Crowd goes wild: Risks of overreliance on crowdsourcing

While the concept of a sharing economy may be a fairly new one, its roots date back to the centuries-old practice of crowdsourcing (i.e., outsourcing work, or aspects of work, traditionally performed by an employee or designated agent to separate specialized groups or individuals). Over the last five years, crowdsourcing has been scaled-up to an industrial level.

It does have clear benefits, including:

    • Access to a wide range of hidden skills, knowledge and expertise that can be applied to specific elements of a project
    • Accelerated delivery times as development processes can be run concurrently and collaboration and competition can be harnessed to encourage rapid outcomes
    • Potential development problems can be quickly overcome through sharing of knowledge
    • Capital costs can be greatly reduced or at least better focused, ensuring a greater or faster return on investment as well as healthy margins

However, it also carries risks, and companies using these processes should exercise extreme caution on numerous connected fronts, or at the very least, adopt a realistic attitude to leveraging multiple external resources and assets.

Main risk: Copyright control

For decades, publishers have warned would-be authors that ‘unsolicited manuscripts would be returned unopened,’ recognizing the potential for rejected writers to sue over the inclusion of similar concepts in other authors’ published work. This maxim should carry particular weight when businesses employ crowdsourcing techniques, as disputes over intellectual property (IP) ownership can strangle even the greatest of concepts at birth.

It carries risks, and companies using these processes should exercise extreme caution

Companies using crowdsourced data, applications and processes in their finished product need to be able to prove in court that their product is completely original and not based — in whole or in part — on earlier, copyrighted ideas. Legal action brought by external parties that didn’t give license or consent for their IP to be used might result in fines or liabilities. Detailed contracts apportioning rights to IP should be used in all dealings with third-party contributors; however, IP ownership is notoriously difficult to prove and easily contested.

Even before this stage, handling submissions — solicited or otherwise— must be done carefully. It would be all too easy for a writer to claim IP infringement if, even by coincidence, there was a degree of similarity between a rejected submission and the one that was ultimately accepted.

Quality control: You get what you pay for

Unless the original request for ideas is extremely prescriptive, companies are likely to be overwhelmed by submissions, making it difficult to identify the responses that best suit their needs. Even once selections are made, project organizers may have little control over methodologies used by contributors, and the quality and integrity of results will be compromised.
Managing contributors is also time- and labor-intensive and the cost benefits of turning to crowdsourcing may be lost if excessive management/oversight needs to be employed.

In addition, retaining talent can also be a laborious affair. Individuals contributing the best work may find they’ll be better off moving away from crowdsourcing to more formal employment where effort is rewarded with greater levels of remuneration.
From a legal perspective, too, the weakest link will always be people. Contributors must be made aware of the legal repercussions of discussing their work with others, or contributing aspects of their work to those working in rival streams, and that ownership of their ideas will lie with company they’ve contracted with.

A global resource

Digital platforms such as the Internet have facilitated the most extensive crowdsourcing resource available and made freelancing a more financially viable way of living for people, regardless of their skills or location. The main attractiveness of crowdsourcing is that a large number of agents can be engaged to take on extensive tasks that a single person or organization couldn’t easily or quickly accomplish. However, with so many individuals available, finding the right talent can be a time-consuming process.
Over the last 10 years, numerous agencies have been formed to facilitate connections between companies and freelancers, while businesses such as YouTube and monetize user-generated content through parallel sales (i.e., advertising, sharing data on usage/user profiles, etc.).

The main attractiveness of crowdsourcing is that a large number of agents can be engaged to take on extensive tasks that a single person or organization couldn’t easily or quickly accomplish

A 2014 survey by Deloitte identified at least eight different crowdsourcing models typically used by enterprises, ranging from very broad ‘crowd collaboration’ to more specialized approaches such as macrotasking for crowd labor. Each has its strengths and weaknesses.

The existence of multiple crowdsourcing models and potential for multiple nuanced iterations of each model means that sizing the market is challenging. IBISWorld estimated the market for U.S.-based crowdsourcing service providers at $6.5B in 2016, the result of a compound annual growth rate of 45.5% since 2011.

Meanwhile, estimated in 2014 that a typical U.S. crowdsourcer was female, under 41 years old, with a college degree and an ‘average’ personal income ($55,648, according to World Bank data). Less than a third are married with children and engage in crowdsourcing as a second income or for filling downtime. Few crowdsourcers are involved on a full-time basis and this lack of willingness to commit is the one area of weakness that no amount of management or oversight can insulate a project.

The bottom line

While crowdsourcing is a useful, low-cost approach to building new products and businesses, it should be entered into with care and consideration. It’s not a panacea for every business challenge; but, if used appropriately, it can be a transformative and enabling paradigm for enterprises of all sizes and maturity levels in many different industries.

About Tom Srail

Tom Srail is Regional Industry Leader for Willis' Technology, Media and Telecommunications practice, based in Medin…
Categories: Claim & Risk Control, Global Risks, Intellectual Property | Tags: , ,

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