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From the original post..on SpinAct Blog..

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:

 Crowdsourcing

 

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?

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  1. Jon Reed
    I have talked with Monty about this topic before, and I have definitely seen the power of crowdsourcing for myself in a variety of different ways. One of my favorite current crowdsourcing tactics: before I do an interview with a journalist on a topic pertaining to the SAP market, I will often post questions on this topic on Twitter. I get real-time feedback and often quote the folks who posted their Tweets when I do the interview.

    What is more interesting in this context is how crowdsourcing might play a role in the SAP services world, as Monty suggests, perhaps changing or supplementing conventional consulting and training.

    As with any such idea, the proof is in the customer experience. It would be fascinating to hear some case studies from SAP users who have innovated around finding the services and skills they need using “outside the box” tactics such as crowdsourcing.

    I’ll certainly report any such developments and look forward to hearing more on this topic.

    – Jon Reed –

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