vWorker.com research: Is the world really flat?

Important alert: May 9, 2012 11:29:40 AM EDT.

My apologies for the inconvenience: the system for processing emailed responses was not processing all of them correctly (and it was only reported to us recently, so we didn't realize it). This has been fixed, but may result in older messages (from the last two weeks) showing up on May 8 and May 9 in your message thread. We have also taken steps to monitor this system more closely so we will know immediately in the future if there is a problem. Again, my apologies and thanks for your understanding. Ian Ippolito CEO and Founder of vWorker
Attention employers: One Million by One Million is looking to interview employers who have used vWorker to help build their business and have earned at least $1 million in revenue over the past 12 months. Your company must be independently held and you must be willing to openly discuss revenue numbers. If you are interested in being interviewed, please contact us for more information.

Is the World Really Flat? A Look at Offshoring at an Online Programming Marketplace

David Gefen and Erran Carmel

Abstract

In a world that is flat, where all clients and providers can easily transact with one another, offshoring represents the proposition that information technology providers from low-wage nations can now underbid providers from high-wage nations and win contracts. We examined a particularly flat "world"—an online programming marketplace—and found that this profound tilt to low-wage nations is overstated. We analyzed the entire history of transactions at one of the major online programming marketplaces (vWorker.com), a marketplace for outsourcing small IT projects. The data spanned 38 months and included over 263,000 bids by over 31,000 providers from 63 countries on over 20,000 small IT projects requested by over 7,900 clients from 55 countries.

Contrary to the world-is-flat proposition, the data in this particular site show some client preference for domestic providers. However, the largest group of clients, the American clients, are a marked exception to clients in the rest of the world: they give relatively less preference to domestic providers. In a sense, the American clients have a higher preference for offshore providers. Among non-American clients, the preference for domestic providers is mitigated when both client and provider are from an English-speaking nation. Relative bid price, often very low already, also determines the winning bid, as does the ratio of purchasing power parity (PPP) between the country of the client and the country of the provider. Nonetheless, the strongest determinant of the winning bid is client loyalty: the client gives very strong preference to a provider with whom there has been a previous relationship, regardless of whether the provider is offshore or domestic.

Keywords:

Outsourcing, offshoring, online programming marketplace, agency theory, bidding, PPP

http://aisel.aisnet.org/misq/vol32/iss2/10/