Crowdsourcing through Knowledge Marketplace

SAP recently decided to solicit ideas for business-friendly social networking applications from a crowdsourcing platform, Innocentive. SAP got 1,239 responses, which it is currently evaluating to find the best proposed solution. The experiment went so well that SAP submitted another idea to crowdsourcing, this time in search of a vendor-independent way to handle Web services errors, and got a viable solution by December.

When SAP debuts its next social networking functionality or Web service error-handling capability, odds are some freelance developer far from Walldorf came up with some of the code. This marks a true revolution in the evolution of service delivery, which we visualize as follows:

 

 

Insource: Use your own employee(s) to do the customization.

Outsource: Hire an outside developer or development team.

Crowdsource:  Post your need on a platform and let the crowd respond.

As you move up the pyramid, cost increases, time to value goes up, and breadth of solutions decreases.

Tasking employees to do customization and other services work is expensive. Hence, most companies outsource. Provisioning services from a partner is cheaper, since you don’t have to maintain that capacity in-house and can pay for it as needed. But outsourcing is still more expensive than many companies realize. In Jeff Howe’s The Rise of Crowdsourcing in Wired, the example is a company that needs to buy some stock photography. The first option would be for the company to do the photography itself, but insourcing would be expensive, and the company isn’t equipped for it. The second option is outsourcing, and the company finds a photographer willing to charge $100 a picture. The third option is crowdsourcing. When the company finds a stock photography platform on the Web, the cost is $1 per picture. No contest—game over.

That’s the power of crowdsourcing in a nutshell. Someone out there has a $1 solution to your $100 problem.

If you think that example doesn’t apply to SAP, think again. SAP’s own Web services error-handling challenge paid $10,000. If SAP’s own employees were tasked to create this functionality, it might well cost ten FTEs a month of labor each to come up with it, costing SAP $100,000. If SAP bought it from a professional development firm, the cost might be even more. But going to crowdsourcing reduced the sticker price on the solution by an order of magnitude. SAP is pleased enough with the quality of the solution, as it chose—from among 485 submissions—and made a reward.

If you’re in the market to buy SAP services, this should be a signal to you. If SAP is crowdsourcing development, you should crowdsource your use of SAP services. Don’t do it in-house; don’t even outsource it to a dedicated services organization, like a systems integrator or consultancy; use the power of the crowd to find what you need.

Say you go to a consultancy and ask them to customize an SAP solution for you. It’s a fairly complex customization, requiring a lot of creativity. How many consultants do you think will give thought to your problem? One? Three? Ten? How much will it cost you to retain their services? Now take a page out of SAP’s book and imagine posting your need to the crowd. SAP got 1,219 responses to their social networking tender. Do you really think SAP wanted to pay 1,219 consultants to come up with individual project ideas for social networking, or could have pulled 1,219 employees off their jobs to concentrate on this feature?

SpinAct is an SAP services crowdsourcing platform. Using the SpinAct crowd for your SAP services, training, and customization needs is designed to be cheap, quick, and broad, in terms of the number and quality of solutions you can find. Our search box replaces the black box of doing it yourself, or hiring a company to do it. Hire the crowd to do it, and reap the benefits.

 

Comments

[Dennis Stevenson]

What I find interesting, and which I only saw when reading your post is that "Crowdsourcing" is a way for proprietary software to behave like an Open Source project.

Open Source allows anyone/everyone to have a great idea and implement it. Crowdsourcing allows anyone to have a great idea, but I still do the development work.

It's a step in the OpenSource direction - while still giving the enterprise control over what is in the software. I would maintain that Open Source is the 4th layer in your pyramid.

[Sarah]

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Sarah

http://grillsblog.com

[Peter Fox]

I see your point with the advantages of crowdsourcing, but it's not like 1,219 consultants worked TOGETHER to reach the best solution. Remember that 1,218 of them went away empty handed in the end of the day. I know, competition is tough...

[Offshore Outsourcing]

Nice informative post. Thanks for sharing this blog.

[Offshore Outsourcing]

Good informative article....thanks for sharing your post.

[Shaiju Joseph@Siddha Home Remedies]

Crowd sourcing is definitely much cheaper. The rates people are paid look very pathetic, for example in Mturk. But it is there to stay.

[Magdalena Szarafin]

To estimate the cost of SAP implementation is a very interesting topic. However, not in all cases the implementation by external conultants is more expensive than by the own staff. Sometimes we have to do with diseconomies and insourcing can be more expensive than outsourcing. We have to perceive the complex context of the implementation: for our staff the implementation means an additional project to be made except of the normal tasks while external consultants can fully focus on the project.
Insourcing vs. outsourcing: the price is discutable in my opinion.
Magdalena Szarafin
http://www.szarafin.info

[contact center philippines]

Interesting point in comparing service delivery paradigms. Thanks for sharing your idea. Great blog!

[Rapid Income Creator]

I am just familiar with Outsourcing. I never knew the term "Crowdsourcing" is available. It does make sense though when you gave examples in your post. I do see the advantages and disadvantages of both crowdsourcing and outsourcing. Of course, crowdsourcing cost less but will the results be satisfactory as when you are working with a few people for your project?