. They both serve their own exclusive outsourcing segments. Offshore freelancers should only be utilized for short-term, low-budget projects, where limited interaction is sufficient and the client does not want to manage the freelancer. Virtual Employees should be hired for more valuable, long-term full-time employment positions, where clients want project management authority and want to work directly with their employee. Unfortunately often due to a lack of experience, knowledge, and research, this distinction can become blurred for some clients, who will end up hiring offshore freelancers for long-term positions. If this occurs, an offshore freelancer cannot compete with a Virtual Employee, because clients get a lot more for their money with a remote dedicated professional. For only a marginally higher cost (often the cost of freelancing is not even cheaper but the same), clients get a significantly better service, attain higher levels of efficiency, professionalism, and enjoy cost benefits.

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