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New outsourcing hotspots: More developing-country companies are hiring labor in the United States

To save labor expenses, American enterprises and small businesses have traditionally outsourced work to freelancers in emerging nations. A new twist on the trend has emerged: developing-country businesses are turning to freelancers in nations with greater labor expenses, such as the United States and Canada.


As corporations from underdeveloped nations attempt to build a stronger presence in developed markets, reverse outsourcing is exploding. The reason for this is that hiring people who are familiar with the local culture may help you obtain a competitive advantage and reach favorable profit margins rapidly.


According to Freelancer.com, a huge worldwide freelancing platform located in Sydney, there is a significant flow of work from developing nations to developed economies such as the United States, the United Kingdom, Australia, Canada, and Germany.


Argentina (17.49 percent), Thailand (12.32 percent), Mexico (10.76 percent), Egypt (10.68 percent), China (10.3 percent), Pakistan (8.05 percent), India (7.45 percent), Turkey (7.35 percent), Saudi Arabia (7.12 percent), and Nigeria are among the emerging economies with the greatest flow of work assignments to developed economies (7.12 percent).


According to Sarah Tang, Freelancer.com's head of global operations, the site is seeing some demand from business clients in countries like India that offer professional services and want to engage freelancers who live in the markets they serve. They have informed her staff that because they operate with clients in the United States and the United Kingdom, they must recruit freelancers from those countries.


Higher-paid freelancers result in increased earnings.


Hiring in developed markets is more profitable for Estuardo Orriols, who manages a 10-person graphic design firm in Guatemala City that made half a million dollars in sales last year, than attempting to make do with local workers who lack the deep experience he requires.


Because he couldn't find employees in Guatemala with some of the specific technical abilities he required to pursue larger projects, his company, Perinola, began employing freelancers from nations such as Canada. He tried teaching college-educated generalists from the region and putting them on payroll, but he discovered that they were not as fast as abroad freelancers he found on the freelancing portal Upwork, even after being taught, and he finally shrank his business from 25 to 10. He identified highly skilled freelancers in places like Canada and Sweden who did the same task over and over again, allowing them to function very effectively, he claimed.


A front-end developer from Canada was one such freelancer who assisted on a hurry job to construct a WordPress site. "She helped us push it through in record speed," Orriols claimed, despite the fact that she cost significantly more than he would spend locally. "We got a fantastic review."


When Orriols calculated the profit margins on ten recent projects, he discovered that the average profit margin for local staff was 37.56 percent, compared to 64.43 percent for freelancer-completed jobs. Orriols also discovered via his calculations that recruiting higher-paid, specialist freelancers has been more lucrative than hiring less specialized and lower-paid freelancers, regardless of where they are based.


Orriols is now in discussions with a new freelancer from the United States who he hopes to hire. The problem is that in the economies where he has to acquire talent, freelancers are often suspicious that he will be able to satisfy wage requirements. The firm's track record on Upwork, where it has completed more than $20,000 in work and received great reviews, is beneficial. "They look into us, and then they reach out," he explained.


Tamma Ford, a freelancer in Santa Clarita Valley, California, has also received work from developing-world charities. She helps customers draft business plans and ghostwrites nonfiction and business books, drawing on her experience operating a management training organization in Europe. Not long ago, she was contracted by an African NGO to create a series of nonfiction books about its socioeconomic message for distribution to European influencers, including prime ministers. Ford feels that her experience working in Europe contributed to her being a desirable candidate for the project.


Ford was able to charge the NGO a lesser amount than she does on other projects because she loved what the group stood for — "I had some passion going," she remembered — and had previously done research on the themes the NGO focused on. Ford, who retired in 2011, had some price flexibility, but "nothing was pro gratis by any means," she said. It also helped that authoring the books wasn't her primary source of income at the time. She explained, "I had other freelancing tasks that kept me going."


The United States is the world's third-largest freelancing market


Work is done in markets with cheaper labor costs in the majority of international freelancing partnerships. According to the University of Oxford Internet Institute Online Labor Index worker supplement, which uses data from the freelance platforms Fiverr, Freelancer, Guru, and PeoplePerHour, India is the most popular place for freelancing, followed by Bangladesh.


The United States, on the other hand, is ranked third, and part of the work done by its freelancers comes from underdeveloped countries. For example, Alex Wood, a researcher at the Oxford Internet Institute, interviewed American freelancers in Los Angeles who were performing business development for an Indian software company that required assistance navigating the US market. When enterprises made up of highly qualified individuals in emerging economies like India try to expand into markets like the United States, they run into cultural difficulties, according to Wood. "Adding a U.S. freelancer to help you with the U.S. side of the company is going to be a bigger market there in many circumstances," Wood said.


Wood, on the other hand, doesn't see the trend taking off on a significant scale unless it becomes a need for corporate development. "It'll be such occasions where bringing in a U.S. freelancer will be quite beneficial."


Software development shops in Eastern Europe and South America are also hiring Americans for business development, according to Steve King, a partner at Emergent Research, which studies the freelance economy. This allows them to establish a presence in the United States and interact with their clients in the same time zones. "These businesses are seeing the benefits of having a local presence," King added. "It should get better over time." Commercials tend to flow both ways once you've established trade links with a country. That's how trading usually works."


The accessibility of large freelancing platforms like Upwork is a crucial aspect that allows firms in developing nations to recruit freelancers in countries like the United States. "Without them, firms in other countries would be unable to discover and schedule engagements with individuals," said Andrew Karpie, Azul Partners' research director for services and labor procurement. "They ostensibly perform a crucial function."


In sectors like software development and web design, several organizations in developing nations are boosting their team's capabilities. They ended up hiring Americans, either full-time or on a contract basis, to help them grow their business. This frequently means that business owners must push their freelance and salary budgets much beyond what they normally spend, and the wage gap is shrinking.


"If someone is employed in a U.S. capacity for one of these businesses, they would most likely be paid less than they would from a U.S. or European firm," King said. "I would imagine they would be paid similar to their typical U.S. wages or they would move somewhere else," he continued.


Ford uses her business planning talents to help her customers with restricted budgets discover solutions to cover the expenditures of a project. For example, one customer in the Caribbean wanted to organize a multi-nation African tour for a well-known musician. "They went on the job board and said, 'This is exactly what we want to do.'" Is it possible for anyone to pull this off? ’”


Ford had previously worked on a similar idea but discovered they lacked the necessary financial flow to complete it. She assisted them in developing a strategy for securing in-kind donations and corporate sponsorships, as well as writing a template for letters to send to contacts.


They got off to a good start, but due to a lack of time, they decided to postpone the event until this spring. "That's going on right now," she replied.


[Courtesy: CNBC]


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